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ORGANIZATION AND OPERA~I1ON OF THE
SMALL BUSINESS ADMINISTRATION
(1968)
HEARINGS
BEFORE THE
SELECT COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
NINETIETH CONGRESS
SECOND SESSION
PURSUANT TO
H. Res. 53
A RESOLUTION CREATING A SELECT COMMITTEE TO CONDUCT
STUDIES AND INVESTIGATIONS OF THE PROBLEMS
OF SMALL BUSINESS
WASHINGTON, D.C., MAY 20, 21, AND 22, 1968
Printed for the use of the
Select Committee on Small Business
0
U.S. GOVERNMENT PRINTING OFFICE
95-193 WASHINGTON : 1968
OC)02 ~
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SELECT COMMITTEE ON SMALL BUSINESS
WRIGHT PATMAN, Texas
TOM STEED, Oklahoma
JOHN C. KLUCZYNSKI, Illinois
JOHN D. DINGELL, Michigan
NEAL SMITH, Iowa
JAMES C. CORMAN, California
DONALD I. IRWIN, Connecticut
JOSEPH P. ADDABBO, New York
JOE L. EVINS, Tennessee, Chairman
ARCH A. MOORE, Ja., West Virginia
SILVIO 0. CONTE, Massachusetts
JAMES T. BROYHILL, North Carolina
FRANK J. HORTON, New York
ROGERS C. B. MORTON, Maryland
LAURENCE J. BURTON, Utah
BRYAN HASRELL JACQUES, Staff Director and General Counsel
RICHARD L. MITCHELL, Special Counsel
MYRTLE RUTH FOUTCH, Clerk
BETH RUSSELL SCHULTHEIS, Staff Assistant
JOHN J. WILLIAMS, Minority Counsel
(II)
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4-
.`Co~TENTs
Hearing dates: Page
May 20, 1968 - 1
May 21, 1968 139
May 22, 1968 185
October 1, 1968 269
Testimony of-
Bothmer, Clyde B., Deputy Associate Administrator for Procurement
and Management Assistance, Small Business Administration 139
Brown, Glenn ]~., Associate Administrator for Investment, Small
Business Administration 185
Biographical sketch 186
Exhibits 195
Davis, Elliot T., president, National Association of Small Business
Investment Companies 236, 241
Greenberg, Howard, Deputy Administrator, Small Business Ad-
ministration 3, 139, 185, 273
Hendricks, Logan B., Associate Administrator for Financial Assistance,
Small Business Administration 3
Lord, Grogan, chairman, National SBIC Advisory Committee, pre-
pared statement 266
Maness, Irving, Associate Administrator for Procurement and Man-
agement Assistance, Small Business Administration 273
Moot, Robert C., Administrator, Small Business Administration 3, 139, 185
Prepared statement 11
Appendix A-supplement 33
Appendix B-statistical 43
Samuels, Howard J., Administrator, Small Business Administration - 273
Stults, Walter, executive director, National Association of Small
Business Investment Companies 236
Tenzer, Herbert, a Member of Congress from the State of New York,
prepared statement with exhibits 132
Williams, George C., first vice president, National Association of
Small Business Investment Companies 239
Additional information:
American Machinist Metalworking Manufacturing article, "Used
Machine Tool Loans Available".. 8~
Business loans, section 7(a), statutory authority 8
Economic Opportunity Act of 1964, Public Law 88-452, title IV,
employment and investment incentives 144
Economic Opportunity Act Amendments of 1966, Public Law 89-794,
title IV, amendments to title IV of the act. 146
Economic Opportunity Act Amendments of 1967, Public Law 90-222,
amendments to title IV-Employment and investment incentives. - 14~
Economic opportunity loans approved 158
Employment in SBA areas, actual 1950, and expected change 1970-
Selected industries (table) - 9-
Federal Liquor Store letter to Hon. Donald J. Irwin, May 16, 1968 - 85
Garment and apparel industry, funds for training in the 153
H.R. 10410, a bill to amend the Internal Revenue Code of 1954 with
respect to income tax treatment of small business investment
companies 248
Summary 251
Iron Age, article, "SBA Offers New Loan Plan for Used Machinery
Buyers" 89
Liberty Manufacturing Co., letter to Hon. Joe L. Evins, May 15,
1968 153
Loans (22) approved by SBA under section 501 by States, by fiscal
years 104
(III)
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`V
Additional information-Continued
Machinery Dealers National Association, letter to Hon. Joe L. Evins, Page
May 9, 1968 87
MDNA members, information for on SBA used machine tool loans. - - - 91
Metalworking News article, "MUNA, SBA Trade Views on Tool
Plan," by Ron Sohneiderman 90
National Association of Small Business Investment Companies:
Application for exemption from provisions of the Investment
Company Act of 1940 258
Exhibits 264, 265
Code of ethics 199
Letters to Hon. Joe L. Evins:
June 12, 1968 248
June 13, 1968 256
Trade practice rules 199
National Small Business Investment Co. advisory council 207
Number of lease guarantee/reinsurance certificates issued 113
"Promoting Balanced Economic growth", SBA directive 75
Relocation payments for individuals and businesses displaced by
Federal highway programs and by activities of the Department of
Housing and Urban Development 131
Small Business Act disaster loan program 123
Small Business Act, section 7(b) (3), displaced business disaster loans. 100
Small Business Act, section 8(a) 148
Small Business Administration industry size standards, partial listing
of
Small Business Administration letter to Hon. Joe L. Evins, Feb. 7,
1967 196
Small Business Administration letters from Howard J. Samuels to
Hon. Joe L. Evins:
October 9, 1968 301
October 11, 1968 299
Small Business Administration memo from Robert C. Moot, 502
policy 78
Small Business Investment Act of 1958, as amended:
Title IV-Lease guarantees 115
Title V-Loans to State and local development companies 102
SBIC companies and locations 212
SBIC's, control and divestiture of small business concerns by 231
Small Business Investment Act, amendments, as of May. 29, 1968 202
SBIC litigation, summary of, referred to and cleared by Civil Division,
Department of Justice 200
SBIC's, location of 439 (map) 205
SBIC program-control of small business concerns by SBIC's 210
Small Business Protection Act of 1967, Public Law 90-104, title III,
Sections 301-303 61
Steel article, "SBA Loans 80% on Used Machine" 89
Surplus Record articles:
"An Open Letter to Industry" 88
"New SBA Loan Program for Used Machinery Approved" 90
Used Equipment Directory, article "An Open Letter to Industry" 91
Appendix-Summary of SBA loan approval activity 305
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ORGANIZATION AND OPERATION OF THE
SMALL BUSINESS ADMINISTRATION
(1968)
MONDAY, MAY 20, 1968
HOUSE OF REPRESENTATIVES,
SELECT COMMITTEE To CONDUCT STUDIES AND
INVESTIGATIONS OF THE PROBLEMS OF SMALL BUSINESS,
Washington, D.C.
The committee met, pursuant to call, at 10 a.m., in room 2359
Rayburn House Office Building, Hon. Joe L. Evins (chairman)
presiding.
Present: Representatives Evins, Kluczynski, Smith, Irwin, Conte,
Broyhill, Horton, and Burton.
Also present: Richard L. Mitchell, special counsel; Myrtle Ruth
Foutch, clerk; Beth Russell Schuitheis, staff assistant; and John J.
Williams, minority counsel.
The CHAIRMAN. The committee will come to order.
We have with us this morning Administrator. Moot of SBA and
our friends from the SBA staff. We want to take up the hearings on
the organization and operation of the Small Business Administration.
Before doing so, I note we have present our ranking minority Mem-
ber, Mr. Silvio Conte, of Massachusetts. Other Members present in-
clude Mr. Kluczynski of Illinois, Mr. Smith of Iowa, Mr. Irwin of
Connecticut, Mr. Broyhill of North Carolina, Mr. Horton of New
York, Mr. Morton of Maryland, and Mr. Burtonof Utah. It has been
several months since we have had an overall review of the programs
of the Small Business Administration. Within the last year there has
been new legislation., and new powers have, been given to the Small
Business Administration which we want to review. We want to
conduct hearings that we trust will be helpful and constructive.
The committee has convened this morning for the purpose of review-
ing all of the operations of the Small Business Administration.
We want to seek full information concerning all of SBA's programs
in its various divisions. The Congress, in creating this committee
vested in it by resolution the authority and duty to conduct a con-
tinuing review of the operations and programs of Federal laws relating
to small business, and the operations of Government agencies as they
affect small business. This resolution in part provided:
It shall be the duty of such Committee to conduct studies and investigations
of the problems of all types of small business existing, arising, or that may arise
with particular referen ce to * * * (2) Administration of Eederal laws relating
specifically to small business to determine whether the laws in their administration
adequately serve the needs of small business; (3) `Whether government agencies
give due consideration to the problems of small business * *
(1)
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This authority placed a particular mandate on the committee to
review the activities of the Small Business Administration and the
laws under which the agency operates. The SBA is a great agency,
which has taken its place among the most vital governmental opera-
tions in the field of business. It is an independent agency and it is an
arm of the Congress. It has a revolving fund of more than $2.5 billion,
excluding funds available for disaster loans. It is the advocate of the
business community composed of approximately 5 million entre-
preneurs-all of them small business.
SBA has emerged as an important force in the business life of this
Nation.
Since SBA was established in 1953, we are advised that financial
assistance has been made available to more than 117,000 businesses
involving more than $5 billion. Its economic opportunity loans,
displaced business loans and disaster loans have assisted many addi-
tional thousands, and its procurement and management assistance
programs exert a powerful influence in the competitive structure of
our economic society.
Some say that SBA has fully "grown up".
Because of its size, its importance, and its impact on our business
and the economy, it is incumbent upon this committee to review its
programs, to assist the agency in ironing out its problems, to discuss
with the agency ways and means by which programs may be improved
and to keep the publc spotlight on all governmental activities that
relate to small business. And, yes, to also inquire into complaints
that may have been made concerning the agency's work.
No agency of the size and importance of SBA can operate without
some complaints and some problems, and one of the functions of this
committee is to recognize complaints of the small businessman, and
to utilize those complaints in connection with the review of the
agency's policies.
It is this committee's desire to assist and strengthen the arm of the
Small Business Administration, Mr. Administrator. This is the very
purpose of these hearings. Certainly it is my desire that these hearings
may be helpful and constructive.
The role of SBA is of particular significance at this time when
there is such a great desire and need to stimulate the development
of a healthy business sector in the poverty areas of our country. We
think there is no better way to provide jobs and to assist the eco-
nomically deprived than through the building and expanding of small
business enterprise. We think that SBA must play an increasing role
in this effort.
The agency's management assistance programs and its antipoverty
lending programs under the Economic Opportunity Act are especially
geared to help along these lines. The committee desires to fully docu-
ment at these hearings the manner in which the Small Business Admin-
istration has utilized its programs to "zero in" on urban decay and
rural underdevelopment. As we have stated in previous findings of
this committee:
The committee believes that the building and strengthening of our small business
community is as effective as any course of action in the economic development
of our cities, small towns and rural areas, especially in areas of poverty and
economic deprivation.
We want to assist the agency in this great task.
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3
These hearings will continue through Wednesday, May 22, and we
will on Wednesday look into the operations of the Small Business
Investment Division of SBA.
The implementation of the Small Business Investment Act of 1958,
as amended, is of great importance to this committee. The committee
especially desires to inquire into the effect and utilization of new legis-
lation passed by the Congress that confers additional powers upon the
SBA and its constituent departments, and gives additional incentives
to small business investment companies.
The members of this committee are particularly gratified to have
with us this morning for the first time the new Administrator-not
the first time to be with us, but the first time before the full com-
mittee-Mr. Robert C. Moot.
Administrator Moot came to SBA with a great record of public
service. He has already proved to be a strong, active, and able ad-
ministrator.
Mr. Moot, we are very happy to have you and your associates with
us. We welcome you and we will be pleased to hear your statement.
May I say, Mr. Administrator, that I have reviewed your very
lengthy statement, some 72 pages with appendix. You may proceed
as you wish. It is my suggestion that we take up each division or
branch of SBA separately and confine questions by the membership
to each particular division in an orderly fashion, if that is your wish.
TESTIMONY OF ROBERT C. MOOT, ADMINISTRATOR, SMALL BUSI-
NESS ADMINISTRATION; ACCOMPANIED BY LOGAN B. HEN.
BRICKS; ASSOCIATE ADMINISTRATOR FOR FINANCIAL ASSIST-
ANCE; AND HOWARD GREENBERG, DEPUTY ADMINISTRATOR
Mr. MOOT. Thank you, Mr. Chairman and members of the com-
mittee.
I would like to start this morning by introducing my two colleagues
at the table. On my left is Mr. Howard Greenberg, Deputy Adminis-
trator of the agency, and on my right is Mr. Logan Hendricks,
Associate Administrator for Financial Assistance.
Mr. Chairman, it is a great pleasure for me to appear before you
today and to participate in hearings which I believe are of paramount
importance to the small business community and to the Nation. We
feel that this is a very propitious time to put on the record what small
business contributes to our national economy and to our society.
Over a year ago this committee stated that:
The building and strengthening of our small business community is as effective
as any course of action in the economic development of our cities, small towns,
and rural areas.
Mr. Chairman, the Small Business Administration is dedicated to
that proposition as we think these hearings will show. I do have a
comprehensive statement, as you mentioned, Mr. Chairman, too long
to read in full. With your permission, I would like to read those brief
passages that will not be covered by my associates testifying about our
individual programs, and then submit my full text for the record.
This morning, together, Mr. Greenberg, Mr. Hendricks, and myself
will cover our various financial assistance programs, with the exception
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4
of the economic opportunity program, which with your permission
will be included later by Mr. Greenberg in his testimony on our
economic development and antipoverty program.
We will, of course, be happy to answer any questions you may have
as we proceed. So, Mr. Chairman, if there are no objections, I will now
go into the highlights and the summary of my statement.
The CHAIRMAN. Very well.
Mr. MOOT. The status and prospects of small business in a pro-
gressively growing economy are generally good. Yet, some grave prob-
lems confront us, growing out of the increased market power of giant
firms in some segments of industry; current inflationary pressures,
high-interest rates, and attendant tight money market conditions;
the increasing need for management and technical assistance to small
firms; and the uneven distribution of the benefits of economic growth
and prosperity among social groups, regions, and industries.
From the date of SBA's establishment through December 1967,
our financial assistance programs, excluding disaster assistance,
have made $5.3 billion available to finance the capital needs of over
117,000 borrowers. Of this total, $2.2 billion-or 41.6 percent-was
financed by the private sector (table 1).
Our studies of the business loan program demonstrate that these
loans have helped borrowers to achieve highly satisfactory growth
rates and to contribute to the well-being of the economy in general.
These growth rates, in recent years, have been at higher levels than
the growth of business in general and confirm the oft-stated belief of
the Congress that small business, if given a fair opportunity can
compete in the open market place without subsidy.
The local development company loan program has assisted over
1500 projects, representing a gross investment of more than $300
million, principally in smaller communities (table 20). I believe that
this program is still well below its full potential in both rural and
urban economies.
The legislative enactments of 1966 and 1967. have done much to
strengthen the SBIC program and to restore confidence in its prospects.
The companies have undertaken almost 27,000 financing transactions,
involving a total investment of close to $1.2 billion. We expect pro-
gressive improvement in the financial soundness of licensed companies
and extension of the benefits of the program to additional areas in the
near-term future.
In the first 13 months of complete operation under SBA we have
made over 3,700 economic opportunity loans, aggregating almost
$40 million, to disadvantaged persons in urban and rural areas. Our
management assistance facilities have played a major role in this
program and will be further emphasized to assure achievement of
the congressional objectives set forth in the recent amendments to
the Economic Opportunity Act.
We have loaned almost $97 million to 1,308 business concerns
displaced by federally financed construction projects (table 15).
We are stepping up our efforts to increase private sector participation
in this program.
Since the establishment of SBA, there have been about 600 de-
clarations of disaster of widely varying dimensions. A total of 69,000
loans and $616 million have been approved for disbursement to assist
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the victims of floods, hurricanes, other catastrophes, economic injury,
and product disasters (table 22).
We have recently completed a review of loan policies and eligibility
criteria covering this program and have instituted necessary or de-
sirable changes.
Federal prime contracts placed with small business concerns have
risen from $4.7 billion in 1960 to $10.2 billion in 1967. The small
business share of total procurement rose from 18.3 percent to 20.5
percent in the same period. We are also progressively expanding our
cooperative efforts with large prime contractors to maximize sub-
contracts to small firms.
The CHAIRMAN. If I might interrupt there for just a moment, I
recall a few years ago we set a target in this committee of 25 percent
as the goal for procurement participation by small business, and
your statement here indicates it has now reached 20.5. We are ap-
proaching that goal, and I commend you. I think it is a very interesting
fact.
Mr. MooT. Thank you, sir.
We are, as you know, embarking upon a new program which we
hope will add additional stimulus by the reestablishing of our pro-
curement center representatives in this room.
The CHAIRMAN. Thank you.
Mr. MooT. Defense prime contractors report that they have
placed $7.3 billion in subcontracts to small business in fiscal year 1967.
~See table 23.]
Following a 2-year hiatus, we resumed operation of the procure-
ment set-aside program on November 1, 1967. In addition, we have
added emphasis to our efforts to encourage the development of State
and local small business procurement programs.
We are continuing a moderate expansion of our management as-
sistance program in response to the expanding needs of the small
business community. The number of SCORE volunteers has reached
3,210 and continues to grow. We are intensifying our efforts to promote
greater participation by small business in export trade and to broaden
and expedite the transfer of federally financed technology to small
firms.
We have entered into a number of lease guarantee transactions
under the original limited authorization and others are in process
We believe that a sound basis has been laid for expansion of the
program under the broadened program authorized by the Congress,
effective January 9, 1968. We expect a substantially larger volume
of guarantees in the current and future fiscal years, with increased
private participation.
We have initiated a study of the impact of crime on small business,
as directed in the 1967 amendments to the Small Business Act. A
report, with appropriate recommendations, is to be submitted to the
Congress in October 1968.
Finally, the 5 million small business concerns spread through every
community of the Nation are vitally involved and acutely interested
in the major Federal, State, and local programs which have been
launched to promote balanced economic growth and to cope with the
problems of urban decay and rural stagnation. .
We believe that the utilization of the actual and potential economic
capacity of small business in support of these programs is clearly in
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accord with the Small Business Act, as well as the Economic Oppor-
tunity Act, and one of the keys to the success of the programs them-
selves. Accordingly, we are actively engaged in a review of our pro-
grams and procedures to insure full coordination with these major
national efforts.
While this has brought about some new departures in programs
and operations, I believe it to be fully in harmony with the declaration
of this committee, issued more than a year ago, that:
* * * the building and strengthening of our small business community is as
effective as any course of action in the economic development of our cities, small
towns, and rural areas * *
STATUS AND PROSPECTS OF SMALL BUSINESS
The year 1967 was the seventh year of uninterrupted expansion
of the U.S. economy-the longest period of sustained growth in the
Nation's history. The prospects for continued growth at a sustained
high rate are very bright.
The general health of the economy is reflected in the vigor and
persistent growth of the small business community. Over the past
decade, the total business population has increased by approximately
700,000 firms. Virtually all of this represents a net increase in the
small business segment.
Small business accounts for over 50 percent of the total employ-
ment by all business concerns and approximately 30 percent of total
capital outlays for plant, equipment, and business inventories. Despite
mergers, the competitive pressures of large concerns, and marketing
problems, it remains very much alive.
Experience over the recent past indicates that small business will
continue to grow at least in pace with the general economy.
As a rule, small firms tend to gain more than proportionately in
periods of business exp~nsion; conversely, they tend to suffer dispro-
portionately in periods of contraction.
In addition, there are certain favorable indications which point to
realistic opportunities to improve the relative position of small business
in a progressively expanding economy:
Higher individual and family incomes will increase demands for
more personalized, custom-type goods and services which often are
produced most efficiently by small firms.
Growing mass markets-which stimulate the growth of large firms
for certain functions-create new opportunities for specialized small
firms in other parts of the production and distribution process, as has
been the experience in the automotive industry.
The drift of technology and growing diversification of the mass
market tend, in general, to favor smaller units.
Long-term growth prospects are most favorable for trade and
service industries, in both of which small concerns predominate.
The progressively higher level of education of the general population
should generate an increasing supply of entrepreneurs more capable
of coping with the challenges of the modern urbanized economy than
their counterparts in the present and earlier generations.
Government expenditures for goods and services have been rising
dramatically since 1960. In 1966, the National Planning Association
projected these expenditures to rise from $100 billion in 1960 to $287
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7
billion in 1976. Of these amounts, NPA estimated that purchases
from business would increase from $52 billion in 1960 to $138 billion
in 1976 and that the State and local expenditures would exceed the
Federal purchases from business:
un billions of
1966 dollarsl
1960
1965
1971
1976
Purchases from business:
Federal
31.6
37.9
44.9
54.4
State and local
Total
20. 5
29. 8
52. 3
83. 6
52.1
67.7
97.2
138.0
These projections indicate that we can expect a product mix more
favorable to small business and that the absolute and relative share
of small concerns in Government purchases should progressively
increase.
While encouraged by these favorable indications, we are not
oblivious to certain unfavorable situations or trends which will
continue to pose challenges to small business in the years ahead.
The total number of firms in manufacturing has been declining
slowly over most of the past 10 years, in a period of extraordinary
growth of total output. While there are some indications that the
downward trend has been arrested or reversed in the past 2 years,
grave problems persist for small manufacturers in major segments of
the industry.
Recent studies by the Federal Trade Commission shed some new
light on developments in the industry. A study of 213 categories of
manufacturing revealed that the number of firms increased from
95,000 to 99,000-a growth of 4.6 percent in 16 years.
Within the groups, however, the number of firms manufacturing
producers goods-where technology has had a major impact and
where successful marketing is subject to rigorous cost and quality
tests-the number of firms actually increased by 23.3 percent in the
same period. Meanwhile, the number of firms manufacturing consumer
goods declined by 8.1 percent. These widely divergent trends appear to
reflect the influence of brand name and other forms of product differ-
entiation, practiced by large manufacturers and conglomerates,
powerfully reinforced by television advertising.
Dr. Blair, chief economist for the Senate Subcommittee on Antitrust
and Monopoly, stated the problem succinctly in the following words:
"It would indeed be ironic if the potential for greater decentraliza-
tion and stronger competition inherent in the new technologies of
production were to be more than offset by the inability of any but the
largest firms to make effective use of this new technology of corn-.
munication."
The President and the Secretary of the Treasury, in recent state-
ments and testimony, have pointed out the unfavorable and dis-
criminatory impacts of inflation and the tight money market on small
business concerns.
The prime bank interest rate has risen to 6 percent, in contrast to 5
percent or lower, which prevailed from March 1 ,1960, through March
10, 1966. Equal or greater proportionate increases have been registered
in other rates and in public and private bond yields.
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Further, there is significant evidence to indicate that small concerns
have greater difficulty in securing needed financing, even at these high
rates, than do larger concerns.
The impact of the uneven distribution of economic growth and
prosperity among geographic areas, industries, and social groups on the
small business sector of the economy generally escapes public attention.
Yet, the decay of central cities and the ffight to the suburbs have taken
a heavy toll of small business enterprises and weakened an important
element of the economic and social structure of our largest cities.
At the other end of the economic spectrum, thousands of small
business concerns serving a declining farm population or dependent
upon mining or other primary industries have disappeared, leaving
behind pockets of high unemployment and poverty in small towns
and among the rural nonf arm population across the Nation.
The following summary tabulation shows the wide variations in
growth trends and prospects among industries within SBA geographic
areas. The figures show extended employment changes from 1950 to
1970, based on current trends.
(The table follows:)
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Mr. Moop. Concern for the widely varying impacts of these uneven
growth trends is the central theme of most current appraisals of the
Nation's economic health.
In fact, the growing commitment of Federal, State, and local gov-
ernments-with progressively increasing private sector involvement-
to the promotion of balanced economic growth is possibly the most
significant single factor affecting the future rate and direction of eco-
nomic change throughout the Nation. Major new or enlarged Federal
programs aimed at this objective have been launched, stemming from.
such landmark statutes as those pertaining to manpower develop-
ment and training, aid to vocational and higher education, equal eco-
nomic opportunity, Appalachian regional development, public works
and economic development, and model cities.
These programs have two principal thrusts:
(1) To upgrade the skills and the employment, business and
social opportunities of disadvantaged persons and groups through-
out the Nation; and
(2) To arrest and reverse the economic stagnation of the decay-
ing core of major metropolitan complexes and other pockets of
poverty in rural areas created by dependence on industries with
slowly growing or declining employment opportunities.
The status and prospects of the 5 million small business concerns
spread throughout the Nation will be determined, to a large degree,
by these major developments in the national economy.
IMPLICATIONS FOR SBA PROGRAMS
Implications of the current and prospective economic environment
and the agency's objectives may be summarized briefly as follows:
1. Small business needs for all SBA assistance programs will
continue to grow. Continued assistance will be necessary to enable
small business to cope with the opportunities and challenges of an
expanding modern economy.
2. The availability of credit and the terms on which it can be
obtained from private sources will, at best, show only moderate abate-
ment from the tightness that currently prevails in the capital markets.
3. So long as defense expenditures remain at current high levels,
pressures to restrain inflationary forces through restriction of other
programs will remain strong. This will intensify the need to strengthen
the economic justification of loans and other assistance to small
business concerns, and to make sure that each dollar returns an
equivalent or greater benefit to the national economy-as well as
benefiting individual businessmen.
4. The economic health and survival of individual small business
concerns depends, in large measure, upon the progress of economic
development programs undertaken in communities and regions in
which the concerns are located. Business loan programs, in particular,
need to be tied closely to soundly conceived and broadly supported
local development programs since this constitutes the most effective
compliance with the statutory requirement that business loans
"* * * be of such sound value or so secured as reasonably to assure
repayment."
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11
5. There will be an increasing need to tie all SBA assistance pro-
grams in comprehensive packages tailored to the needs of small
business in each local environment.
In the light of these developments, we are shaping our program to
complement the potential economic strengths and needs of specific
geographic areas and industries.
We are also shaping them to satisfy the requirements of local
development planning and to dovetail with State, Federal, and other
blueprints, both public and private, which seek balanced economic
development.
We are as convinced as is this committee that small business is the
most responsive and effective means of building and maintaining
balanced economic growth in the nation.
Mr. Chairman, we are ready to answer general questions, or we are
ready to proceed with our specific financial assistance program,
which Mr. Hendricks has a prepared statement on, if you desire.
The CHAIRMAN. Thank you, Mr. Administrator, for a very concise,
yet broad statement regarding all the operations of the agency-~an
overall look at the SBA's program.
Without objection, the full statement of the Administrator with the
appendix and the table will be included in the record at this time.
(The prepared statement of ~vIr. Moot and attachments follow:)
STATEMENT OF ROBERT C. MooT, ADMINISTRATOR, SMALL BUSINEss
ADMINISTRATION
SECTION I-INTRODUCTION
Mr. Chairman and Members of the Committee, I am grateful for this oppor-
tunity to discuss with you the status, problems and prospects of the small business
community and the related programs of the Small Business Administration. I
know that you desire a comprehensive review of all SBA programs, with added
emphasis on selected areas of interest. This is a major undertaking, in which I am
happy to participate. My several formal statements will cover a broad range of
subjects. To cite a few selected highlights:
The status and prospects of small business in a progressively growing economy
are generally good. Yet, some grave problems confront us, growing out of the
increased market power of giant firms in some segments of industry; current
inflationary pressures, high interest rates, and attendant tight money market
conditions; the increasing need for management and technical assistance to small
firms; and the uneven distribution of the benefits of economlc growth and pros-
perity among social groups, regions and industries.
From the date of SBA's establishment through December 1967, our financial
assistance programs, excluding disaster assistance, have made $5.3 billion avail-
able to finance the capital needs of over 117,000 borrowers. Of this total, $2.2
billion-or about 42 percent-was financed by the private sector (Table 1).
Our studies of the business loan program demonstrate that these loans have
helped borrowers to achieve highly satisfactory growth rates and to contribute
to the well-being of the economy in general. These growth rates, in recent years,
have been at higher levels than the growth of business in general and confirm the
oft-stated belief of the Congress that small business, if given a fair opportunity,
can compete in the open market place without subsidy.
The Local Development Company Loan program has assisted over 1500
projects, representing a gross investment of more than $300 million, principally
in smaller communities (Table 20). I believe that this program is still well below
its full potential in both rural and urban economies.
The legislative enactments of 1966 and 1967 have done much to strengthen the
SBIC program and to restore confidence in its prospects. The companies have
undertaken almost 27,000 financing transactions, involving a total investment of
close to $1.2 billion. W/ e expect progressive improvement in the financial soundness
of licensed companies and extension of the benefits of the program to additional
areas in the near-term future.
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12
In the first 13 months of complete operation under SBA, we have made over
3,700 Economic Opportunity Loans, aggregating almost $40 million, to disadvan-
taged persons in urban and rural areas. Our management assistance facilities
have played a major role in this program and will be further emphasized to assure
achievement of the Congressional objectives set forth in the recent amendments
to the Economic Opportunity Act.
We have loaned almost $97 million to 1,308 business concerns displaced by
Federally financed construction projects (Table 15). We are stepping up our
efforts to inciease private sector participation in this program.
Since the establishment of SBA, there have been about 600 declarations of
disaster of widely varying dimensions. A total of almost 69,000 loans and $616
million have been approved for disbursement to assist the victims of floods,
hurricanes, other catastrophes, economic injury and product disasteis (Table 22).
We have recently completed a review of loan policies and eligibility criteria cover-
ing this program and have instituted necessary or desirable changes.
Federal prime contracts placed with small business concerns have risen from
$4.7 billion in 1960 to 10.2 billion in 1967. The small business share of total pro-
curement rose from 18.3 percent to 20.5 percent in the same period. We are also
progressively expanding our cooperative efforts with laige prime contractors to
maximize sub-contracts to small firms. Defense prime contractors report that
they have placed $7.3 billion in sub-contracts to small business in Fiscal Y ar
1967 (Table 23). Following a 2-year hiatus, we resumed operation of the piocure-
ment set-aside program on November 1, 1967. In addition, we have added empha-
sis to our efforts to encourage the development of state and local small business
procurement programs.
We are continuing a moderate expansion of our Management Assistance pro-
gram in response to the expanding needs of the small business community. The
number of SCORE volunteers has reached 3,210 and continues to grow. We are
intensifying our efforts to promote greater participation by small business in
export trade and to broaden and expedite the transfer of Federally financed
technology to small firms.
We have entered into a number of lease guarantee transactions under the
original limited authorization and others are in process. We believe that a sound
basis has been laid for expansion of the program under the broadened program
authorized by the Congress, effective January 9, 1968. `We expect a substantially
larger volume of guarantees in the current and future fiscal years, with increased
private participation.
We have initiated a study of the impact of crime on small business, as directed
in the 1967 Amendments to the Small Business Act. A report, with appropriate
recommendations, is to be submitted to the Congress in October, 1968.
Finally, the five million small business concerns spread through every com-
munity of the nation are vitally involved and acutely interested in the major
Federal, state and local programs which have been launched to promote balanced
economic growth and to cope with the problems of urban decay and rural stagna-
tion. We believe that the utilization of the actual and potential economic capacity
of small business in support of these programs is clearly m accord with the Small
Business Act, as well as the Economic Opportunity Act, and one of the keys to
the success of the programs themselves. Accordingly, we are actively engaged in
a review of our programs and procedures to insure full coordination with these
major national efforts. `While this has brought about some new departures in
programs and operations, I believe it to be fully in harmony with the declaration
of this Committee, issued more than a year ago, that-
"* * * the building and strengthening of our small business community is as
effective as any course of action in the economic development of our cities, small
towns and rural areas * * ~
SECTION lI-STATUS AND PROSPECTS OF SMALL BUSINESS
The year 1967 was the seventh year of uninterrupted expansion of the 13.5.
economy-the longest period of sustained growth in the nation's history. The
propsects for continued growth at a sustained high rate are very bright.
The general health of the economy is reflected in the vigor and persistent
growth of the small business community. Over the past decade, the total business
population has increased by approximately 700,000 firms. Virtually all of this
represents a net increase in the small business segment. Small business accounts
for over 50 percent of the total employment by all business concerns and for
approximately 30 percent of total capital outlays for plant, equipment and busi-
PAGENO="0017"
13
ness inventories. Despite mergers, the competitive pressures of large conceins and
marketing problems, it remains very much alive.
Experience over the recent past indicates that small business will continue
to grow at least in pace with the general economy. As a rule, small firms tend
to gain more than proportionately in periods of business expansion; conversely,
they tend to suffer disproportionately in periods of contraction. In addition,
there are certain favorable indications which point to realistic opportunities to
improve the relative position of small business in a progressively expandnig
economy:
Higher individual and family incomes will increase demands for more per-
sonalized, custom-type goods and services which often are produced most effi-
ciently by small firms.
Growing mass markets-which stimulate the growth of large firms for certain
functions-create new opportunities for specialized small firms in other parts
of the production and distribution process, as has been the experience in the
automotive industry.
The drift of technology and growing diversification of the mass market tend,
in general, to favor smaller units~
Long-term growth prospects are most favorable for trade and service industries,
in both of which small concerns predominate.
The progressively higher level of education of the general population should
generate an increasing supply of entrepreneurs more capable of coping with the
challenges of the, modern urbanized economy than their counterparts in the
present and earlier generations.
Government expenditures for goods and services have been rising dramatically
since 1960. In 1966, the National Planning Association projected these expendi-
tures to rise from $100 billion in 1960 to $287 billion in 1976. Of these amounts,
NPA estimated that purchases from business would increase from $52 billion in
1960 to $138 billion in 1976 and that the State and local expenditures would exceed
the Federal purchases from business:
[In billions of 1966 dollarsi
1960
1965
1971
1976
Purchases from business:
Federal
State and local
Total -
31. 6
20. 5
37. 9
29. 8
44. 9
52. 3
54. 4
83. 6
51.2
67.7
97.2
138.0
These projections indicate that we can expect a product mix more favorable
to small business and that the absolute and relative share of small concerns in
Government purchases should progressively increase.
While encouraged by these favorable indications, we are not oblivious to
certain unfavorable situations or trends which will continue to pose challenges
to small business in the years ahead.
The total number of firms in manufacturing has been declining slowly over
most of the past ten years, in a period of extraordinary growth of total output.
While there are some indications that the downward trend has been arrested or
reversed in the past two years, grave problems persist for small manufacturers in
major segments of the industry. Recent studies by the Federal Trade Commission
shed some new light on developments in the industry. A study of 213 categories
of manufacturing revealed that the number of firms increased from 95,000 to
99,000-a growth of 4.6 percent in 16 years. Within the groups, however, the
number of firms manufacturing producer goods-where technology has had a
major impact and where successful marketing is subject to rigorous cost and
quality tests-the number of firms actually increased by 23.3 percent in the same
period. Meanwhile, the number of firms manufacturing consumer goods declined
by 8.1 percent. These widely divergent trends appear to reflect the influence of
brand name and other forms of product differentiation, practiced by large manu-
facturers and conglomerates, powerfully reinforced by television advertising.
Dr. Blair, Chief Economist for the Senate Subcommittee on Anti-Trust and
Monopoly, stated the problem succinctly in the following words. "It would indeed
be ironic if the potential for greater decentralization and stronger competition
inherent in the new technologies of production were to be more than offset by the
95-198-68-2
PAGENO="0018"
14
inability of any but the largest firms to make effective use of this new technology
of communication."
The President and the Secretary of the Treasury, in recent statements and
testimony, have pointed out the unfavorable and discriminatory impacts of
inflation and the tight money market on small business concerns. The prime
bank interest rate has risen to 6 percent, in contrast to 5 percent or lower, which
prevailed from March 1, 1960, through March 10, 1966. Equal or greater propor-
tionate increases have been registered in other rates and in public and private
bond yields. Further, there is significant evidence to indicate that small concerns
have greater difficulty in securing needed financing, even at these high rates, than
do larger concerns.
The impact of the uneven distribution of economic growth and prosperity
among geographic areas, industries, and social groups on the small business sector
of the economy generally escapes public attention. Yet, the decay of central cities
and the flight to the suburbs have taken a heavy toll of small business enterprises
and weakened an important element of the economic and social structure of our
largest cities. At the other end of the economic spectrum, thousands of small
business concerns serving a declining farm population or dependent upon mining
or other primary industries have disappeared, leaving behind pockets of high
unemployment and poverty in small towns and among the rural non-farm popu-
lation across the nation.
The following summary tabulation shows the wide variations in growth trends
and prospects among industries within SBA geographic areas. The figures show
expected employment changes from 1950 to 1970, based on current trends:
PAGENO="0019"
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PAGENO="0020"
Concern for the widely varying impacts of these uneven growth trends is the
central theme of most current appraisals of the nation's economic health. In fact,
the growing commitment of Federal, state and local governments-with pro-
gressively increasing private sector involvement-to the promotion of balanced
economic growth is possibly the most significant single factor affecting the future
rate and direction of economic change throughout the nation. Major new or
enlarged Federal programs aimed at this objective have been launched, stemming
from such landmark statutes as those pertaining to manpower development and
training, aid to vocational and higher education, equal economic opportunity,
Appalachian regional development, public works and economic development, and
model cities.
These programs have two principal thrusts: (1) to upgrade the skills and the
employment, business and social opportunities of disadvantaged persons and
groups throughout the nation; and (2) to arrest and reverse the economic stag-
nation of the decaying core of major metropolitan complexes and other pockets
of poverty in rural areas created by dependence on industries with slowly growing
or declining employment opportunities. The status and prospects of the five million
small business concerns spread throughout the nation will be determined, to a
large degree, by these major developments in the national economy.
SECTION Ill-IMPLICATIONS FOR SBA PROGRAMS
Implications of the current and prospective economic environment and the
Agency's objectives may be summarized briefly as follows:
1. Small business needs for all SBA assistance programs will continue to
grow. Continued assistance will be necessary to enable small business to
cope with the opportunities and challenges of an expanding modern economy.
2. The availability of credit and the terms on which it can be obtained
from private sources will, at best, show only moderate abatement from the
tightness that currently prevails in the capital markets.
3. So long as Defense expenditures remain at current high levels, pressures
to restrain inflationary forces through restriction of other programs will
remain strong. This will intensify the need to strengthen the economic justi-
fication of loans and other assistance to small business concerns, and to make
sure that each dollar returns an equivalent or greater benefit to the national
economy-as well as benefiting individual businessmen.
4. The economic health and survival of individual small business concerns
depends, in large measure, upon the progress of economic development
programs undertaken in communities and regions in which the concerns
are located. Business loan programs, in particular, need to be tied closely
to soundly conceived and broadly supported local development p~rograms
since this constitutes the most effective compliance with the statutory
requirement that business loans "h * * be of such sound value or so secured as
reasonably to assure repayment."
5. There will be an increasing need to tie all SBA assistance programs in
comprehensive packages tailored to the needs of small business in each
local environment.
In the light of these developments, we are shaping our programs to complement
the potential economic strengths and needs of specific geographic areas and in-
dustries. We are also shaping them to satisfy the requirements of local develop-
ment planning and to dovetail with state, Fede~al and other blueprints, both
public and private, which seek balanced economic development.
In keeping with this approach, we are stliving to cooperate with development
efforts in both metropolitan centers and the numerous pockets of rural poverty.
Although SBA is not piimarily an economic development or poverty agency, we
are convinced that our statutory mission requires that we support these programs.
Considerations underlying this conclusion are:
First, as I hsve aheady noted, small business concerns have been most severely
impacted by the unravorable economic trends which these programs seek to
moderate or reverse.
The second consideration was set forth most clearly in the report issued by your
committees in December 1966:
"The Committee believes that the building and strengthening of our small
business community is as effective as any course of action in the economic develop-
ment of our cities, small towns and rural areas, especially in areas of poverty
and economic deprivation. Small business loans are quickly translated into more
jobs and stronger, healthier communities."
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17
A third consideration was the enactment by the Congress of the Economic
Opportunity Act Amendments of 1967. Title IV of this Act provides that special
attention be given to the strengthening and upgrading of small businesses located
in urban or rural areas with high proportions of unemployed or low-income
individuals or owned by low-income individuals.
We are convinced that any sound economic development program requires
the active involvement of the small business community and must produce an
economic environment in which small concerns can survive and prosper. The
President's budget for Fiscal Year 1969 recognizes that this objective underlies
programs of assistance to business, in general, and small business, in particular.
"* * * these programs increasingly seek to enlist the active participation of the
business community in the solution of deep-seated social and economic problems,
such as hard-core unemployment and regional economic imbalance. Similarly,
technological and financial assistance for small business is being brought to bear
on stubborn urban and rural economic problems."
Finally, we strive to insure that resources used in SBA programs will produce
maximum returns for small business and the general economy. Since the prospects
of any small business are closely tied to the prospects of the community in which
it is located, benefits of SBA assistance are greatly reinforced by a broadly based
community economic development program.
While we have emphasized our responsibility to assist small business concerns
in depressed urban and rural areas, we also recognize that we must promote small
business growth in prosperous areas. The rapid growth of these areas will be
favorable to the development of a numerous and healthy small business com-
munity. It is essential, therefore, that we assist small concerns to take advantage
of these opportunities in every feasible way. Sound development programs can
promote orderly growth in these areas and help avoid the critical economic and
social problems currently encountered in the more mature regional economies.
Also, in these areas, we would expect major private sector participation in our
financial assistance programs and a strong role for Small Business Investment
Companies.
Our review of the current status and future prospects of small business in the
U.S. economy has caused us to undertake a series of actions which, when com-
pleted, will improve our ability to comply with the intent of the Congress that
SBA programs should help ". . . to improve and stimulate the national economy
in general. .
First: With the cooperation of the Department of Agriculture Graduate School,
we instituted a series of Economic Development Workshops to acquaint our staff
with the principles and techniques of economic development. These workshops
emphasize the need for relating SBA's assistance programs to local economic
situations, to programs conducted by other Federal agencies throughout the
country, and to state and local economic development programs.
Second: We have installed a Reqional Economic Information System through
which we can keep our headquarters and field staffs abreast of national, reoional,
and local economic developments. The information supplied from the d'entral
Office is supplemented with data gathered locally In our area and regional offices.
Third: We have under development a Regional Programming System which
we hope to have operational by the end of the year. The System is being designed
to provide us with an economic basis for allocating our human and financial
resources to our sixty-two regional. offices. Future resource allocations to each
region will take into account (a) current local economic trends and developments;
(b) other Federal Agency programs; and (c) national goals and obj eotives.
Fourth: We have been sponsoring local Economic Development Conferences to
stimulate long-range economic development planning by local business groups
and state and local government officials. The main theme being stressed is that
economic growth is dependent upon (a) local initiative leading toward develop-
ment of good economic development plans; (b) involvement of the local business
community in developing and executing plans; and (c) cooperation between
Federal, state and local governments in providing assistance to individual com-
munities in accomplishing their economic objectives. We do, of course, explain to
the conference participants what SBA assistance programs can be brought to
bear to enhance local economic growth. The attendance at these conferences has
been excellent.
Fiftl~: We have established a good working relationship with other Federal
agencies engaged in economic development such as the Economic Development
Administration and the several Regional Development Commissions such as
Appalachia, Upper Great Lakes, etc. Our objective in working with these agencies
PAGENO="0022"
is
is to assure that there is a high degree of "dovetailing" of their programs with
those of SBA.
Finally, and most important, I have established a new "Community Economic
Development Program" directed at specific urban and rural target areas. You
will recall that Title IV, Section 406, of the Economic Opportunity Act of 1967
places additional responsibilities on SBA and other agencies to accelerate their
programs leading to the alleviation of poverty. The basic goal of our new CED
program is to stimulate local economic expansion by creating minority-owned and
managed new small businesses of substantial manufacturing or wholesale type
employing the "hard-core" unemployed residents of the target areas.
This program is under the personal direction of my Deputy Administrator,
Howard Greenberg, who will have available to him a small staff in the Central
Office, supported by "Community Economic Development Terms" located in the
designated target areas. The CED program will work with state and local com-
munity organizations in developing business and employment opportunities. They
will cooperate with and seek assistance from other Federal agencies seeking to
achieve the same goals-OEO, Labor, DHEW, and EDA.
We have established a tentative listing of target areas, both urban and rural,
for concentrated efforts during the remainder of FY 1968 and in FY 1969. We have
already made direct contact with local action groups in many communities. We
plan a modestly staffed "face-to-face" approach. The CED Teams will consist of
three well trained people. One of them will be a resident of the target area recom-
mended by the community organizations. The full gamut of SBA assistance pro-
grams will be brought to bear to achieve the goals in each target area.
SECTION IV-CAPITAL REQUIREMENTS OF SMALL BUSINESS
Largely because of variation in size standards among and within industries, no
precise estimate of the flow of capital investment into small business is available.
Extremely crude estimates, based on broad industry-wide data and national
income accounts, indicate that during 1967, gross new investment in small business
aggregated about $35 billion. This estimate includes investment in sole proprietor-
ships, partnerships, and corporations with total assets of $5 million or less.
Of the $35 billion gross investment, over 70 percent-or roughly $25 billion-
was financed by the small concerns themselves from internal sources such as
depreciation allowances, personal savings, and retained earnings. The remaining
$10 billion was financed from external sources-principally private financial
institutions, trade creditors, private individuals, and Government loans. Clearly,
means have been found to finance the progressive growth of small business in
pace with the expansion of the economy in general.
The fact that an increasing volume of new capital has flowed into small business
in an expanding economy does not, in itself, indicate that a small business capital
gap no longer exists or, if it exists, that it has been narrowed. The "capital gap"
may be defined as the difference between a volume of investment in small business
concerns which would produce benefits in excess of its cost, and the vo.ume of
investment actually made available on reasonable terms through the private
sector. Since wide differences in opinion are possible in assessing both benefits
and costs, no unique measure of the gap is possible and, to my knowledge, few
have tried to measure it. Professor Edwin Mills estimated a gap of $5 billion in
manufacturing in 1965. An additional investment of this total amount, distributed
over a period of years, would, he estimated, eliminate half the difference between
the ratio of capital to output for firms with less than $1 million total assets and
the comparable ratio of medium sized firms.
Whatever the dimension of the gap, I believe that our analysis of the per-
formance of SBA borrowers, which I shall discuss later on, indicates that it
does exist. Business loans to firms which were unable to secure adequate financing
from other sources have, in fact, realized highly satisfactory returns for the
economy, in general, and small business, in particular.
SECTION V-MEETING THE CAPITAL NEEDS OF SMALL BUSINESS
It is evident, from the foregoing, that most of the financial needs of small
business have been satisfied from private sources. Financial assistance through
SBA, although accounting for a relatively small proportion of total financing,
has played a significant role in further bolstering the competitive position of
small business. Further, the Congress has, over the years, recognized the wide
variety of small business financial needs-from the disadvantaged small pro-
PAGENO="0023"
19
prietor to firms of significant size; from small rural areas to large metropolitan
complexes-and has given us a broad span of lending programs to cope with them.
Since the authorization of the regular business loan program in 1953, several
additional financial assistance programs were authorized, namely, (1) The Dis-
placed Business Loan program, (2) The Economic Opportunity Loan program,
(3) The State and Local Development Company Loan programs, (4) The Small
Business Investment Company program, and (5) The Lease Guarantee program.
These additional programs have enhanced the ability of SBA to assist thousands
of small businessmen in their efforts to enter into the market, to expand or mod-
ernize their facilities, and in some cases, to survive. A detailed discussion of each
of our lending programs is included in the Appendix to my statement and, with
the permission of the Committee, will be inserted into the record. However, I
would like to summarize, for the benefit of the Committee, the accomplishments
under these programs.
(a) Summary of all Lending Programs (except Disaster) .-Analysis of the his-
torical performance of the SBA lending programs indicates conclusively that they
have substantially assisted in providing the capital needs of the small business
community, contributed to economic growth of the nation, stimulated private-
sector interest an d participation in Government programs, and assisted in creating
new jobs needed to meet an expanding work force.
Since the inception of our lending programs, over 117,000 businesses have ob-
tained $5.3 billion in loans and financings, of which $2.2 billion (almost 42%) was
provided by the private sector. (Table 1.)
Reliable employment statistics are available on three of our loan programs:
The Economic Opportunity Loan (EOL) Program indicates that each loan
results in 2.5 jobs, including the borrower. Thus, for the 6,297 loans made thus
far, about 15,000 job opportunities were created.
The Local Development Company (Section 502) program provided employ-
ment opportunities for 64,631 persons. (Table 20).
Reports from 1,381 firms assisted by SBIC's indicate they have increased their
employment by 11,800 jobs (29%) since the original financings were made.
In addition to these benefits, there are several additional but unquantifiable
benefits which accrue to the national economy from our financial assistance
programs, namely:
The $5.3 billion in gross financings have contributed substantially to the Gross
National Product when we consider the multiplier effects of Federal Expendi-
tures.
Added tax revenues to the States and Federal Government.
Keeping people off the unemployment rolls.
Improving family income with a consequent reduction in welfare payments.
Our analysis also shows that these significant contributions to the economy
were made at very modest loss rates. A recent study shows the estimated loss
rates to be: (a) 2.9% in the business loan program; (b) 8.9% in the EOL pro-
gram; (c) 1.5% in the displaced business loan program, and (d) 0.93% in the
Local Development loan program (Table 6).
(b) Business Loan Program.-Sinee the inception of this program, almost
81,000 loans for $3.6 billion had been approved by December 31, 1967; 55%
of the loans for $1.4 billion went into retail and service businesses and 24% for
$1.4 billion went into manufacturing (Table 2). Private sector funding amounted
to $1.2 billion or 34% of the $3.6 billion in approved loans (Table 1).
During the past year, an extdnsive analysis was made of the program to deter-
mine its benefits to the borrowers, it~ cost to the, government and its benefits to
the economy. Briefly, the analysis disclosed the following:
(1) Borrower Growth Patterns.-Ojir analysis traced the annual increase, or
decrease, in the sales, profits, net worth and assets of SBA borrowers for a period
of six years following the loan approval. The results were gratifying: Profits
increased at an annual average rate of 20% for all SBA borrowers and 14%
when new firms were excluded; assets-8%; net worth-6%; and sales-8%.
The profit growth of SBA borrowers exceeded industry-wide patterns in manu-
facturing, wholesale and services; however, SBA borrowers in retail trade lagged
slightly behind the industry-wide pattern. We also found that profit growth
under guaranteed loans exceeded those under direct and participation loans.
(Tables 8 thru 14).
(2) Cost to the Government.-A cash-flow analysis was made to determine the
ultimate net cost of the business loan program over the life-cycle of each year's
loan approvals. All income and expenses, including Treasury interest, administra-
tive costs, and losses, were considered in the calculations. The result indicates that
PAGENO="0024"
20
the Government will receive a direct return of 950 on each dollar expended. This is
indeed a modest cost in relation to the benefits of the program I previously recited.
In addition, there is substantial return in the form of increased taxes and decreased
unemployment and welfare payments.
(3) Benefits to the Economy.-A cost benefit analysis was made to determine
whether the granting of a government loan to a small businessman produced a
benefit to the ecotiomy which was at least equal to the benefit accruing through
private investment. An "opportunity cost" factor of 10% was used on the assump-
tion that this represented a minimum annual return on private investments.
The results showed that the average benefit-cost ratio for all SBA loans was 1.73.
Since a ratio of 1.0 would represent a 10% annual rate of return, we believe the
SBA program represents a significant contribution to economic growth.
Mr. Chairman, to my knowledge, this is the first time an analysis of this nature
has been made of a Government lending program. We do not claim it to be perfect
or precise. We know that the methodology and data base can be improved and we
are working in this direction. However, we believe the analysis is rdasonably good
and the following conclusions drawn on the benefits of the program are not too
far out of line.
SBA borrowers experienced very satisfactory growth in their respective com-
petitive markets and compare favorably with industry-wide experience.
SBA borrowers were presumably high risk, marginal firms, unable to secure
private financing; yet, they survived and prospered.
The program entails a very modest net cost to the Government in relation to
the benefits achieved. The direct and indirect benefits to the economy and the
production of increased tax revenues, almost without question, more than offsets
the direct net cost.
The success achieved in this program has created an increased confidence in the
private sector which has increased its participation in SBA loans in recent years,
from 19.6% in 1961 to 47% in 1967 (Table 7); this trend is expected to continue
in future years.
We plan to extend this type of comprehensive analysis to all of our loan programs
in the current year.
Our program for FY 1968 and FY 1969 calls for significant increases over
1967 in total loan volumes and increasing private sector participation (Table 7).
The 1967 level was 385.3 million of which 181.1 million (47%) was financed
by the private sector. In 1968 the comparable figures are $537 million of which
$330 million (61.5%) will be private sector financed, and in FY 1969, $649.7
million of which $388.7 million (59.8%) will be private sector financed.
(c) Displaced Business Loans.-Loans are made by SBA to small business
concerns displaced by urban renewal, highway construction, or any construction
conducted by or with Federal funds. Thus far, 1,308 loans for $96.9 million have
been made under the program (Table 15). Our program for 1968 and 1969 calls
for $54 million and $56 million, respectively. Also, we are concentrating our
efforts on increasing the private sector participation in this program from 3.8%
in 1967 to 40% in 1969. Close liaison is maintained with other Federal agencies,
such as HTJD and DOT, to assure that early contact is established with potential
displacees.
(d) Economic Opportunity Loans.-Responsibility for this program was trans-
ferred to SBA in November 1966. Considerable progress has been made sine e
that time. The program was expanded and made available through all SBA
offices. Our "management assistance" program has been made an integral part
of the loan processing and counseling is provided to borrowers. We have clarified
the loan eligibility criteria.
In the 13 months of operation under SBA, 3,712 loans for $39.7 million were
approved as compared with 2,585 loans for $26.2 million in the preceding 23
month period (Tables 16 and 17). The budget allowances for 1968 and 1969
provide for $39 million and $47 million, respectively.
We look on this program as a key contributor to the President's program for
bringing industry into ghetto and other depressed areas and for stimulating owner-
ship and management of businesses by the economically disadvantaged. As in
other programs, we are encouraging private sector financing to supplement SBA
resources. Some progress has already been made in Connecticut and Illinois.
(e) State Development Corporations (Section 501) .-We are pleased with success
of the State Development Corporation program, particularly because it has not
required extensive outlays of Federal funds. Thirty-nine (39) states have enacted
legislation to establish the Corporations. Only seven have borrowed funds-
$14.5 million-from SBA (Table 18). Yet, 19 of the Corporations reported that
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on September 30, 1967, they had outstanding 836 loans totaling $76.4 million,
of which 90% went to small businesses. We expect the private sector to continue
to finance corporate activity and have accordingly only budgeted a modest $5
million for each of FY 1968 and FY 1969.
(f) Local Development Companies (Section 502) .-The Local Development
Company program is one I like to describe as a "peoples program" because it is
pre-eminently a local, self-help program. Each company must be principally
composed of, and controlled by, persons residing or doing business in the com-
munity. The benefits of the program accrue to the people in the community-
not just the company oi the small businessman.
Since the inception of the program in 1959, a total of 1,556 projects costing
$305 million had been approved by December 31, 1967. Of this amount, SBA
financed $219 million (71 %), the Local Development Companies raised $69
million, and private lending agencies provided $17 million. The small businesses
financed under this program report that 64,631 employment opportunities have
been provided (Table 20).
During FY 1967, 70% of the 338 loans were made in communities with under
10,000 population; 23.4% were in depressed areas such as Appalachia; some were
used to assist in diversification of industries; others to expand existing businesses;
41.2 % went into new businesses. A wide range of industries was involved: Manu-
facturing-189; Services-83; Wholesale-retail-45; Construction, Transporta-
tion, Recreation, etc.-21. With its proven capacity to stimulate economic
growth at the local level, this program will continue to have a high priority in our
operations.
The program for 1968 calls for 413 projects costing $79 million, excluding Local
Development Company contributions; comparable figures for FY 1969 are 479
projects costing $84.7 million.
(g) Small Business Investment Companies.-We view the SBIC program as an
important and vital SBA resource to aid small business, and as a substantial
contributor to business profitability and job ere~tion in both urban centers and
local communities. From the inception of the program in 1959 to March 31, 1967
(the latest reporting date for the program evaluation report):
SBIC's had made 26,751 financings totaling $1,179 million.
SBIC's had assets of $691.5 million, of which only 36% represented
borrowings from SBA.
Reports from 1,381 SBIC-assisted firms indicate they have increased their
employment by 11,800 jobs (29%) since the original financings were made.
Thus, for every $9,000 in SBIC disbursements, one new employee was hired.
To put it another way, for every $3,000 in SBA seed money, $6,000 was
added by SBIC's to create a new job opportunity.
The accumulated information which we have available regarding the impact
of the SBIC program on small businesses and job creations is still sparse. The
information available covers only two years since the installation of the requi,rement
by SBA for SBIC's reporting data on their portfolio concerns. As the data builds
up on the small business concerns financed by SBIC's, a more complete and
profound analysis can be made of this impact. The i~iformation which is available,
however, demonstrates the high potential of the program to provide assistance to
small busine~s concerns. For instance, a comparison of pre-financing and March
1967 data indicates that-
Gross Revenue increased 42 percent on the average for the small business
concerns.
Profits showed an increase of 100 percent, from $11.1 million to $22.2
million.
Net Worth increased 18.8% from $179 million to $213 million.
Total Assets increased 36.8% from $711 million to $973 million.
Short-term borrowings increased 22.2% from $113.4 million to $138.6
million, demonstrating the increasing ability of SBIC financed concerns to
secure funds from other sources.
We feel that the SBIC program is particulaily valuable in providing assistance
to small businesses in the manufacturing and technical innovation fields, not
only by supplying loan or equity financing to these concerns but in providing
management assistance and financial expertise to the principals of the small
concerns, which is often as valuable as the funds provided.
The legislative enactments of 1966 and 1967 have done much to strengthen the
SBIC program and improve its image. We believe we now have the tools to
properly administer the program to assure that it achieves, more effectively, its
intended purpose-to provide venture capital and long-term loans to small
business.
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22
In the 18 months ending December 31, 1967, we examined 657 SBIC's and
corrective action was instituted on all noted violations. In calendar 1967, 121
SBIC's surrendered their licenses under enforcement actions taken by the Agency,
voluntarily or through mergers and 30 were in the final stages of the surrender
process. At the end of February 1968, there were 547 SBIC's in the piogram.
The Small Business Investment Act Amendments of 1967, significantly affect
the future of the SBIC program.
These Amendments:
Stress the importance of venture capital for small business.
Increase the amount of Government funds available to SBIC's.
Permit creation of an Advisory Board for the program.
Give SBA additional guidelines in issuing licenses.
Limit bank ownership of SBIC's but expand the amount banks may invest
in SBIC's, and:
Require SBA to examine SBIC's annually.
With the effective date of these amendments, SBA issued a comprehensive
new package of regulations which revised, simplified, and reorganized the existing
regulations.
The SBIC industry today is in the most promising position that it has been
in for some years. It is now gaining recognition as a financial institution; its
profits have been rising, and unrealized and realized appreciation of its investments
have been greater; its management is more experienced and many companies
have developed high quality staffs and it has learned how to invest in high-risk
growth situations with the best chance of maximizing profits and minimizing losses.
However, the industry is faced with several problems which we are attempting
to help solve. To name a few:
Attracting more private funds into the program.
More complete area coverage, and
Increasing the turnover of the SBIC's portfolio investments.
We are aware and we are sure that the SBIC industry is equally aware that
the program has not as yet reached full maturity, but we have high hopes of this
program becoming one of the more successful Government-sponsored aids to the
small businesses of the nation.
We will discuss the SBIC program, in detail, at the session which the Committee
will devote to the SBIC program.
(h) Disaster Loan Program.-TJnder Section 7(b) of the Small Business Act,
loans are made to victims of disasters-floods or other other catastrophes. Over
the life of the program, there have been 599 disaster declarations in the 50 states,
Guam, Puerto Rico and the Virgin Islands.
A total of almost $616 million for 68,953 loans has been approved, of which
(a) over $585 million pertained to physical damage from floods, hurricanes, etc.,
(b) over $28 million for economic injury losses, and (c) nearly $3 million for
product disasters (Table 22).
Under this program, we provide loans to businesses and householders who
suffer losses as a result of riots. Loans totaling $3.4 million were made in Detroit,
Michigan and Newark, New Jersey after last year's riots.
In recent months, we have had this program under intensive review to improve
operating procedures, reduce paperwork, and tighten up the loan policies and
eligibility criteria.
Considerable improvements have already been effected in the paperwork and
procedural aspects. With respect to loan policies and eligibility criteria, I have
made the following changes:
Loans to Househokters
1. Effective March 19, 1968, regulations have been revised to require use of
both cash and liquidable assets held by householders to the extent it does not
create hardship. In addition, private credit to the extent it can be obtained on
reasonable terms and costs shall be used by any householder where the gross in-
come is in excess of $10,000 plus $600 additional allowance for each dependent
other than the applicant.
2. The limit of SBA share of loans to any one household group may not exceed
$20,000 for repairs or replacement of structures. Up to $10,000 in addition to, or
separate from, funds for structures may be approved for repair or replacement
of household goods. The total for both purposes combined, however, cannot exceed
$25,000, SBA share. Over 98 percent of all home loans made are within this limita-
tion. We can, of course, guarantee bank loans, where necessary, in excess of the
limitation.
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23
3. No refinancing of debt of any type is permitted, except on existing SBA dis-
aster loans made as a result of a previous disaster, in order to provide better ability
to repay the total debt to SBA. This requires no additional outlay of SBA funds
and aids in loan administration by having only one loan to service.
Loans to Bnsinesses
1. In addition to insurance recovery, cash and securities convertible to cash,
owned by the business or by a firm controlled by applicant, must be used to the
extent that the total available is in excess of funds needed to meet normal payroll
requirements for a period of 30 days.
2. Any other assets not required in the normal operation of the business, which
can be liquidated for 90 percent of value, must be disposed of and funds used to
alleviate disaster losses. Where time is needed to liquidate, the proceeds when
obtained must be applied to reduce the principal amount of the loan made.
3. Where a firm has total equity of three times total debt, privately supplied
funds must be obtained for any excess over this ratio to the point the assets to
liabilities fall below the 3 to 1 ratio. After such private credit is obtained to this
extent, a disaster loan may be considered for additional funds needed.
4. The foregoing paragraph 3 shall not apply to any firm with a post disaster
adjusted net worth of less than $10,000. None of the requirements of this section
on business loans is applicable to churches, hospitals, privately owned schools
and colleges or eleemosynary institutions although loans to such entities are
considered business loans.
5. In no event will a loan to any firm or business-classed entity be in excess of
$100,000, SBA share. Bank guarantee loans can exceed this limit.
General-Apply to Both Honseholds and Businesses
1. No funds will be provided to repair, replace or rebuild, which will increase
the size or capacity of any structure, except as may be required by applicable
ordinances.
2. No funds will be provided to repair or replace household goods or machinery
and equipment which would upgrade the quality, Fize or capacity of the repaired
or replaced item.
3. Where a firm or individual uses its own labor to restore property, funds may
be approved for materials only. Whenever controlled or affiliated contractor is
used, funds shall be approved only for the actual labor and materials used for
the work. No profit or overhead costs shall be allowed.
4. Disbursements will be made only based on submission to SBA of bills and
cost records covering work completed and/or materials and equipment delivered
except up to $1,000 can be disbursed in advance of purchase, to householders to
buy items of replacement furnishings and equipment costing not more than $50
each.
Economic Injury Loans
Loans to small firms for economic injury where there is an Agriculture, Presi-
dential or SBA Diseased Products declaration will be made on the same basis as
previously except that the use of available resources and credit shall apply, and
the loans shall be limited to $100,000 to any one firm or group of affiliated firms
for combined injury under any one disaster. Bank guarantee loans can exceed
this limit.
SECTION vi-L0AN POLICY AND ELIGIBILITY
In its report on the hearings conducted in July of 1966, this Committee ex-
pressed some concern about the establishment of loan priorities. I have given this
subject considerable thought in the light of the SBA mission and the national
economic objectives of the President.
(a) Loan Policy.-The organic law and legislative history of SEA adopt a
philosophy of encouraging the growth of small business (much as national policy
has supported the family farm), and of strengthening competition. The two
purposes are tied together and usually accomplish the same objectives because a
large and thriving small business population restrains oligopoly and enhances
competition. In addition to these two objectives, there is today a major policy
at national and local levels to promote a sustained high rate of economic growth
with a geographically balanced development and major emphasis on the elimina-
tion of poverty in urban slums and rural areas. As a general SBA policy, therefore,
allocation of SBA resources are made through administrative limits, so as to
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24
maximize all three goals, being superior to an allocation which satisfies only one
or two goals.
A result is an evolution of the SBA role in the national economy. Its programs
must be highly sensitive to national economic policies. In the forthcoming years,
therefore, the loan policy of SBA will reflect a number of significant changes on
program emphasis, including:
1. Increased attention will be given to a comprehensive approach to
economic development through the coordinated efforts of Federal, state and
local governments and the private sector of the economy.
2. There will be an increasing need to assist small businesses in expanding
primary employment in central cities and rural poverty areas particularly
those firms which reduce unemployment by hiring structurally unemployed
and upgrading the skills of those already employed.
3. There will be a need to increase the number of businesses of relatively
substantial size in both central cities and in underdeveloped rural areas.
4. Continued pressure to achieve equal economic opportunity objectives
will reQuire further expansion of programs designed to extend opportunities
for business entrepreneurship to disadvantaged persons and groups.
5. Greater attention will need to be given to achieving a reasonable balance
among industries and geographical areas in the distribution of SPA resources
to stimulate lagging industires and local economic development in depressed
or slow-growth areas.
Notwithstanding the fact that the resources available to SPA will fall short of
demands, skillful evaluation of applications for assistance in the light of their
prospective economic returns will hopefully obtain maximum return from SBA's
resources to the nation.
(b) Loan Eligibility Criteria-Closely allied with overall business loan policy
is loan eligibility and this area, too, is subject to renewed scrutiny.
Because it is a public agency using taxpayers' funds, SBA has an unusual
responsibility as a lender. In many instances, loans cannot be made because SBA
is stopped by law. For example, tl.e law does not permit SPA loans to be made if
the funds are otherwise available on reasonable terms. Another example, under
our interpretation of the law, we do not make loans to applicants which are non-
profit organizations.
Also, SBA has a history of established policy which makes ineligible, for one
reason or another, the making of loans to certain types of businesses. This is not
to imply that there have been no changes throughout the history of SBA with
regard to loan eligibility policy. To the contrary, there have been several areas
in which review of existing eligibility criteria has resulted in a change, making
additional small businesses eligible for SBA assistance such as iii the EOL program.
One of my eaily undertakings as Administrator was to establish a task force
under the direction of the Deputy Administiator to examine all SBA loan eligi-
bility criteria.
The task force has made progress and is still reviewing the several areas of eligi-
bility from the standpoint of law and of logic. Relevant questions are being ex-
plored: What is prudent from the money management point of view? What is the
congruity of each policy with the mission of the Agency? What is the supporting
logic behind each eligibility policy?
Defense of present policy is not desired nor are pre-judgments to be made by
the task force. Nor is the task force considering the political, social, or moral
aspects of existing eligibility policy. These aspects will be considered by me after
the criteria have been considered by the task force from the standpoint of law and
logic.
The study of eligibility criteria is an effort of SBA to avoid complacency and to
make available SBA assistance of every kind to as many small businesses as
possible as a public agency.
In Summary-SBA loan policy and eligibility criteria can never remain static.
They must be flexible. They must be under continuous review if SBA programs
are to achieve the intent of the Congress and keep pace with changing national
and local economic trends and national social goals established by the President.
I am convinced that a rigid loan priority system is neither feasible or desirable.
I am equally convinced that we can maximize the returns from our loan dollars
if they are applied in the right areas, in the right industries, and within the frame-
work of well developed action plans designed to uplift the economy of a given area.
These are the guidelines under which we are operating today. Loans are being
accepted from all eligible businessmen and approvals are made keeping in mind
the need for maximizing returns to the nation and the economy.
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SECTION VU-PROCUREMENT A~D SALES ASSISTA1~fCE TO S~ULL BUSINESS
The general objectives of our Procurement Assistance program are to increase
the share of awards to small business at both the prime and sub-contract level,
and to decrease the number and severity of the problems which small fIrms ex-
perience either in being considered for awards, or in the field of contract ad-
ministration.
Since 1960, there has been a dramatic rise in total Federal procurement and
the amounts going to small business (Table 23).
In 1967, Federal procurement totaled $49.8 billion, an increase of 92.2% over
the $25.9 billion in 1960. The amount going to small business more than doubled
and reached $10.2 billion in 1967, an increase of 117% over the $4.7 billion in
1960. Percentage-wise the small business share increased from 18.3% of the total
in 1960 to 20.5% in 1967. We believe this trend speaks well for the efforts expended
by SBA and for the cooperation we are receiving from the procurement activities
of the Government. However, we are not resting on this past record. We intend to
continue to press for larger shares of procurement for small business and would
like to raise the level to 26% by 1975.
In addition to prime contract awards we are, in cooperation with DOD and
GSA, engaged in an effort to induce big business prime contractors to increase
their sub-contracting with small business. We are working with 39 large Govern-
ment contractors to seek out more small firms for sub-contract work. In FY
1968/9, the number of prime contractors will be increased from 39 to 74 and the
number of plants from 244 to 324. We also have established "Project Upgrade"
which is designed to assist submarginal small firms to improve their capabilities
for sub-contract work. The sub-contract program already is producing good results.
In FY 1967, DOD, AEC and NASA prime contractors reported that they had
placed $7.3 billion in sub-contracts with small firms (Table 23). If we add this
amount to the $10.2 billion in total prime contracts awarded to small business,
the total would represent 35.2% of the 1967 Federal procurement dollar, as com-
pared with 20.5% (Table 23).
I am glad to report that after little more than a two-year lapse, the procurement
set-aside program was resumed on November 1, 1967. We have 18 representatives
working at major procurement activities of the Department of Defense and are
budgeting for full implementation in 1969. These representatives open up new
opportunities for firms to compete by recommending, when appropriate, that
sole source procurements be made competitive; recommending that separate
portions of large planned procurements, or suitable components of end items~
be purchased separately so small firms may compete; locating additional small
business suppliers for these opportunities; and recommending modification of
unduly restrictive specifications.
To help reduce contract administration problems of small firms, we plan to have
representatives stationed at Defense Contract Administration offices. There they
can serve as a "friend in court" in such matters as inspection problems, problems
of delay in performance caused by the Government, or causes beyond the control
of the small firm, progress and other payment problems, and proprietary rights
problems (Table 24).
We have recently started some special studies to determine, on a geographic
and industrial basis, where the Federal procurement dollar is being spent. The
first such study dealing with a contract density index has recently been completed
The contract density index is a useful measure of the relative impact of Federal
procurement among SBA regions and areas. The index represents the ratio of
each region's or area's share of total procurement to its share of total manufac-
turing shipments, converted or a base of 100. An index of 100 for an area or region
means that its share of total Federal procurement equals its share of manufacturing
shipments. Indices above or below this base measure the degree to which the
area or region has exceeded or fallen short of its proportionate share of Federal
procurement awards.
The wide dispersion of the index (from a low of 20 for the Boise and Sioux
Falls regions to a high of 900 for the Washington metropolitan region) reflects
major variations in regional industry mixes (Table 25).
The twenty-seven regions with the highest indices (125 and above) generally
contain medium or large metropolitan areas which have emerged as growth
centers for new industries serving the needs of the electronic, missile and space
age. Illustrative of these are most of the regions of the Northeast Area; Jackson-
ville and Miami in the Southeastern Area; and Los Angeles, San Francisco and
San Diego in the Pacific Coastal Area. Indices of 80 or lower were recorded for
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2~
29 regions. These include~-two principal types of region: (1) regiQns containing
metropolitan complexes with high concentrations of manufacturing concerns
producing basic materials, heavy equipment, production equipment and automo-
tive vehicles-such as Pittsburgh, Birmingham, Chicago, Detroit, Cleveland and
Portland; (2) regions which are predominantly rural with limited manufacturing
facilities largely devoted to supplying local markets on processing local primary
materials-such as Clarksburg, Jackson, Augusta, Little Rock, Des Moines,
Boise and Spokane. In some instances, a high concentration of service-type contracts
may distort an index based upon manufacturing capabilities. This explains, in
part, the abnormally high index (900) for the Washington metropolitan region.
* The Certificates of Competency program is designed to give small firms a better
chance to participate in Government procurement. If a small business bids low
on a Government contract, and the contracting agency feels that the firm does
not have sdequate productive capacity or credit to fulfill the contract, SBA is
authorized to investigate the competency of the firm. SBA may issue a COC based
on a thorough study of the company's operations. The contracting agency must
award the contract to the small business when the certificate is issued. SBA
follows the progress of the contract until it is completed. If the contractor has
difficulty meeting production schedules because of technical or other problems,
SBA offers assistance.
The program also makes available to the Government the services and products
of those qualified small firms that have submitted low bids on particular purchases.
This enables the Government to realize a saving and the Government, as well as
small business, benefits.
Since it began through FY 1967, the COC program has saved the Govein.~
merit $29.8 million through the acceptance of low bids on the 2 111 COC's issued.
In FY 1967, the total savings were $1,498,000 based on 141 ÔOC awards made
for $22.8 million.
Another 94 awards valued at $14.3 million were made without the necessity
of issuing COC's after SBA supplied specific information to contracting agencies.
The savings, by accepting these low bids, exceeded $1.5 million.
Section 8(a) (1) of the Small Business Act declares it to "be the duty of" SBA,
and SBA is empowered whenever it "determines such action is necessary" to
enter into procurement contracts with other Government agencies on such terms
and conditions as the parties agree.
SBA is authorized by Section 8(a) (2) to sub-contract to others the perform-
ance or contracts it has obtained. This authority had not been exercised by
previous SBA Administrators. Our decision to utilize this authority was prompted
by the President's Test Cities Program announcement proposing to "mobilize
the resources of private industry and the Federal Government to help find jobs
and provide training for thousands of America's hard-core unemployed." In addi-
tion, the Economic Opportunity Act Amendments of 1967 added Congressional
emphasis and direction for our use of this authority. In utilizing 8(a) in the con-
text, we are trying to encourage small business development in areas which require
economic stimulus and small business participation in resolving a critical national
problem of developing job opportunities for the hard-core unemployed in our
country.
We are moving carefully in employing our 8(a) authority. Our initial effort
was focused on the five cities in which the Test Program operated-Washington,
Boston, Los Angeles, San Antonio, and Chicago. With the full cooperation of the
Department of Defense and the General Services Administration, we are jointly
determining the items that are relatively simple to manufacture; that have a
large continuing requirement; and that generally lend themselves to the training
and skill development needs of the hard-core unemployed. We are seeking out
qualified small business firms that are interested in participating in this program.
Other Government agencies are assisting us in developing a procurement package
that will be acceptable to the small business sub-contractor who is being asked to
assist not only in training of completely unskilled individuals, but also in providing
permanent jobs. The Labor Department has agreed to expedite its consideration
of training program requirements that can be included in our negotiations with
potential sub-contractors.
Arrangements have been made with Lackland Air Force Base for a contract
to supply troop issue bakery items. We have sub-contracted with an existing
supplier, and we are assisting in expanding a small minority-owned bakery in
San Antonio to which we will sub-contract a portion of the requirement. Both
firms plan to work with the Labor Department in a training program. A loan
application from the second firm to assist in its expansion plans is now being
processed by our Agency.
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27
In Washington, D.C., ~e, are working initially with a large business concern.
In this particular case, the large concern in conjunction with a local civic organiza-
tion is setting up a Local Development Corporation. The Cbrporation will provide
opurating capital for a newly formed small business firm to *hich SBA will sub-
contract for military ret~uirements.
For the initial production item, we are taking contracts from the Defense Supply
Agency for wooden pallets nnd boxes. These will be sub-contracted to the small
manufacturer and will provide a production base from .which this business can
be launched suece~ssfully. Eventually, the firm plans to expand into electronic
assembly work. At least 60 hard-~re unemployed will be brought into the training
program during the initial phase of this operation.
The Labor Department has agreed to a 12-week training program and the
Economic Development Administration will provide assistance for necessary
management and technical advice.
SBA seeks to assure full opportunity for small logging and milling concerns to
bid on Federal timber sales. To do this, SBA and the appropriate Federal sales
agency set aside certain timber sales for bidding by small concerns only. Since the
inception of this program in 1959, SBA-sponsored set-asides have averaged almost
$6 million annually. It i~ expected that set-asides will be $14 million annually by
FY 1969.
SEA also has programs to assist small firms in purchasing surplus Government
property; to promote the interests of small business in the purchase of stockpile
items; and to encourage the Department of Commerce to keep in mind the interests
of small business when preparing regulations governing the allocation of critical
materials.
In Summary.-The major SBA procurement assistance events during the rast
year involved:
Re-establishment of the Agency's "procurement set-aside" program.
Expansion of the sub-contracting program to gain more Government
business for the small producers.
Increased activity in the Certificate of Competency program.
Activation of the 8(a) procurement program in furtherance of the Presi-
dent's Test Cities effort to provide more jobs for the hard-core unemployed.
Re-staffing of the procurement centers with SBA representatives to assure
continued attention to the small business potential by the procurement
officers.
SECTION VIII-IMPROVING MANAGEMENT AND EFFICiENCY OF SMALL BUSINESS
(a) Business Management Assistance.-Our Office of Management Assistance
conducts a number of programs designed to assist businessmen in their day-to-day
operations. This Office-
Publishes factual pamphlets and booklets covering the whole spectrum of
small business operation;
Provides counsling services through its own network of Management
Assistance officers in 73 cities;
Offers Counseling at Local Levels Program which brings the services of
SBA counselors to about 500 cities per quarter;
Makes arrangements with educational institutions to provide both day and
evening training sessions in business subjects for established businessmen as
well as potential entrepreneurs;
Manages a cadre of 3,210 retired executives (Service Corps of Retired
Executives) who volunteer to provide their expertise to small business free of
charge.
During Fiscal 1967, 3,400,000 copies encompassing 500 different business
subjects were distributed. Our publications are written by distinguished authori-
ties in the business field, either as a public service or for a modest fee. Interest in
our publications is continually growing.
The overwhelming majority of all publications distributed was a direct result
of specific requests from individuals, corporations, governmental institutions,
State governments, foreign governments, and banks. Many police departments
have recently requested volume amounts of publications dealing with crime
prevention measures which small businesses located in ghetto areas may be able
to take.
During 1967, the Agency set up more than 2,000 business education courses,
workshops, seminars, or conferences. This training varies from a course meeting
one night a week for 8 to 10 weeks; a one-day workshop for prospective business
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owners; or a one-day conference for established small business owners. Approxi-
mately 73,000 small businessmen and potential small businessmen attended such
training units in FY 1967. This past year there has been a sharp increase in
attendance by relatively young people and members of minority groups who
desire to own their own businesses.
The 3,210 volunteers in SCORE helped more than 11,500 businesses and indi-
viduals last year. These ranged from one-time visits to small stores to assist in
such problems as bookkeeping, inventory management, customer stimulation
and other subjects, to intensive day-to-day counseling. An outstanding example
of the service rendered free of charge by individuals in this category is seen in
the case of help given to a Cooperative in a small Louisiana town. A retired Vice
President of General Mills went from Minnesota to Louisiana (travel paid by the
SBA, but no salary) and as a result of his visit, the Cooperative's ventures into
the baking industry, and the retail grocery and gasoline business, was completely
remade.
(b) Promotion of Small Business in Export Trade.-On November 13, 1967, SBA
and the Department of Commerce formally signed an agreement to help the na-
tion's small businessmen enter export markets and share in the benefits of our
expanding export trade. The agreement provides for close cooperation between
SBA and the Commerce Department's Office of International Trade Promotion to
expand U.S. exports to help improve the nation's balance of payments. Under this
agreement, SBA will give additional emphasis to loans to small business for
participation in U.S. export trade. SBA will also encourage small businesses to
participate in U.S. commercial exhibits, in U.S. Trade Center exhibitions in trade
missions and trade conferences. SBA shares the frequently expressed confidence
of the House Select Small Business Committee that American small businessmen
possess the competence and ingenuity to compete successfully in export trade,
provided they have a knowledge of foreign market potential for a given product,
or service and follow sound marketing management practices.
The two agencies, together with American-flag carriers, have set up a series of
at least 12 foreign trade conferences in the United States during 1968. A highly
successful conference was held in Boston in which Pan American World Airways
Cargo Service joined the Government agencies. Another has been held in Seattle,
Washington, with Northwest Airlines joining Commerce and SBA as sponsors,
with 64 new potential exporters signing up.
Preparations are underway now for conferences in Phoenix, Atlanta, Los Ange-
les, Jackson, Chicago, Cleveland, Louisville, Miami, and other cities of small
business manufacturing concentration.
(c) Technology Utilization.-In the middle of 1967, SBA undertook to assist
to the small business manufacturing community (300,000 companies) to obtain
some of the benefits from technology information generated as a result of Govern-
ment-sponsored research and development. Two programs have been activated:
First, the scheduling of technology utilization conferences throughout the coun-
try and technology transfer workshops to encourage the potential commercial
application of technical advances from space, nuclear energy and other programs,
and
Second, the screening of technical information resulting from Government-
sponsored research and development and publication of selected items in special
industry-aimed pamphlets.
During the past six months, three highly successful general conferences have
been held and an additional 23 are scheduled in the major manufacturing centers
of the country. Conferences and workshops are co-sponsored with SBA by such
agencies as NASA, AEC, State Technical Services and are participated in by
technical staffs from those agencies.
Smaller, industry-oriented, workshops have been held with the co-sponsorship
of universities and trade associations, such as the Tool and Die Institute. It is
estimated that more than 500 companies have already reacted to conference and
workshop attendance by requesting additional and more detailed information
on specific technical subjects.
Many publications will be issued in the coming months. The fitst publication,
dealing with Electrical and Electronics Advances, has been issued and will reach
a selected audience of 17,000 manufacturing firms. Other carefully screened pub-
lications will appear later in the year and will cover such subjects as: Advances
in Tools, Dies, Jigs, and Fixtures Technology; Advances in Welding, Brazing and
Soldering Technology; and Selected Advances in Instrumentation Technology.
PAGENO="0033"
29
SECTI0N~ IX-LEASE GUARANTEE PROGRAM
The Lease Guarantee program was authorized by the, Housing' and Urban
Development Act of 1965~ as new Title IV of the Small Business Investment Act.
Initially, the program Was limited to those firms suffering substantial economic
injury as a result of Federally aided projects, such as urban renewal and highway
construction, and to businessmen who could qualify as Economic Opportunity
Loan applicants. On January 9, 1968, under an amendment to the Small Business
Investment Act, the progrlLrn Wils broadened to inckitle all anlail businesses eligible
under policies established for SBIC and SBA business loans. The program will
enable small businessmen to lease space at prime locations without the necessity
of a Triple A rating that requires a net worth of $1 milliou.
The operating procedures and guidelines for this program have been carefully
designed to assure complete compliance with the intent of the Congress:
First, we are seeking the participation of private companies, with SBA acting
as re-insurer. We are also urging development of private lease guarantee programs
without Government parcicipation. Regional conferences were held' in 1967 in
Chicago, Washington, New York, San Francisco and Dallas to present our plans
for the program. Superintendents of State insurance departments and representa-
tives of private casualty insurance companies attended these conferences. Par-
ticipation agreements have been signed with three private companies.
Second, on May 13, 1967, a pilot program was launched to test the soundness
of the procedures and i4entify needed improvements in the rate structure.
Third, with the advice of outside experts, a risk rating system was developed
to measure the risks incident to successful operation of a business, i.e., manage-
ment capabilities, financial position, location and economic evaluations. The
adequacy of the fees established in the rate structure will be continually evaluated
as the program proceeds.
Agency staffs are being trained to handle the public inquiry publicity and process-
ing of Lease Guarantee applications, both direct and in participation with
insurance companies.
Of the three insurance companies with whom we have signed agreements,
one company is actively receiving applications in 30 states, and has already, at
this date, submitted 24 applications for reinsurance.
An active program to obtain broader participation by insurance companies
has been implemented. On February 14, 1968, a conference for this purpose was
held with eight midwestern companies and two insurance trade associations,
National Association of Independent Insurers and American Mutual Insurance
Alliance
The program was explained to each of the state insurance regulatory agencies,,
and SBA continues to `work with each state agency. Reception by the states of
the Lease Guarantee Program is good.
In addition, we are working with the `Life Insurance Association of America,
American Insurance Association, American Society of Real Estate Counselors,
National Associatien of Real Estate Boards, International Council of Shopping
Centers, and the Urban Land Institute to broaden interest in all fields of Lease
Guarantee activities.
Forty-four Lease Guarantee commitments have been issued nine of these in
participation with insurance companies. Twenty-three commitments are to
prospective EOL tenants in a shopping center of Cuban refugees in Miami,
Florida. These are highly qualified small business people who will also obtaii~
Economic Opportunity loans. Participation of these guarantees is being developed
with one of our participating insurance companies. Long-term mortgage financing
of the shopping center is provided by one of the major insurance companies.
In the same geographical area, we have issued direct lease commitments on
three day-care centers for pre-school children, with 100% bank financing obtained
because of Lease Guarantee. The mothers can now obtain jobs and escape from
dependency upon welfare benefits.
A direct lease guarantee issued to a small Cleveland, Ohio, firm enabled it to
get space in an industrial park. Other projects being processed involve twO large-
sized groups of merchants in Chicago and one group in White Plains, New York,
and agencies in Washington, D.C., displaced by urban renewal projects who are
working together to develop new urban shopping plazas. Because of Lease Guaran-
tees for these displaced small businesses, long-term mortgage financing for land
purchase, design and construction costs becomes available. We are finding that
we are able to obtain lower interest rates for the developers for this financing and
willingness to extend greater dollar participation because of Lease Guarantees.
95-193-68----3
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30
Total private investment in these projects is estimated to be in the neighborhood
of $28.2 million.
The proportion of direct guarantees is presently high in relation to participa-
tions, but it is anticipated that the ratio will reverse in the future. We hope that
of the total, direct writings will be about half of participations, although this
may not take place during the next fiscal year.
SECTION X-$MALL BUSINESS SIZE STANDARDS
To carry out the policy of the Congress that the Government should assist
small business concerns in order to increase the competitive strength of the small
business, it is essential to channel the benefits of the programs of the Small
Business Administration to those businesses which need assistance to overcome
any disadvantages because of their small size.
Since 1953 the small busine~s size standards of the Agency have been de-
veloped on the basis of studies of the size structure of the business economy and
the experience gained through the administration of the size standards. Studies
were made of whatever information was available concerning the structure of
the business economy and the disadvantages of small businesses. Most weight
was gi~ven to the statistics compiled by the Bureau of the Census for the manu-
facturing industries, the whole sale and retail trades, and selected services in the
development of the definitions of small business for these industries. Through
the years, there has been a continuing effort to improve the size standards on
the basis of new statistical and other factual evidence.
During the first half of calendar year 1967, 1963 Census of Manufactures size
data became available. Concentration ratios for the manufacturing industries
were analyzed together with the 1963 data tabulated by size of establishment
and the comparable 1958 data. Studies were made also of the multiunit company
data for the wholesale and retail trades and for selected services. Using the tech-
niques which had been employed previously in the development of the small
business size standards, some revisions were indicated. On the basis of these studies,
the Administrator proposed revised and new definitions of small business for cer-
tain industries. These proposals were published in the Federal Register in June
and July of 1067.
interested persons were given an opportunity to file written statements of facts,
opinions, or arguments concerning these proposals. Divergent views were expressed
by many persons interested in the proposal to revise the small business size
standard for financial assistance to small petroleum refining companies and pro-
curement assistance to small companies bidding on Government purchases of
refined petroleum products. As a result, a hearing was held on October 9, 1967.
The statements made at the hearing, together with all other relevant information
available, were given further study and it was decided to retain the present small
business size standard. Tinder the present size standard, any business concern
having an average of 1,000 or fewer employees, including affiliates, and not more
than 30,000 barrels per day crude oil or bonn fide feed stock capacity from owned
or leased facilities, is classified as small.
A hearing was held also on November 30, 1967, to get the views of interested
persons regarding the present small business size standards for the construction
industries. After consideration of statements made by members of the industry
and all other pertinent available information, it was decided to retain the present
definitions of small business for the construction industries. The definition of a
small construction concern for SBA loans is any such business that has average
annual receipts not in excess of $5 million for the preceding three fiscal years. The
definition of a small construction concern for Government procurement assistance
is any concern bidding on a contract for construction work that has average
annual receipts for its three preceding fiscal years not in excess of $7Y2 million,
except for dredging. The size standard for dredging is $5 million.
During 1967, some size standards were revised or newly established for certain
manufacturing industriea, wholesale and retail trades, and selected services.
Howevdr, some of the proposed changes have not yet been made. As indicated
above, there is a need for continuing studies to improve the de~1nitions of small
business on the basis of changes in the competitive position of small business.
In addition, there is need from time to time to review the thinking and the tech-
niques leading to the development of the small business size standards. For these
reasons, an interoffice Size Standards Task Force was organized as a working
group to develop further information that should lead to the further improve-
ment of the present small business size standards.
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It is contemplated that the work being done will provide a better foundation
for the definitions of small business to guide future aQtions designed to assure the
channeling of Federal programs where they will do the most good for the small
businessman and the national economy.
SECTION XI-SMALL BUSINESS "ADVOCACY" rEOçIR4~SI
Section 8(c) of the Small Business Act requires that SEA make studies of
matters materially affecting the strength of small business and of the effect of
Federal laws, programs and regulations on small business. Section 10(f) permits
the Administrator to consult with other Federal agencies in the formulation of
policies affecting small business interests. The Administrator can make recom-
mendation to other Federal agencies "for the adjustment of such programs and
regulations to the needs of small business" and may request other agencies to
consult and cooperate with SBA in order to recognize, protect and preserve
small business interests.
The basic mission of the Small Business "Advocacy" program is to comply
with these Congressional mandates. Existing and proposed programs and regula-
tions of other Government departments and agencies are studied to identify those
which would tend to put a segment of the small business community at a com-
petitive disadvantage compared to large business and to advocate changes or
modifications in such programs or regulations. We believe this program to be
extremely important to protect the interests of small business. For this reason,
it is under the direct supervision of the Deputy Administrator with staff support
from the Office of General Counsel and other operating divisions of the Agency.
Recent Examples of Advocacy Mat~ers.-During the past six months, SBA has
intervened on a formal basis, in two proceedings before the Federal Maritime
Commission and the Civil Aeronautics Board:
1. The FMC conducted an investigation in the form of a public hearing
on the disparity of inbound and outbound freight rates between the United
States and the United Kingdom. SBA participated in the hearing and filed
a brief pointing out that the disparity in freight rates between inbound and
outbound traffic, as well as the disparate rate structure in outbound traffic
alone, has seriously disadvantaged small business.
On January 31, 1968, an initial decision was issued by the Examiner of the
Federal Maritime Commission which sustained the SBA position suggesting
both voluntary reforms and guidelines to assist in establishing carrier rates.
2. The CAB instituted a proceeding to determine whether helicopter
service between Washington, Baltimore and the three area airports, on a
non-subsidy basis was warranted in public interest, and if so, which of the
applicants should be certificated, SBA participated in the hearing and has
filed a brief setting forth the advantages accruing to small business from
such a service and arguing that certification should go to an applicant that is
a small business as defined by SBA regulations.
On an informal basis, during the past year under this program, SBA has been
in contact with nine executive departments and eight agencies of the executive
branch concerning the problems of some segment of the small business community.
For example, the National Ice Cream Mix Association, Inc. complaint of unfair
standards promulgated by the Department of Agriculture resulted in SBA con-
ferring with the Department of Agriculture to attain an easing of the standards..
Interagency problems can involve any facet of the Government's operations.
The program is an important part of SEA's function. It can and should serve as
the small businessman's voice in Government channels.
SECTION XII-CRIME STUDY
The Small Business Protection Act of 1967, signed by the President on October
11, 1967, calls upon SBA to conduct a study of the impact of crime on small
business concerns to determine ways in which such concerns may best protect
themselves. Good progress has been made in conducting the study:
A comprehensive review has been made of the published literature.
In-depth discussions have been held with authorities in the field-International
Association of Police Chiefs, Insurance Associations, Manufacturers of protective
devices, Industry Associations, and operators of private alarm and detection
systems and services.
The foregoing has provided us with a basis for developing a detailed study
design which includes:
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1. A study of the impact of crime on small business to provide, for the
first time, reliable information on losses resulting from robbery, burglary,
vandalism and shoplifting. This study is being conducted with the advice
and assistance of the U.S. Bureau of the Census. This is an in-house study.
2. An evaluation of existing protective device systems available to business-
men and the development of improved systems using components already
in use elsewhere in defense, industry and other countries. Cost-benefits of
alternative systems will be considered in the evaluation. This evaluation
will be performed by contract.
3. Architectural changes in physical facilities that may assist in reducing
losses and deterring crime. An interagency task force will be organized to
conduct this study.
4. A review of managerial techniques to identify changes which might be
made by the businessmen themselves to reduce losses. This would be aimed
at a "self-help" program for the businessman.
5. A review of the role of insurance in helping to reduce economic losses
due to crime. Full use will be made of the work of the Insurance Advisory
Panel of the President's National Advisory Commission on Civil Disorders.
We are confident that the study will be completed and a ieport filed with the
Congress within the one-year time limit established in the Act.
SUMMARY AND CONCLUSION
Mr. Chairman, this has been a lengthy statement. I felt that a long statement
was necessary because it has been over 18 months since SBA appeared before
this Committee, and that the Committee should have a complete and current
picture of what we have accomplished and what the outlook for the future was.
I would like to summarize:
The economic prospects for the nation and the small business community are
generally bright but some grave problems persist.
As the economy grows, the opportunities for small business also grow. This
causes expansion in demands placed on SBA for assistance to small business-
loans, procurements, and management assistance.
Our loan programs have contributed to national economic growth, have pro-
vided thousands of new job opportunities, and have enhanced the competitive
environment.
The net cost to the Government of SBA programs are quite modest in relation
to the returns to the nation and the economy.
The future appears to portend a challenging period for small business and SBA
in promoting balanced economic growth on both a national and community basis.
SEA and small business will be significant elements in achieving national economic
and social goals.
Our ne~v Community Economic Development Program holds much promise
for helping to solve the hard-core unemployment problem.
The banking community has gained increasing confidence in the small business
prospects and we look forward to greater private sector participation in our loan
programs in FY 1968. and FY 1969, thus conserving tax dollars for use in other
high priority programs.
Our SBIC program holds much promise to assist in narrowing the equity financ-
ing gap existing in the small business segment of the economy and to provide
important supplemental assistance to the small concern.
Our procurement assistance program has been revitalized with the reinstitution
o~ the set-aside program and the stationing of SBA representatives at major
procurement centers.
Our management assistance program, as supplemented by the 3,210 man cadre
in SCORE, are reaching more and more small businessmen with our training
and counseling activities.
Our lease guarantee program is off to a good start, It is an important supple-
ment to our small business aids and the outlook for extensive participation by
the insurance industry is optimistic.
The legislative amendments enacted in the last two sessions of the Congress
have materially assisted us in the conduct of our programs. We do not have any
proposals to submit to the Congress at this time. If our program evaluations so
indicate, we may submit some new proposals.
This concludes my statement, Mr. Chairman. I would be pleased to answer
any questions the Committee may haveS Thank you.
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Appendix A-Supplementing the statement of Robert C. Moot, Administrator,
Small Business Administration
CONTENTS
Section
I. Regular Business Loan 7(a) Program.
II. Displaced Business Loan Program.
III. Economic Opportunity Loan Program.
IV. Local Economic Development Programs (Sections 501 and 502).
V. Small Business Investment Company Program.
VI. Disaster Loan Program.
APPENDIX A-PREFACE
Section VI of the Administrator's statement discussed, in summary fashion,
the contribution of SBA's lending programs toward Meeting the Capital Needs
of Small Business.
The material in this Appendix provides additional details on each of SBA's
lending programs-legislative authorization, historical performance, loan policies,
and the outlook for the future.
SEcTIoN I-BUSINESS LOAN PROGRAM
A. Introduction-SBA's business loan program is the oldest and the largest
of its financial assistance programs. In the fourteen year period ending June 30,
1967, almost 76,000 loans had been approved for a total of $3.4 billion. Of this
amount, $2.4 billion (70.1%) has been approved during the unprecedented seven
year period of continued national economic growth which began in 1961. This
indicates that as the national economy grows, the demands on SBA for financial
assistance to small business increases substantially. An expanding economy
generates new business entries as well as business expansion and modernization.
The objective of the Congress in authorizing the business loan program was
to insure a well-balanced national economy . . ." Reflecting this objective,
we have tailored our program to achieve a balance among the loan recipients.
In the six year period ending June 30, 1966: (a) 11% of our loans were for less
than $5,000 and (b) 62% for less than $25,000.
In the fourteen years ended December 31, 1967, the industry distribution o~f
our business loans has been wide and varied (Table 2):
Industry
Number
Percent
Amount Percent
Manufacturing
Wholesale
Retail
Services
Others
19,331
6, 706
29,005
15, 243
10,497
24
8
36
19
13
$1,355
327
780
597
544
38
9
22
16
15
Total
80,782
100
3,603
100
B. SBA's Participation Program with the Banking Community.-The authority
to make business loans was restricted by the mandate that "no loan shall be
made unless it is shown that a participation is not available" and further that
"such participation by SEA shall not be in excess of 90% of the balance of the
loan outstanding at the time of disbursement."
Over the years, we have maintained close liaison with members of the American
Bankers Association and the Independent Bankers Association to get greater
participation in our loans. Good progress has been made (Tables 1 and 7):
[Dollar
amounts in millionsj
1954-67
By 1967
Fiscal year 1968
estimate
Fiscal year 1969
~estimate
Amount
Percent
Amount Percent
Amount Percent
Amount Percent
Total $3,350.7 100 $385.3 100 $537 100 $649.7 100
Direct 856. 4 26 60. 4 16 57 11 77. 0 12
Participation 1, 846. 5 55 196. 4 51 225 42 276. 0 42
Guaranteed 647. 8 19 128. 5 33 255 47 296. 7 46
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We believe that theincreases forecast for FY 1968/69 are realistic in the light
of recent experience which indicates a greater confidence in the SBA programs by
the banking community. In FY 1967, we introduced the Simplified Bank Guar-
antee Plan (SBLG), which has been well accepted by the banking community.
By December 31, 1967, there were 614 SBLG agreements signed with banks and
340 loans made for $26 million under the agreements.
SBA's immediate participation loan program was improved in earlier years
through the adoption of the Simplified Bank Loan Plan (SBLP) and the Simplified
Early Maturity Plan (SEMP). These plans streamlined procedures, reduced
paperwork and provided other incentives to increase bank participations. Our
Bank Relations Officer Program, currently consisting of 24 retired bankers, has
contributed to wider acceptance of SBA programs by the banking community.
One of the primary tasks of these experienced men is to contact the banks each
year to promote the SBA participation program.
C. Evaluation of Program Performance.-With the initiation of the Fiscal
Year 1970 budget cycle, all SBA programs become subject to the principles and
procedures of the Governmentwide Planning, Programming and Budgeting
System (PPBS). As part of our preparation for this, we have initiated a systematic
evaluation of the performance of all major programs in terms of their contribution
to Agency objectives in relation to cost incurred. Over the past year, principal
efforts have been devoted to a comprehensive evaluation of the business loan
program.
As a first step, we collected, in a mechanized file, financial reports of some
22,000 firms which had received assistance through the business loan program
since the establishment of the Small Business Administration in 1953. The progress
of each borrower was recorded year by year after the approval of a loan. From
these data, we were then able to trace the annual increase, or decrease, in the
principal measures of the performance of assisted firms-profits, sales, net worth,
and total assets. We were also able to compare some of these growth rates with
the growth experience of other private firms over a comparable period of time.
Selected results, converted to index numbers, are portrayed in charts attached.
While the raw data traced growth experience through 10 years after issue of loans,
the number of observations in the sample dropped off sharply in the seventh and
subsequent years. This small number of observations in the later years raised
questions as to the reliability of the results for these years. Accordingly, we have
restricted our analysis to the first 6 years after loan issue.
Average Growth Rate for All Borrowers.-As shown in Table No. 8, every measure
of borrower performance displayed marked and progressive improvement over
the first 6 years following the issue of loans. Profits, in particular, more than
doubled, averaging an annual rate of increase of 20 percent for all firms new and
old. Growth, as measured by other indicators, was also significant, though less
spectacular-annual growth rates averaged almost 8 percent for total assets, 6
percent for net worth, and 8 percent for net sales. These last three measures were
uniformly closely related.
Growth Rates by Industry.-Wide variation was noted in profit growth rates
by industry, as shown in Table No. 9. The four industry groups displayed-
manufacturing, wholesale trade, retail trade, and services-accounted for ap-
proximately 85 percent of the total dollar volume of loans during the period under
review. Profits of SBA-assisted manufacturing concerns increased at an average
annual rate of 21 percent during the first 6 years following the issue of loans. This
suggests that small business can still compete effectively in manufacturing, despite
the persistence of mergers and consolidations in many areas. Profits of borrower
flims in wholesale trade are shown through the fifth year only and averaged an
annual growth rate of 7 percent in that period. An abnormally sharp further
increase was indicated for the sixth year, but we question its validity because of
the relatively small number of observations for that year. Profits in retail trade
and services displayed orderly and progressive growth, with annual rates of
increase of 8 and 15 percent, respectively.
Growth in net sales (Table 10)-taken as representative of other growth
measures-displayed less variation by industry: 3.9 percent per year in wholesale
trade, 6.4 percent in retail trade, 8.4 percent in manufacturing, and 10 percent
in services.
Growth of SBA Borrowers Related to Industry Averages-Available data for
industry as a whole, while not strictly comparable with data for SBA-assisted
firms, indicate that profit growth rates of the latter compare most favorably with
PAGENO="0039"
35
industry-wide experience. The data used in this particular analysis exclude new
firms and cover those loans made for the primary purpose of promoting general
economic growth as distinguished from such purposes as economic opportunity,
local economic development, and competitive environment. As portrayed in
Table No. Ii, profits of SBA-assisted firms increased at an average annual rate
of 14 percent, as compared with an average of 6~ percent for U.S. corporate
profits in a comparable period. The difference ~s as most marked in manufacturing,
where SBA borrowers showed a 211/2 percent annual growth rate, as compared
with 4.8 percent rate for all U.S. corporations. SBA-assisted firms in wholesale
trade and in services experienced profit growth rates above their respective industry
averages. The industry-wide profits growth rate was slightly higher than the rate
for SBA-assisted firms in retail trade. The 8 percent rate of increase in retail
trade, while lower than the industry average, still represents a respectable im-
provement. Further, the SBA-assisted firms are largely comprised of single es-
tablishments operating in local markets while the total industry includes large
chains operating in numerous markets in broad geographic areas.
Comparable industry-wide sales data are available only for manufacturing,
wholesale trade and retail trade, which are displayed in Table No. 12. In maim-
facturing, the sales growth rate for SBA borrowers-8.4 percent per year-
exceeded the 5.2 percent growth rate for the industry as a whole. Borrowers in
wholesale trade, with an annual sales growth rate of 3.9 percent, fell short of
the industry average; those in the retail trade, on the other hand, registered a
higher growth rate-6.4 percent-than the industry average.
Cost of the Program-Concurrent with the evaluation of the business loan
program accomplishments, we undertook a review of the net cost of the pro-
gram to the Government. We have examined our loan administration experience
to develop estimates of all loan costs, including the original amount of the loan,
interest payments to the Treasury, losses through borrower defaults, the cost of
loan processing, administration, and liquidation, and an appropriate share ~f
overhead costs. Income received to offset costs includes payments on principal,
interest payments, fees earned, and recoveries through loan liquidation. This
analysis revealed that, at current rates of interest paid and received, we can
expect a net ultimate cost to the Treasury of approximately five cents per dollar
of loans approvals under this program. For example, we estimate that the total
net direct cost to the Treasury of the $590 million business loan program origi-
nally budgeted for fiscal year 1968 would be approximately $24 million. This fig-
ure, moreover, represents only the net cash flow directly associated with the
operation of the program. To the extent that the program results in added profits
and employment, additional real benefits accrue to the Government in the form
of increased tax revenues.
Benefit/Cost Analysis.-As a means of assessing the indirect economic benefits
of the business loan program, we also conducted a comprehensive benefit/cost
study based upon the data I have previously described. This required the develop-
ment and application of rather complicated mathematical formula. Basically, we
sought to develop quantitative measures of the total economic benefits and total
economic costs of the program. Total economic benefits included principal and
interest payments, increases in profits, and, and in the case of corporationr,
increases in officer salaries and withdrawal. The principal costs included were
total loans disbursed, cost of loan administration and servicing, liquidation costs
and net losses on liquidated loans. To take into account the fact that the resources
made available to borrowers would, theoretically, have been devoted to alterna-
tive productive uses and would have resulted in an average rate of return to the
economy, all benefits and costs after the date of approval of each loan were dis-
counted at the rate of 10 percent per year. Ratio of discounted benefits to dis-
counted costs were then developed for the total loan program and for several
loan classifications. Assuming that 10 percent is an appropriate discount rate,
a ratio of 1.0 is a break-even point reflecting neither a net economic gain nor
loss as a result of the loans evaluated. A higher ratio would represent a net gain
(positive contribution to overall economic growth) and a lower ratio would rep-
resent a net economic loss (negative contribution to economic growth). The results
by principal industries (accounting for approximately 95 percent of all SBA loans)
and by SBA area are shown in the following table:
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(All program categories combined)
Benefit-cost ratios-by principal industries
1 Manufacturing -- - - - 2 56
2 Transportation - - -- - - 1 59
3. Wholesale trade 1. 33
4. Construction 1. 25
5. Sei~vices 1. 12
6. Retail trade . 80
All industries combined 1 73
SBA area benefit-cost ratios
1. Mid-Atlantic 1. 91
2. Southeast 1. 88
3 Pacific coast 1 87
4 Midwest - - - 1 85
5 Northeast - - - - -- - 1 85
6 Rocky Mountains - - - - - - 1 33
7 Southwest - - 1 27
8. New York 1. 07
U.S. total 1. 73
It will note that the benefit/cost ratio for all loans was 1 73-well above the
break-even point. Questions may be raised as to the accuracy of the break-even
measure because of unavoidable limitations of data and methodology and because
of certain assumptions in the study The very high average ratio indicated by
these results, however, supports the general conclusion that this program has not
only benefited individual borrowers, but has also contributed to the growth of
the general economy Further, other indirect benefits resulting from the improved
competitive posture of small concerns are additional to those indicated by the
measure of economic growth.
The higher ratio shown for manufacturing reqects the rapid profit growth
rates realized by borrowers in this industry Retail trade, on the other hand,
falls below the assumed break even point This has been a h~gh1jy competitive
industry, and this is reflected in the earnings of small proprietors Also, most of
the loans to this industry were relatively small and were placed w~ith relatively
small firms, resulting in a high administrative cost per dollar of realized returns
Since the growth rates for these borrowers were encouraging, we conclude that,
while no overall contribution to economic growth is evident competitive gains
have been achieved~
Finally retail concerns are highly sensitive to economic trends in the corn
munities in which they are located. Thus, the results of the loans to borrowers
in this industry reinforce our conclusion that our assistance programs will yield
best results when applied in coordination with active community development
programs.
Significance of the Results -In all candor, I must caution that what I have just
presented reflects the initial results of a comprehensive analysis which is still
undergoing refinement and elaboration. As far as I know, this is the first time
an analysis of this kind has been attempted for any Federal lending program
The results, so far, lead to several principal conclusions. Briefly, these are:
Small firms assisted by this lending program have thereafter experienced very
satisfactory growth in their respective competitive markets. Their growth appears
to compare most favorably with industry wide experience
The firms receiving assistance were high risk, marginal firms which had been
unsuccessful in their efforts to secure private financing on reasonable terms Yet,
they survived and prospered This indicates that the financial needs of credit
worthy small business concerns are still not adequately served by private sources-
a basic assumption underlying the financial assistance provisions of the Small
Business Act.
This lending program has in fact contributed to the "preservation and expansion
of * * * competition," as contemplated in the statute.
The program has been carried out at a modest net direct cost to the Govern-
ment in relation to benefits achieved. It is safe to assume that direct benefits
to the economy and indirect monetary benefits to the Government through
increased tax revenues more than offset this direct net program cost. The favorable
cost/benefit ratio of SBA loans tends to confirm this conclusion.
PAGENO="0041"
37
The proportionate share of private participation in total loans approved under
the program has increased progressively and is expected to increase further in
the current year. This indicates that the success achieved in this loan program
has caused private financing sources to view the future prospects ot small business
concerns with increased confidence.
Extension to all SBA Programs-We intend to undertake similar comprehensive
evaluations of all SBA assistance programs in the current year. I feel that they
will prove to be of great value to the Agency in managing our programs and will
permit us to report progress to you in increasingly meaningful terms.
SEcTIoN 11-DiSPLACED BUSINESS LOAN PROGRAM
A. Authorization.-In 1961, section 7(b)(3) was added to the Small Business
Act authorizing loans to small business concerns displaced by urban renewul,
highway construction or any construction conducted by or with Federal funds.
The authorization provides (1) loans with up to 30 years duration, (2) a formula
for computing interest on the Government's share of the loans at a lower level-
currently at 41/4 percent for 1968-than the regular business loan 53~ percent rate,
(3) there is no specific collateral requirement.
B. Current Loan Policy~-SBA regulations permit displaced business loans
to be made for (1) moving expenses, (2) working capital for a reasonable period
of time, (3) the purchase of machinery and equipment, (4) replacement costs of
realty or improvements, and (5) increased rental costs or fixed charges in the new
location. A recent change in the regulations permits loan proceeds to be used for
upgrading the business land area up to 50 percent and higher where justified.
Formerly, the limit was 333/2 percent. No changes in current loan policy are con-
templated at this time.
C. SBA Advisory Assistance Program.-As required by section 8(b) of the
Small Business Act, we attempt to establish an early contact with potential small
business displacees. We maintain close liaison with HUD's Office of Relocation
Assistance and with DOT's Bureau of Public Roads. State Highway Departments
are also utilizing SBA services in their programs.
Over the next three years, it is estimated that more than 13,000 businesses
will be displaced annually by Federal and Federally-assisted programs. This total
excludes displacements resulting from HTJD's Model Cities and its other new
programs.
All the available evidence indicates that business displacement is basically a
small business problem and that it is essentially an urban problem. Its biggest
impact is expected to be felt in the Nation's densely populated centers in the next
few years.
D. Loan Volumes.-Since the inception of the program in 1961, through
December 1967, a total of 1,308 loans for $96.9 million had been approved (Table
15). Of this amount, 170 loans for $15.8 million were approved in the first half
of FY 1968. The estimate for the remainder of FY 1968 is $38.2 million and the
FY 1969 budget for this program provides an additional $56 million which we
-believe adequate to meet anticipated demands.
One of our major objectives for this program is to obtain greater bank participa-
tion in the loans. Since the beginning of this program, private sector participation
has accounted for only 3.4 percent of the total. Our target for FY 1969 is 41
percent.
SEcTIoN Ill-EcoNoMic OPP0RPUNITT LOAN PROGRAM
A. Background.-For some years, SBA has been concerned with the very urgent
problem of providing meaningful help to the economically disadvantaged in the
business community. Studies indicated that-
The minority-owned business was stymied in its growth potential by a
lack of funds or management know-how.
The small business in depressed rural areas found itself unable to develop
and provide the means for establishing a solid foundation of economic
stability.
The Negro in the big city ghetto, the Indian on a poverty-stricken reser-
vation, the Mexican-American in the Southwest, the struggling entrepreneur
in our rural areas-all were lagging in the general, unparalleled prosperity.
In January of 1964, SBA launched on a pilot basis, a special loan and manage-
ment assistance program to overcome these problems. The "6 x 6" loan program
authorized loans for $6,000 with up to a six year maturity.
PAGENO="0042"
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Based on the "6 x 6" pilot experience, a program of business incentives for the
economically disadvantaged was authorized under Title IV of the Economic
Opportunity Act of 1964. Initially, this program was delegated to the Small
Business Administration by the Director of the Office of Economic Opportunity.
In November of 1966, the EOL program was transferred to the Small Business
Administration. Since that time we have:
First: Expanded the program nationwide. Financial and management assistance
became available through all of our field offices operating in the 50 states and
Puerto Rico. Previously, the program was available in only 44 communities where
Small Business Development Centers were located.
Second: Re-oriented our "management assistance" program to make maximum
use of specialized talents in processing loan applications and counseling the
borrower or potential borrower:
An evaluation guide has been developed to assist in processing loan appli-
cations and determining whether (1) the applicant had or could acquire
managerial competence, or (2) the applicant's lack of managerial capability
and motivation precluded consideration for financial assistance. Over 3,000
loan applicants have been screened and evaluated by our Management
Assistance specialists since May 1967.
Where needed, a SCORE volunteer is assigned to the EOL borrower for
one-to-one counseling. This assistance is offered for as long as the borrower's
need exists.
SBA is also offering courses, workshops, and seminars to those eligible for
EOL assistance.
Third: Redefined the eligibility criteria and divided the program into two
sections:
EOL (I) Program-provides loans up to $15,000 with a term of up to 15
years at 53~ percent interest-lower in EDA designated areas-to individuals
with marginal or sub-marginal incomes who need help to expand or strengthen
an established business and to those who have the necessary talent, motiva-
tion, and experience to establish a new business.
EOL (II) Program.-is designed to assist those who, although their incomes
may be above the marginal level, have been denied the opportunity to
compete in business on equal terms because of social or economic discrimina-
tion, health, handicap, hardship, etc. Loans up to $25,000 are available for
periods up to 15 years.
B. Loan Volumes.-There has been a substantial acceleration in loan volumes
since SBA was given direct authority for this program in November of 1966
(Tables 16 and 17):
In the first 23 months, with geographical limitations, 2,585 loans for $26.2
million were approved.
In the 13 months of the expanded operation, 3,712 loans for $39.7 million
were approved.
Thus, our loan approvals have already exceeded by about 50 percent, the
volume of the first 23 months.
C. Future Outlook.-The budget allowances for FY 1968 and FY 1969 provide
for $39.0 million and $47.0 million respectively. To assure maximum benefits to
the economy we have adopted two basic guidelines:
First, our resources will be carefully allocated so that this assistance will
continue to be made available on a nationwide basis, but priority will be
accorded to those rural and urban areas where pockets of poverty exist.
Second, we are encouraging private banks and lending institutions to
expand their participation in the EOL program. For example:
Five banks in the New Haven, Connecticut area have recently estab-
lished a million-dollar loan fund to make loans to minority-owned
businesses-with an SBA guarantee.
The State of Illinois has deposited $2 million with the Hyde Park
Bank in South Chicago with which the Bank will make loans to be guaran-
teed by the Small Business Administration.
SECTION IV-L0cAL ECONOMIC DEVELOPMENT PROGRAMS
A. Authority.-SBA is authorized to provide financial assistance to State
Development Corporations and Local Development Companies to assist in pro-
moting economic development of communities or areas-and on condition that
these entities use the proceeds of Federal loans to assist eligible small businesses.
The intent of the programs is to increase the flow of private equity capital and
long-term loans to small business concerns to finance their operations, growth,
expansion, and modernization.
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B. State Development Corporations (Section 501) .-These corporations are
authorized by special Acts of the State legislatures, privately organized, owned
and operated, and initially financed from private sources. We are pleased with the
success of the program particularly because it has not required extensive outlays
of Federal funds. Since the program was initiated in 1959:
37 states have enacted legislation to establish the Corporations.
21 of the Corporations are now active.
7 of the Corporations have borrowed $14.5 million from SBA under 23 loans
(Table 18).
An organization of 19 State Development Corporations has been formed to
stimulate the program. The organization reports that 90 percent of the financing
provided by State Development Companies benefits small business; as of Sep-
tember 30, 1967, their 19 companies had outstanding 836 loans totalling $76.4
million.
Future outloolc.-The willingness of member banks to finance Corporate opera-
tions has reduced demands for loans from SBA. We expect this healthy condition
to continue through FY 1969. Accordingly, our budget calls for a modest $5 million
in FY 1969 for this program.
C. Local Development Companies (Section 502) .-The Development Company
program is one I like to describe as a "peoples program" because it is pre-eminently
a local self-help program. Members of a community are encouraged to build
healthy, viable communities capable of sustained economic growth. Each Company
must be principally composed of, and controlled by, persons residing or doing busi-
ness in the community. The benefits of the program accrue to the people in the
community-not just the Company or the small businessman.
Program progress-From a modest beginning in 1959, when only 14 loans were
made for $1,671,000, the program has financed through December 31, 1967;
a total of 1,556 loans for projects costing almost $305 million (Tables 19 and 20).
Of this amount, the Local Development Companies raised $69.0 million and
private lending agency participation totalled $17.0 million, thus leaving the SBA
share at $219.0 million.
*The small businesses financed under this program have provided about 65,000
employment opportunities which means that for every $3,400 in SBA seed money,
a new job opportunity was created. This is a most remarkable record. Furthermore,
if we assume the average wage to be $4,000 annually, new payrolls would run to
over $250 million a year, thus generating local economic growth and added tax
revenues.
The majority of these Development Company loans are made in small com-
munities. To illustrate this, I would like to cite a few statistics on our FY 1967
activity:
Loan projects
Community population
Number Percent
Job opportunit
Created
ies
Number Percent
Under 2,500
2,501 to 5,000
5,001 to 10,000
Subtotal
146
48
44
43.1
14.1
13.0
6,199
1,566
1,211
53.0
[3.4
10.4
238
28
72
70. 2
8. 2
21.6
8, 976
930
1,778
76. 8
7. 9
153
10,001 to 25,000
Over25,000
Total
338
100.0
11,684
100.0
During 1967, 23.4 percent of these loans were placed in depressed areas such as
Appalachia. Some were used to assist communities in diversification of their
industries. Others were used to expand businesses to stimulate economic growth
in the community. Forty-one percent of the funds loaned in 1967 went into new
businesses. The 338 projects financed in 1967, covered a wide range of industries:
Manufacturing-I 89; Transportation-12; Wholesale-retaii-45; Serviees-83;
Construction, recreation, etc.--9.
Loans are made for the overall benefit of the community involved. To give you
some examples of how flexible we are in this program, I would like to illustrate
the variety of loans we make:
In a mining town in the west for years, the people have been removing
ore from beneath the nearby mountains and yet, no use was ever made of
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the mountains itself. Last year, we granted a sizable loan to construct a
~ ski-lift, a lodge, and a ski-run to the community.
In another area we found a community having 28 manufacturing firms
in its immediate area , yet there was a limited amount of recreation facilities
In this case we grirnted a loan for a golf course.
In another part of the country, we helped construct a unique old world
style market place in the heart of a large city enabling 42 minority-owned
new busincsses to sell their wares.
In another city, deep in the ghetto area of that city, we helped construct
a shopping center solely owned by the minority citizens residing there
When a large steel company ceased its operations in a community of 11,000,
we provided funds to assist three new industries to establish in that commu
nity, providing 85 job opportunities
In a rural section of this country, we provided funds to assist in the con-
struction of a roller bearing plant providing employment for 206 people, and
finally,
In still another rural section of this nation, we aided in the construction
of a handbag manufacturer, now employing 125 people in a town having
a population of 700 persons. In fact, the same local development company
in that town came to us for another loan to aid a manufacturer of men's
and boy's socks employing in excess of 1GO people
We have provided 119 loans to aid in the construction and equipping of
medical facilities such as clinics hospitals, and nursing homes
Among the domestic problems that confront us today is the mass exodus of
young people from the small rural communities of our nation and the plight of
ghetto area residents of our big cities Realizing this, our Local Development
Company policy is more lenient in these two cases For example in communities
having a population of 5,500 or less and in a ghetto or depressed target area of a
big city, all the Local Development Company needs to raise towards the total
cost of the project is 10 percent of its cost. I am now studying ways and means
to implement the Local Development Company~ concept in our EOL program
and in carrying our our responsibilities under Section 406 of the Fconomic Oppor-
tunity Act of 1967.
This program has proven the wisdom of Congress in directing a program
to blend the people of a community, the private lending sector, and the Federal
Government into a solid, strong, and effective mix leading to better overall eco-
nomic development of this nation.
D Future Outlook -With its proven capacity to stimulate economic growth
at the local level, this program will continue to be given a high priority in our
operations. We have recently revised our criteria to encourage greater private
participation in the program. A new flexible first mortgage plan has been insti-
tuted which permits a bank to participate with as little as 20 percent and up
to 40 percent (depending upon the size of the community) in our loans and
obtain a first mortgage position on the property. This new plan has stimulated
active participation: in 1967, only 16 first mortgage loans were made; in the first
half of 1968, we*~'hav~e already approved 34 such loans.
We are still eicperiencing difficulty in convincing the private lending sector that
it should participate in our up to 90 percent guarantee plan However, we are
studying ways and mqans to make this plan more acceptable to the private lending
agencies.
Our program goal for FY 1968 is to approve 413 projects with a total cost of
$79 million exclusive of Local Development Company contributions. For FY 1969,
the comparable goals are: 479 projects, costing over $84 million.
SEcTIoN V-SMALL BusINEss INVESTMENT COMPANIES
Since SBA appeared before this Committee in July 1966, th,e Congress has
enacted two pieces of legislation concerning the SBIC Program. In September
1966, the Congress passed legislation giving SBA powers to control, regulate,
and investigate the SBIC industry and to penalize violators with fines and losses
of licenses. Within the framework of this legislation, we have taken numerous
actions, too detailed to list here, to improve the image of the industry and to
assure that the SBIC program effectively achieves its intended purpose-to
provide venture capital and long term loans to small business On October 9, 1967,
the President signed into law the most significant alteration of the SBIC program
since its inception in August 1958. These amendments were the result of the
efforts and consideration of the Congress and represent a new era in the Invest-
PAGENO="0045"
41
ment program. This legislation provided new standards for the licensing of
SBIC's, an increase in the funds an SBIC may draw from SBA, an increase in
the percent of assets a bank may place in an SBIC, and the establishment of an
SBIC Advisory Board as well as other provisions.
We view the SBJC program as an important supplement to SBA resources to
aid small business and as a substantial contributor to business and job creation
in urban centers. From the inception of the program in 1959 to March 31, 1967,
(the last reporting date):
SBIC's had made 26,751 separate small business financing transactions in
all 50 states, the District of Columbia, Guam, Puerto Rico and the Virgin
Islands.
SBIC's had disbursed $1.2 billion.
Reports from 1,315 SBIC-assisted firms indicate they have increased their
employment by 11,800 jobs (29.4%) since the original financings were made.
Thus, for every $9,000 in SBIC disbursements, one new employee was hired;
to put it another way, for every $3,000 in SBA seed money, $6,000 was
added by SBIC's to create a new job opportunity.
SBIC s had assets of $691.5 million March 31, 1967, of which only 36
percent were represented by borrowings from SBA.
This is an impressive record which will, undoubtedly, be improved in the
future as our new Act and regulations become fully operative.
This combination of a concerted effort to regulate bnd the passage of incentive
legislation has created a great interest in the program and a positive image has
emerged. From July 1, 1967, through January 31, 1968, eight SBIC's were libensed
with total private capital of $17.4 million or an average of $2.2 million per com-~
pany. In addition, several large licensees increased their private capital during
this period in excess of $13 million. For the first time in approximately six years
an SBIC has requested and received permission to make a public offering of stock.
The amount of this offering is $2.9 million.
The price index of the stocks of publicly held SBIC's increased 230 percent
during the period of December 31, 1966, through Deëember 31, 1967. The gain
in December represents the 12th consecutive monthly rise.
As a result of the regulatory powers afforded by the September 1966 Amend-.
ments and vigorous attempts to regulate, the following significant actions were
taken;
We intensified our examination of individual SBIC's to determine compliance
with regulations. In FY 1967, we examined 487 SBIO's and, in FY 1968, 170
companies were examined through December 31, 1967. Where violations were
noted, prompt action was taken to remoye from the program those companies
whose actions constituted serious violations of the Act or Regñlations.
On June 30, 1966, there were 686 SBIC's licensed.
By December 31, 1967, there were 568 licensed companies and 3Q of these
were in process of surrender.
On December 31, 1967, there were 179 licensed companies classified as "prob-
lem" cases, and were in the process of being investigated, the subject of a pre-~
litigation r~port or a judicial compliant, in the process of liquidation (receivership
and so on), or in the process of surrender.
* Senate Committee Recommendations .-T he Senate Government Operations
Committee recently issued a report on its review of the SBIC program. The report
contained three recommendations:
1. That SBA and the Department of Justice take all necessary steps to
protect the Government's investment in SBIC's.
Comment: On July 1, 1967, SBA and Justice executed a working agreement'
designed to prosecute violators. In the seven months ending January 31,
1968, civil judgments were obtained against 28 violating licensees.
2. That the examination and investigation activity be maintained at the
present level.
Comment: As previously indicated, the examination activity has been'
accelerated. There are no plans for reducing the current level. Furthermore,
procedures have been strengthened to assure timely action on all findings of,
* violations. Since July' 1, 1967, twenty-four (24) full-scale investigations had
been completed and nineteen (19) new cases initiated.
3. That a report be made on the effectiveness of the new legislation or
whether a completely new approach is needed.
Comment: We believe the SBIC Act amendments of 1966/1967 have done
much to strengthen the SBIC's. At this time, we feel that we have the requl-
PAGENO="0046"
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site tools to administer and regulate the industry in a manner to insure a
successful program with losses to the Government minimized or completely
eliminated.
Outlook For The Future-After the recent period of shakedown, we believe the
SBIC industry is well on its way to becoming a viable financial institution. There
is still much work to be done: (1) Many areas of the country remain inadequately
served by SBIC's. We are continuing to foster, interest in the program in these
areas and particularly in ghetto and other depressed and rural areas; (2) Strict
surveillance and rapid action must be taken to minimize violations and prosecute
those SBIC's who do not adhere to the Act and regulations; (3) Current licensing
screening procedures must be continually reviewed and improved to assure that
the management is capable, the proposed equity base is sufficient, and that there
is a real need for the SBIC in the area of proposed operation.
SEcTIoN VT-DIsAsTER LOAN PROGRAMS
A. Loan volumes.-Section 7(b) of the Small Business Act authorizes assistance
to individuals, businesses, churcheS, charitable and non-profit organizations,
private schools, colleges, and universities which have suffered as a result of floods
or other catastrophes. Since the inception of the program, through December
31, 1967, almost 69,000 loans of all types for a total of almost $626 million have
been approved (Table 22). In the past fourteen years, there have been a total of
599 disaster declarations involving all 50 states, Guam, Puerto Rico and the
Virgin Islands.
A summary of our lending assistance under each of our disaster loan programs
follows:
1. During the first half of FY 1968, under Section 7(b)(1), 8,967 loans for
$73.3 million were approved to alleviate losses from physical disasters:
flooding, hurricanes, tornadoes, etc. Over the life of this program, almost
68,000 loans for over $585 million have been approved.
2, Under Section 7(b) (2), small businessmen who suffered economic
injury as a result of drought, excessive rainfall, freezes, floods, hurricanes,
etc., obtained 1,240 loans for over $28 million through December 31, 1967;
82 loans for $5.8 million were made in FY 1968 through December 31, 1967.
3. Under Section 7(b)(4), a total of 36 loans for nearly $3.0 million have
been made to small businessmen as a result of inability to market a product
for human consumption due to circumstances beyond their control, cumula-
tive through December 31, 1967. No such loans have been made in fiscal
1968.
The principal activity in the disaster program during the first half of FY 1968
has resulted from the flood in Fairbanks, Alaska, in August 1967, and Hurricane
Beulah which struck south Texas in September 1967. In Fairbanks, through
December 1967, there were 2,813 loans approved for almost $50 million and in
Texas 5, 243 loans for $21.9 million.
B. Riot Assistance-Under the disaster loan program, SBA can provide loans
to businesses and househ,olders who suffer losses as a result of riots. We have
provided such assistance in Detroit, Michigan, and Newark, New Jersey. During
FY 1968, there were 185 loans for $3.1 million made in Detroit and 30 loans for
$305.6 thousand made in Newark.
C. Disaster Procedures-When a disaster occurs in any area, a survey and
report of same is made within 24 hours. When a justification exists for a declara-
tion of SBA disaster loan assistanCe, a disaster cadre in the regional or area
office (depending on the size of the disaster) proceeds immediately to the area
to obtain space in which to operate. Supplies are immediately shipped to the
operating disaster office.
Operating personnel are obtained from regional offices in the area involved to
the extent they are available. Upon request from the field, additional personnel
are detailed to the emergency area by the Central Office. These come from a
list of Government and other retirees indicating availability for disaster work.
Also, members of SCORE (Service Corps of Retired Executives) are used, 120 of
whom have had special disaster work training by SBA.
During the past few months, the application forms used for requesting dis-
aster loans have been completely revised. Two forms were completely eliminated
and others changed so that applicants could more readily supply SBA with inf or-
mation needed for expeditious processing and statistical purposes. These new
forms, coupled with special training given representative members of all field
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offices and a complete new line of directives applicable to each required function,
have greatly streamlined and simplified disaster office operations.
D. Loan Authority and Policy-
1. Loan authority.-Over the years, legislative amendments to the Small Busi-
ness Act of 1953 progressively expanded the scope of disaster relief assistance:
1953-Loans were authorized to restore disaster victims, as nearly as possible
to the pre-disaster physical condition.
1955-Loans were authorized to farm-oriented small businesses suffering
economic injury from prolonged drought.
1958-Loans to farm-oriented small business concerns were authorized to
those suffering economic injury due to excessive rainfall.
1964-Loans authorized to small business concerns suffering economic injury
from any major disaster as determined by the President or natural
disaster as determined by the Secretary of Agriculture.
2. Current Loan Policy-
(a) Applicants showing a strong cash or a readily liquidable asset position
must use their funds to the extent available to reduce or obviate entirely the need
for SBA funds.
(b) No upgrading in size of structure, number of rooms or type, is allowed as a
replacement for one lost or to be repaired.
(c) Machinery and equipment lost may be replaced with new items of similar
size and capacity, unless satisfactory used equipment is available and desired by
the victim in order to reduce the debt incurred. Furniture and household goods
should be repaired, if feasible. If unrepairable or lost, they can be replaced with
new articles of similar size and quality. Loans to replace automobiles are permitted
only to acquire one of the same age and condition as the car or truck lost. A wide
choice of used cars is readily available in most areas.
(d) Collateral is not a primary requirement in disaster loans and no loan is
declined only for lack of collateral. Refusal of an applicant to pledge whatever
worthwhile collateral is available may be reason to refuse a loan request.
(e) Loans are generally repayable in level monthly installments, including
principal and interest. Although loans may be for a period up to 30 years (with
five additional years allowable in certain proved hardship cases), the time
allowed for repayment is set at the shortest time possible without creating undue
hardship.
APPENDIX B
STATISTICAL PRESENTATIONS
Table No.
Description
Page No.
1
2
3
4 and 5
6
Lending program historical summary-SBA versus private sector funding
Lending program historical summary-By industry
Lending program historicai summary-SBA share versus participations and guarantees
Loan levels-Fiscal year 1967, 1968, 1969
Loan programs-Loss rates
44
45
46
47
48
7
8
9
Business loans 7(a)-Trends in private sector participation
Business loans-Growth patterns:
Summary
Profits
48
49
50
10
Net sales
50
11
12
13
14
15
16
17
Profits-SBA borrowers versus private corporations, by industry
Sales-SBA borrowers versus private corporations, by industry
Net prolits by type of loan-
Sales by type of loan
Displaced business loans-Historical summary
EOL-l loan program-Historical summary
EOL-ll loan program-Historical summary
51
51
52
52
53
53
18
19
20
State development company (501) loans-Historical summary
Local development company (502) loans-Historical summary
Local development company (502) loans-Cumulative date on job opportunities created by size
of Community
54
55
21
22
23
SBIC program-Historical statistics
Disaster loan program-Historical summary
Procurement statrstics-Small business share
55
56
56
57
24
Procurement center representatives-Locations
57
25
Procurement contract density-By SBA region -
58
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44
TABLE 1.-GROSS IMPACT OF SBA LENDING PROGRAMS ON THE FINANCING OF SMALL BUSINESS,
JULY 1953 THROUGH DEC. 31, 1967
IDollar amounts in millionsi
Number
Type of loan program of
business
financing
Gross
amount
Funded
by SBA
Funded by pr
~---~
Amount
ivate sector
-----
Percent
of gross
Regular business loans 80,782 $3, 603. 0 1 $2, 369. 2 $1, 233. 8 34. 2
Displaced business loans 1, 308 96. 9 1 93* 6 3. 3 3. 4
Economic opportunity loans 6, 297 65. 9 1 61. 9 4. 0 6. 0
State development corporations (501)____ 2 752 68. 8 14. 5 54. 3 78. 9
Local development companies (502) 1, 556 305. 0 219. 0 98. 0 32. 1
SBIC financing 3 26,751 1, 179. 0 358. 3 820. 7 69.6
Total 117,446 5,318.6 3,116.5 2,214.1 41.6
1 "Funded by SBA" representsthe full amount of direct loans plus SBA's share of participation loans. The bank share of
participation loans and the full amount of guaranteed loans are considered as "Funded by the private sector."
2 Represents 90 percent of the 836 loans for $76,400,000 reported outstanding by 19 State corporations as of Spet. 30,
1967. The remaining 10 percent went to other than small businesses.
3 The number and gross amount are loans and financings made by SBIC's to portfolio companies through Mar. 31, 1967.
PAGENO="0049"
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PAGENO="0051"
Fiscal year 1967 Fiscal year 1968 Fiscal year 1969
Actual estimate estimate
Gross SBA Gross SBA Gross SBA
Displaced business loans 32.7 31.4 54.0
Direct and immediate participation 32. 7 31.4 32. 0
Guaranteed 22.0
Development company loans (502 and 502) 54. 6 52.2 84. 0
Direct and immediate participation 54. 2 51.9 50. 0
Guaranteed .4 .3 34.0
Trade adjustment loans 1. 2
Investment company assistance 15. 5 15.5 15. 0
Debentures 6. 6
Loans 8.9
29.0 32.0 32.0
10.0 15.0 15.0
1.2 1.2 1.2
15.0 30.0 30.0
COMPARATIVE LENDING PROGRAMS FISCAL YEARS, 1967,1968, and 1969
(EXCLUDING DISASTER)
ALL OTHER
$134.7 $520.0 MILLION
MU.LION
47
TABLE 4.-LOAN LEVELS
[In millions of dollarsj
Loan programs
7(A) business loans 385. 3 305.3 537. 0
Direct
60. 4
60. 4
57. 0
57. 0
77. 0
77. 0
Immediate participation
Guaranteed
196.4
128.5
143.8
101.1
225.0
255.0
150.0
199.2
~
276.0
296.7
184.0
230.0
39.0
47.0
47.0
406.2 649.7 491.0
EOL 31.9 31.3 39.0
Direct and immediate participation 30. 1 29. 8 29. 0
Guaranteed 1. 8 1. 5 10. 0
50.0
56.0
53.0
30.0
20.0
34.0
22.0
33.0
20.0
77.0
89.7
82.0
47.0
30,0
55.7
34.0
52.0
30.0
Tnbil
6.6 13.5 13.5 30.0 30.0
8.9 1.5 1.5
520.0 435.7 730.2 588.4 873.6 704.2
TABLE 5
ESJIMATED
FY 1968
s.6.
R
MILUON $730.2 MILLION
MILLIONS I
OF DOLLARS~ 0
I I I I I
100 200 300 400 500 600 700 800 900 1.000
PAGENO="0052"
Cumulative
As of- SBA share of Actual
disbursements
Actual losses
losses as a percent of
disbursements
Estimated
losses
Total actual
and estimated
losses
Composite loss
study rate
(total losses as
a percent of
disbursements)
7(A) BUSINESS LOANS
$14.7 0.81 $31.3 $46.0 2.60
20. 8 1. 01 32. 6 53.4 2. 58
31.4 1.36 34.9 66.3 2.86
ECONOMIC OPPORTUNITY I
$41.4 $0.6 1.44 $3.1 $3.7 8.93
June 30, 1965 2 $258. 0 $2. 4 0. 92 $5. 6 $8. 0
June 30, 19662 469.8 3.2 .67 12.2 15.4
June 30 1967 471 8 4 5 96 14 4 18 9
3. 09
3.21
3 90
1 Loss reserve studies not made in prior years
2 Includes displaced business loans in these years
TABLE 7-TRENDS IN PRIVATE SECTOR PARTICIPATION-APPROVED 7(A) BUSINESS LOANS
[Dollar amounts in millionsj
SBA financed Private sector financed
Total ------- - --
Fiscal approved Direct Partici- Partici- Guaran- Percent
year loans pation Total pation teed Total of total
loans loans loans approved
(1) (2) (3) (4) (5) (6) (7)
A(8)
1960 $168 4 $53 0 $80 7 $133 7 $20 7 $14 0 $34 7 20 6
1961 250 4 77 8 123 4 201 2 31 5 177 49 2 19 6
1962 360 8 93 6 178 4 272 0 55 2 33 6 88 8 24 6
1963 313 9 67 1 154 6 221 7 61 3 30 9 92 2 29 4
1964 312. 2 78. 0 155. 1 233. 1 58. 5 20. 6 79. 1 25. 3
1965 418 1 115 5 167 2 282 7 60 0 75 3 135 3 32 0
1966 354 8 65 7 96 1 161 8 34 5 158 5 193 0 54 4
1967 385. 3 60. 4 143. 8 204. 2 52. 6 128. 5 181. 1 47. 4
19681 537 0 57 0 150 0 207 0 75 0 255 0 330 0 61 5
19691 649 7 77 0 184 0 261 0 92 0 296 7 388 7 59 8
1 Estimated.
48
TABLE 6-ACTUAL AND ESTIMATED PRINCIPAL LOSSES ON LOANS BASED ON ANNUAL LOSS RESERVE STUDIES
[Dollar amounts in millionsj
June 30 1965 $1 809 4
June 30, 1966.. 2,067. 7
June30, 1967 2,317.1
June 30, 1967
DISPLACED BUSINESS LOANS 1
Do $53 6 $0 1 0 12 $0 7 $0 8 1 52
LOCAL DEVELOPMENT COMPANY LOANS 1
Do $135 2 $0 3 0 20 $1 0 $1 3 0 ~3
DISASTER LOANS
PAGENO="0053"
Net Profits
Total Assets
~ Net Worth
*uiii*pup~~~ Net Sales
49
TABLE 8
GROWTH PATTERNS
Index SBA Assisted Small Business Firms
Year of loan issue 100
`I
*
I~.
I
3
4
5
.6
No. of Years After Issuance of Loan
PAGENO="0054"
50
TABLE 9
NET PROFITS
SBA Assisted Small Business Firms
Assisted Small Business Firms
SBA NET SALES
l50~
$00. ~ ~
50 -
e~ I i~i
Index
TABLE 10
Base
Year
Number of Years After Loan Issuance
-9-
PAGENO="0055"
51
TABLE 11
PROFIT GROWTH COMPARISON
SEA Borrowers a~d All CnrpOrations
(Annual Rates)
Percent
31
SBA Borrawers
2S All Corparations
2C
10
t
TABLE 12
SALES GROWTH COMPARISON
SEA Borrowers and Total Industry
(Annual Rates)
PAGENO="0056"
52
* Direct Loans
..~lmmediate Participation Loans
- Guarantee Loans
Index
TABLE 13
NET PROFITS BY TYPE OF LOAN
SBA Assisted Small Business Firms
225
200
Year of loan issue = 100
150
125
I BC
-c
U
TABLE 14
NE. SALES BY TYPE OF LOAN
SBA* Assisted Small Business Firms
~.. ~
Base
Year
2
3 4 S
Number of Years After lss~:ance of Loan
6
PAGENO="0057"
53
TABLE 15.-DISPLACED BUSINESS LOAN ACTIVITY, FISCAL YEAR 1962 THROUGH DEC. 31, 1967,
BY FISCAL YEAR
[Dollar amounts in thouSands]
Applications Loans approved -
Fiscal year Received - Withdrawn Declined Amount Average size
Num- Amount Num- Amount Num- Amount Num- Total SBA Total SBA
ber ber ber ber share share
1962 154 $10,154 16 $1,588 24 $1,972 90 $4,996 $4,877 $55.5 $54.2
1963 147 11,148 12 727 46 2,845 93 5,662 5,448 60.9 58.6
1964 132 10,751 7 535 30 2,788 95 6,874 6,817 72.4 71.8
1965 289 22,172 16 969 47 4,302 199 12,504 12,152 62.8 61.1
1966 377 32, 129 36 2,455 60 4,624 276 18, 341 17, 918 66. 5 65. 1
1967 490 47,521 44 4,529 53 7,842 385 32,676 31,440 84.9 81.7
1968, to Dec.
31,1967___ 238 25,102 22 2,321 33 2,867 170 15,848 15,255 93.2 89.7
Total_ - 1,827 158,977 153 13, 124 293 27, 240 1, 308 96,901 93,907 74. 1 71. 8
PERCENTAGE OF NUMBER AND AMOUNT OF LOANS APPROVED AND AVERAGE SIZE BY TYPE
Number Amount Average size
Type of loan Percent Percent SBA Percent SB
Number of Total of bar of Total sha e
number amount $ e amount
Direct 1, 179 90. 1 $81,746 84.4 $81,746 87. 0 $69. 3 $69. 3
Immediate participation 125 9.6 14,858 15.3 11,900 12.7 118.8 95.3
Guaranty 4 . 3 297 . 3 261 . 3 74. 2 65.2
Total 1,308 100. 0 96,901 100. 0 93,907 100.0 74. 1 71. 8
TABLE 16.-ECONOMIC OPPORTUNITY (I) LOAN ACTIVITY, FISCAL YEAR 1965 THROUGH DEC. 31, 1967,
BY FISCAL YEAR
IDollar amounts in thousandsi
Applications - Loans approved
Fiscal year Received Withdrawn Declined Amount Average size
Num- Amount Num- Amount Num- Amount Num- Total SBA Total SBA
ber bar ber ber share share
1965 307 $3,847 5 $30 47 $629 159 $1,766 $1,731 $11.1 $10.9
1966 2,617 29,836 143 1,722 672 8,547 1,689 17,625 17,157 10.4 10.4
1967 3,211 30,821 162 1,546 1,045 10,780 1,968 17,360 17,165 8.8 8.7
1968 to Dec.
31,1967.. 1,008 8,919 77 662 320 2,995 689 5,297 5,217 7.7 7.6
Total. - - .7, 143 73, 423 387 3, 960 2, 084 22, 951 4, 50542, 048 41, 6309.39.2
PERCENTAGE OF NUMBER AND AMOUNT OF LOANS APPROVED AND AVERAGE SIZE BY TYPE
Num
Type of loan
Number
ber - Ama
Percent Percent
of Total of
number amount
unt
Avera
ge size
SBA
share
Percent
of
amount
Total
SBA
share
Direct 4,283 95. 1 $39, 425 93. 8 $39, 425 94. 7 $9. 2 $9. 2
Immediate participation 75 1.6 1,112 2.6 860 2. 1 14.8 11.5
Guarantee 147 3.3 1,511 3.6 1,345 3.2 10.3 9.1
Total 4, 505 100. 0 42, 048 - 100. 0 41, 630 - 100. 0 9. 3 9. 2
PAGENO="0058"
54
TABLE 17.-ECONOMIC OPPORTUNITY (II) LOAN ACTIVITY, FISCAL YEAR 1967 THROUGH DEC. 31,
1967, BY FISCAL YEAR
[Dollar am
ounts in thousandsj
Applications
Loa
ns approved
Fiscal year
Received
Num. Amount
ber
Withdrawn
Num- Amount
ber
Declined
Num- Amount
ber
Num-
ber
Amount
Total
SBA
share
Average size
Total SBA
share
1967 1,756 $25,132 90 $1,298 359 $5,619 1,066 $14,543 $14,192 $13.6 $13.3
1968 to
date 992 13,599 87 1,288 262 3,935 726 9,305 9,138 12.8 12.6
TotaL 2, 748 38, 731 177 2, 586 621 9, 554 1, 792 23, 848 23, 330 13. 3 13.0
PERCENTAGE OF NUMBER AND AMOUNT OF LOANS APPROVED AND AVERAGE SIZE
Type of loan
Number
Percent
of
Number
Amount
-
Average size
SBA
Total share
Total
Percent
of
SBA
share
Percent
of
amount
amount
Direct
Immediate participation
Guaranty
Total
1, 566
80
146
87. 4
4.5
8. 1
$20,453
1,403
1,992
85. 8
5.9
8. 3
$20, 453
1,075
1, 802
87. 7 $13. 1 $13. 1
4.6 17.5 13.4
7. 7 13612.3
1, 792
100. 0
23, 848
100. 0
23, 330
100. 0
13. 3 13. 0
TABLE 18.-STATE DEVELOPMENT COMPANY (SEC. 501) LOAN ACTIVITY, FISCAL YEAR 1959 THROUGH DEC. 31'
1967, BY YEAR, BY AREA, BY STATE
[Dollar amounts in thousandsj
Applications Loans approved
Fiscal year Received Withdrawn Declined Amount Average size
Num- Amount Num- Amount Num- Amount Num- Total SBA Total SBA
ber her her her share share
1959 1 $628 1 $314 $314 $314.0 $314.0
1960 2 1,300 2 1,300 1,300 650.0 650.0
1961 4 2,490 4 2,490 2,490 622.5 622.5
1962 6 5, 330 1 $200 5 4, 630 4, 630 926. 0 926. 0
1963 1 500 500 500 500.0 500.0
1964 1 1,000 1,000 1,000 1,000.0 1,000.0
1965 1 200
1966 4 2,320 5 2,120 2,120 424.0 424.0
1967 4 2,522 1 $272 3 2,000 2,000 666.7 666.7
1968 to date_ 1 160 1 160 160 160.0 160.0
TotaL~ 25 16,450 1 272 1 200 23 14,514 14,514 631.0 631.0
Note: All State development loans are direct loans.
PAGENO="0059"
55
TABLE 19.-LOCAL DEVELOPMENT COMPANY (SECTION 502) LOAN ACTIVITY, FISCAL YEAR 1959 THROUGH
DEC. 31, 1967, BY FISCAL YEAR
[Dollar amounts in thousandsj
Applications Loans approved
Fiscal year Received Withdrawn teclined Amount - Average size
Num- Amount Num- Amount Num- Amount Num- Total SBA Total SBA
ber ber ber ber share share
1959 24 $2,502 2 $125 1 $22 14 $1,671 $1,540 $119.4 $110.0
1960 47 5,177 3 492 5 400 35 3,773 3,296 107.8 94.2
1961 75 9,194 3 176 5 485 69 8,385 7,545 121.5 109.3
1962 138 19,336 12 1,265 18 1,985 75 10,175 9,280 135.7 123.7
1963 124 19,836 14 2,897 12 1,862 115 17,458 15,599 151.8 135.6
1964 176 26,519 11 1,075 8 1,297 153 21,969 19,724 143.6 128.9
1965 305 53,278 14 3,224 19 4,251 256 40,205 37,843 157.0 147.8
1966 423 73,871 36 7,075 41 9,426 312 51,966 48,241 166.6 1546
1967 383 59,601 35 6, 062 35 6,853 338 52,654 50, 220 155.8 148.6
1968 to
Dec. 31,
1967 227 37,382 16 1,292 4 868 189 27,500 25,700 145.5 136.0
Total__ 1,922 306,696 146 23,683 148 27,449 1,556 235,756 218,988 151.5 140.7
PERCENTAGE OF NUMBER AND AMOUNT OF LOANS APPROVED AND AVERAGE SIZE BY TYPE
Number - Amount
Type of loan Percent Percent SBA
Number of Total of share
number amount
Avera
Total
ge size
SBA
share
Percent
of
amount
Direct 757 48.6 $117,056 497 $117,056 53.5 $154.6 $154.6
Immediate participation 779 49.4 116,306 49.3 100,102 45.7 151.2 130.2
Guarantee 30 2.0 2,394 1.0 1,830 .8 79.8 61.0
Total 1,556 100.0 235,756 100.0 218,988 100.0 151.5 140.7
TABLE 20
LOCAL DEVELOPMENT COMPANY LOAN PROGRAM
JULY 1. 1958 - DECEMBER 31, 1967
Number of Loans
1.000 800 600 400 200
931
r I Number of
- TV ~ Employment Opportunities
(In rhousands)
I I I I I I
5 10 15 20 25 30 35 40 4)
2"
TOTALS: 1.556 Loans: $305.0 Mi). F
I TOTAL: 64,631
PAGENO="0060"
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PAGENO="0062"
58
TABLE25.-GEOGRAPHIC DISTRIBUTION AND DENSITY OF DOD AND GSA PRIME CONTRACT AWARDS,
FISCAL YEAR 1967
IDollar amounts in thousandsj
Contract
Area/SBA region
DOD 1 GSA a
awards
Index of con-
tract density
ntof total
Total Perce
U.S. total $38,160,052 $2,012,332 $40,172,384 100.0
Northeastern area 3,887,475 109,342 3,996,817 9.9 162
Augusta, Maine 57, 884 7, 140 65, 024 .2 50
Boston, Mass 1,424,975 60, 898 1, 485, 873 3.6 124
Concord, N.H 162,658 2,584 165,242 .4 133
Hartford, Coon 1,943,107 31,578 1,974,685 4.9 258
Montpelier, Vt 100, 247 2, 692 102,939 . 3 150
Providence, R.l 198,604 4,450 203, 054 . 5 125
New York area 4,507,032 608,946 5,115,978 12,7 91
Newark, N.J. 1,236,931 107,867 1,344,798 3.3 70
New York, N.Y 2,580,013 224,969 2,804,982 7.0 115
Syracuse, N.Y 690, 088 276, 110 966, 198 2. 4 75
Mid-Atlantic area 5, 580,975 332, 093 5,913, 068 14. 7 72
Baltimore, Md 658,284 16,491 674,775 1.8 129
Clarksburg, W. Va 165, 775 13, 547 179, 322 - 4 50
Cleveland, Ohio 620,976 64,861 685,837 1.7 40
Columbus, Ohio 994, 059 76, 275 1, 070, 334 2. 6 74
Louisville, Ky 145,995 15,767 161,762 .4 29
Philadelphia, Pa 1, 504, 190 96,612 1, 600, 802 4.0 82
Pittsburgh, Pa 246,991 13, 255 260, 246 - 6 26
Richmond, Va 546,700 21,388 568,088 1.4 93
Washington, D.C 698,005 13,897 711,902 1.8 900
Southeastern area 3,627,444 96,914 3,724,358 9.3 86
Atlanta, Ga 1,157,745 11,015 1,168,760 2.9 138
Birmingham, Ala 315,506 6,968 322,474 .8 62
Charlotte, N.C 451,142 20,076 471,218 1.2 44
Columbia, S.C 183, 348 8, 503 191, 851 * 5 42
Jackson, Miss 133,100 17,748 150,848 .4 67
Jacksonville, Fla 371,622 3,660 375,282 .9 180
Nashville, Tenn 552,264 17,787 570,051 1.4 78
Miami, Fla 462,717 11,157 473,874 1.2 200
Midwestern area -- 6,857,004 456, 9537,313,957 18. 2 64
Chicago, Ill 979,501 111,448 1,090,949 2.7 39
Des Moines, Iowa 293,906 5,614 299,520 .7 47
Detroit, Mich 1,044,621 107,473 1,152,094 2.9 37
Indianapolis, nd 916,299 37,910 954,209 2.4 60
Kansas City, Mo 446,285 28,668 474,953 1. 2 50
Madison, Wis 347,311 22,937 370,248 - .9 33
Minneapolis, Minn 695,899 135,154 831,053 2.1 124
St. Louis, Mo 2, 133, 182 7,749 2, 140,931 5. 3 379
Southwestern area 4, 773,314 75, 571 4, 848, 885 12. 1 178
Albuquerque, N. Mex 86,427 3,476 89,903 .2 200
Dallas, Tex 2,673,991 19,095 2,693,086 6. 7 447
Houston, Tex 323,494 23,173 346,667 .9 47
Little Rock, Ark 180, 360 5, 529 185, 888 . 5 83
Lubbock, Tex 85,072 2, 596 87, 668 . 2 100
Marshall, Tex 432,415 1, 270 433, 686 1. 1 275
New Orleans, La 571,713 9,416 581,129 1.4 127
Oklahoma City, OkIa 206, 123 6, 298 212, 421 . 5 83
San Antonio, Tex 213,719 4,718 218,437 .6 150
Rocky Mountain area 906,128 - - 30,639 936,767 2.33_ 101
Casper, Wyo 32,868 873 33,741 .08 80
Denver, Cob 211,948 17,427 229,375 .60 120
Fargo, N. Dak 18,880 860 19,740 .04 40
Helena, Mont 100,292 1,285 101,577 .20 100
Omaha, Nebr 109,634 1,866 111,500 .30 50
Salt Lake City, Utah 178, 850 3,866 182,716 . 50 167
Sioux Falls, S. Dak 11,735 112 11,847 .02 20
Wichita, Kans 241,921 4,350 246,271 .60 150
See footnotes at end of table, p. 59.
PAGENO="0063"
59
TABLE 25-GEOGRAPHIC DISTRIBUTION AND DENSITY OF DOD AND GSA PRIME CONTRACT AWARDS,
F~SQAL YEAR 1967-Continued
Contract awards
Index of con-
tract density
Area/SBA region
DOD 1
GSA 2
Total
*
Percent of total
Pacific coast area
Anchorage, Alaska
Boise, Idaho
Honolulu, Hawaii
Los Angeles, Calif
Phoenix,Ariz
Portland, Oreg
San Diego, Calif
San Francisco, Calif
Seattle, Wash
Spokane, Wash
8, 020, 680
301,874
8, 322, 554
20. 71
187
88,466
17,081
.65,689
4,224,895
252,301
158, 048
664, 125
1, 882, 115
583, 965
83,995
1,185
397
1,818
106, 108
13,028
29, 708
1, 933
113, 941
31, 801
1,955
89,651
17,478
67,507
4, 331, 003
265,329
187, 756
666, 058
1, 996, 056
615, 766
85,950
.2
.04
.2
10. 8
.6
. 5
1. 7
4.97
1. 5
.2
200
20
200
212
200
50
567
191
136
67
1 Includes procurement, construction, R. & D., and services, contracts over $10,000. Excludes work at classified locations.
2 Federal Supply Service.
Sources: Office of Secretary of Defense, Directorate for Statistical Servrces, military prime contract awards, fiscal year
1967; summary of Federal programs, fiscal year 1967, Office of Economic Opportunity. The contract density index is the
percent of the national total of fiscal year 1967 prime contracts awarded to each SBA area or region divided by the percent
of the national total of manufacturers value of shipments in each SBA area or region expressed in terms of 100.
The CHAIRMAN. Mr. Administrator, I think before we go into
the regular loan program we might have a few general questions.
What is the status of the revolving fund? S.B.A. cannot operate
without adequate funds, and the legislative provisions in this regard
have to be amended from time to time. I think the committee would
like to document basically the condition of the revolving fund.
Mr. MooT. Yes, sir.
As you mentioned in your opening statement, Mr. Chairman, we
have two funds. We have authority granted by the Congress in our
business loan and investment fund of $2,650 million, and we have an
unlimited authority granted in our disaster fund.
In terms of the operation of the fund, as you know, we receive
collections and interest payments deposited into the fund, plus fees,
and we make loans from these funds. At the present time, we have
sufficient dollars to finance our program as included in the President's
budget through fiscal year 1969.
We had planned and do plan, as shown in the President's budget,
to make certain participation certificate sales during the year, which
would allow us to have an ending cash position at the end of fiscal
1969 to enable us to operate for at least the interim period while
Congress was considering our 1970 budget.
In summary, therefore, we are in a good position at the present
time, and we can operate through fiscal year 1969 at the program
level contemplated by the Administration's budget.
The CHAIRMAN. You say you are in a good position, and you state
that the fund is liquid. Will you describe to the committee the con-
dition in general terms?
Mr. Moop. No, sir; I would give you a specific figure if you would
like.
At the end of March, on March 31-
The CHAIRMAN. Round figures.
Mr. MooT (continuing). 1968, our business loan and investment
fund had an uncommitted balance of $347 million. Our disaster loan
fund had an uncommitted balance of $107 million. These are funds to
which we add collections and from which we make loans.
PAGENO="0064"
60
The CHAIRMJ~N. You have a round figure balance for your regular
business loan program of about $340 million. How long does the
Administrator think these funds will last, based upon recent experi-
ences?
Of course you have not told us bow much is returning into the
revolving fund monthly or quarterly from payments on SBA loans
outstanding.
Mr. MooT. Yes, sir; we are making loans of about $50 million a
month from our business loan and investment fund, and we are
collecting because we are increasing our program. We are collecting
somewhat less than that. However, we have sufficient funds as of
March 31 to carry us with our collections through the next fiscal
year, sir.
The CHAIRMAN. Mr. Moot, you mentioned the participation cer-
tificates. Have the sales of these small business loan participation
certificates been used exclusively for SBA or have the funds been
returned into the Treasury for other programs?
Mr. MooT. The certificates that have been sold based on the paper
of SBA have been returned exclusively for SBA use, Mr. Chairman.
The CHAIRMAN. Other agencies have a different policy.
For instance, the Veterans' Administration, I understand, is not
using its funds from participation sales solely for direct loans or
guaranteed loans, but some is going into the Treasury for other
purposes. But in the SBA's case, your participation sales are being
used for small business loans exclusively?
Mr. MooT. Exclusively, sir.
The CHAIRMAN. Very good.
Mr. Administrator, you mentioned in your statement about a
special study on crime in the cities as it affects small business. Again,
what is the status of this study? How long has it been under way,
and what are you determining? What are you learning?
Mr. MooT. Yes, sir. Mr. Chairman, the Small Business Act amend-
ments of 1967 authorized a study to be undertaken by the Small
Busiiiess Administration, and to be completed and reported to the
Congress by October of 1968. So, therefore, we are in midstream on
the particular study.
We are taking this in several phases. We are undertaking a. ques-
tionnaire, which has been designed and with the participation of the
Social Security Administration, and with the Census Bureau we have
done a sampling of cross section of small business, throughout the
country in both rural and urban areas, and they are ifihing out ques-
tionnaires with our assistance, so that we will know the status of the
impact of crime on small business.
This study is going on at the present time, as I mentioned before,
in connection with the U.S. Bureau of the Census as well as the help
of the Social Security Agency.
The second step we are taking on this is an evaluation of existing
detection devised systems available to businessmen and the develop-
ment of improved systems which will be within the economic reach of
small business, and yet effective in signaling as a sensoring device for
the calling of protection.
The cost benefits of alternative systems will be considered in this
evaluation.
PAGENO="0065"
61
Along with this, and as a further step, we are studying the effect of
architectural changes, that is in building construction, so that it is not
as simple as entering a shopping center and tunneling right through
every one of the stores on the inner walls, which are of course, as you
know, not of sufficient strength to withstand determined assault.
The approach on this is going to be an interagency approach. As a
matter of fact, the work that we are doing on this study is probably a
landmark effort in that very little, if anything, has been done in an
organized way. We think that perhaps this will be one of the finest
studies that Congress has ordered, and that we will be able to provide
it. The cooperation is fine from the other Federal agencies.
The only outside work we are doing by contract will be the evalua..
tion of the protective devices, because the industry we understand is
about on the verge of a technological breakthrough on low cost, yet
highly effective, protective devices.
Again as far as I know, there is nothing that would lead me to say
other than that we are on target and we will be writing up our results
late in the summer for reporting to the Congress early in the fall, sir.
The CHAIRMAN. We will place in the record title III of Public
Law 90-104 which directs SBA to make this study of shoplifting,
vandalism, and other criminal activities with a view to determining
ways in which such concerns may best protect themselves against
such activity. I am not speaking for the committee, but speaking for
one individual. I think I can give you some off-the-cuff advice right
quick as to how to have some law enforcement in this country, in
the ghettos and in the cities.
The police should be supported and law enforcement should be
upheld. The Attorney General should proceed more vigorously.
I think I èould give you some one-man advice as to how to protect
small business, and the public generally. But we will await with interest
your report l and we hope that it will be helpful, with all of the
agencies submitting their views.
You indicated your study was going so far as to improve structures
of buildings. It is basically law enforcement that we must have.
(The information follows:)
PUBLIC LAW 90-104
TITLE III
SEC. 301. This title may be cited as the "Small Business Protection Act of
1967".
SEC. 302. The Administrator of the Small Business Administration shall con-
duct a special study of the impact on small business concerns of robbery, burg-
shoplifting, vandalism, and other criminal activities, With a view to determining
ways in which such concerns may best protect themselves against such activities.
SEC. 303. The Administrator shall report to the President and to the Congress
the results of the study conducted pursuant to this title, including such recom-
mendations as he may deem appropriate for administrative and legislative action,
within one year after the date of enactment of this title.
The CHAIRMAN. I do not want to consume all of the Administrator's
time. I might, however, go back through this statement with a few
additional questions.
You referred to the SBIC program. We will look into this later,
but briefly-how many SBIC's have been chartered to date, how many
1 Note: The report referred to is the final report to Congress, which is due on Oct 11, 1968.
95-193-68----5
PAGENO="0066"
62
are problem cases, how many charters have been revoked, and how
many SBIC's have merged?
Mr. MOOT. All right, sir.
The CHAIRMAN. Just in summary.
Mr. MooT. We have at the present time, and I would like to correct
this, because I am talking from memory now, we have at the present
time 537, of which only 495 are not in the process of dissolution or of
surrendering their licenses. We have 120 of that 495 that--
The CHAIRMAN. You have less than 500?
Mr. MooT. Yes, sir.
The CHAIRMAN. You have 495 operating. What was the maximum
numbered chartered?
Mr. MOOT. We bad 687.
The CHAIRMAN. You had about 187 over the years to go by the
boards?
Mr. MOOT. That is right, sir.
The CHAIRMAN. Mr. Administrator, on page 3 of your statement you
ref er to the economic opportunity loans for disadvantaged persons in
urban and rural areas. You try to apply this rule equally and fairly
in both areas of unemployment-urban and rural-in economically
depressed situations?
Mr. MooT. Yes, sir; we do.
The CHAIRMAN. You referred to the about 600 declarations of
disaster-and we never know when they will occur. Some years there
are few, other years there are many. But have there been any changes
instituted in the SBA program since the disaster program was started?
Mr. MooT. Yes, sir.
You have provided us from the Congress with certain new legis-
lative authority over the years, and we have, of course, been trying to
make the program more effective and more responsive.
Mr. Hendricks in his statement will cover the most recent changes,
in terms of our program approach. But aside from that, the program is
working and we are finding that it is responsive.
The CHAIRMAN. Mr. Conte?
Mr. CONTE. At the outset, Mr. Chairman, I would like to associate
myself with your opening remarks.
As the second ranking Republican, and now that our ranking
minority Republican has been nominated for Governor of West
Virginia, as, I hope, the ranking Republican, I want to assure you
of my full cooperation, as Mr. Moore has given to this committee
and to the chairman who has done such an outstanding job.
You mentioned, Mr. Moot, that you had unlimited authority in
disaster funds. Do you think it is realistic to set a ceiling of $100,000
on these loans? We had a very terrible experience in my congressional
district only recently, where we had a flash flood which destroyed an
industry that employed some 185 employees, A $100,000 disaster loan
to that industry, one of the major sources of employment for the
entire community, is not sufficient to put that little industry back
on its feet. Do you think this is realistic?
Mr. MOOT. Yes, sir.
Under the overall circumstances, we do. As a matter of fact, I still
think it is realistic. I understand exactly what you are saying,
Congressman. I think in the particular case you did have reference to,
with your help and with Mr. Hendricks' help, we have provided that
financial assistance from the private sector.
PAGENO="0067"
63
Let me put it this way: It is true-.
Mr. CONTE. May I interrupt?
Mr. Moop. Surely.
Mr. CONTE. Mr. Hendricks certainly has been most helpful in that
particular instance. Thanks to him, the doors of that industry will
be open again.
Mr. Moor. Yes. I understand, and we have watched that very
carefully. The problem is this: Early last fall we were faced with the
necessity of making sure that we were not creating an adverse impact
on Treasury dollars, in all of our programs, any more than was
necessary to get our basic job done.
The general trend of prices and such with creeping inflation indi-
cated that there needed to be as much fiscal restraint as possible.
We undertook to look at all of our programs.
We found that 98 out of every 100 of our loan programs for homes,
and 95 out of every 100 of our business loan programs for businesses
in the disaster program could be covered, could be covered by certain
limitations; namely, 25,000, which is a combination of 20 and 10, not
to exceed 25,000 for homes, and 100,000 for businesses, leaving above
that the authority to provide guarantees for bank participation for
the kinds of homes and kinds of businesses that had a greater loss than
that.
We found that while this would cover, as I said, 95 to 98 percent of
our total applicants, it would likewise save considerable dollars, be-
cause when there is a big requirement, it is a very significant one, as
you well know in this particular case.
But we felt that the funds would be available in these cases from
the private sector, because they are more substantial, either homes or
business, and we felt that we could distribute what has to be an overall
limitation of our total effort more properly if we did apply these
limitations.
Now they are obviously not the most desirable from the Administra-
tion point of view, from our Administration's point of view, because
it is easier not to have a limitation but we felt in good conscience in
order to make the SBA more responsive to the total economic needs
and distribute its total resources where it could do the most economic
good, that the cost was worth the benefit, really.
Mr. CONTE. It was really a question of money. If you did not have a
limitation, the money could be exhausted very quickly.
Mr. MOOT. It could be more readily exhausted; that is right, sir.
The CHAIRMAN. Mr. Kluczynski, any general questions?
Mr. KLUCZYNSKI. Mr. Chairman, I have no questions at this time..
These are extensive hearings and 1 am sure the members of this fine
committee are anxious to be here and to know more about the adminis-
tration of small business. However, I want to compliment the Adminis-
trator for the wonderful job he is doing, and the fine staff you have.
We have one of the greatest chairmen, as you know, of any com-
mittee. We have a very good staff.
Every member of this committee wants to be helpful to the small
businessman, the small fellow who needs help, the small fellow who
has built the communities-I am chairman of the Urban Affairs
subcommittee; we had hearings all over the country in big cities. Now
we are making the smaller cities, and I am very happy that we are
able to do something for the man who needs help.
PAGENO="0068"
Are you aware of the situation in New York just a couple of years
ago, where Federal urban renewal came and cleaned out 250 or 300
small businesses?
The Federal Government also comes in to build the highways. We
want to take care of those people-the papa and mama stores, the
people who have been in business within the family for 50 or 60 years.
Some of them, 25 or 30 percent, were willing to get out of business,
but many of them, or most of them, wanted to stay in business, and
I am very happy with the splendid cooperation we get from you and
your men and your staff.
I know I have called your people several times for information,
and in no time I got whate~ er I wanted, and I know that you are going
to continue that. We are all working for the man who needs help,
the small businessman.
Mr Chairman, I will have some questions perhaps tomorrow or the
day after as the hearings go on, but again I want to say it is a pleasure
to have Mr. Moot, one of the great men, in this agency.
The CHAIRMAN. Thank you, Congressman Kluczynski. Congress-
man Neal Smith, any questions of the Administrator?
Mr. SMITH. Not at this time, Mr. Chairman.
The CHAIRMAN. Mr. Irwin?
Mr. IRwIN. No, thank you, Mr. Chairman.
The CHAIRMAN Mr Horton, of New York
Mr HORTON Mr Chairman, I w ould also like to say a word in
behalf of our chairman I have a great deal of respect foi him and for
his leadership on this very important committee
Principally through his efforts we have been able to preserve the
integrity of the Small Business Administration.
I do not think I ever saw a committee of Congress work so unan-
imously to preserve the integrity of an agency of the Federal
Government as this committee did not too long ago. It has been a
very important step forward to focus this attention on small business
I also want to add a word or two to the comments made by Chair-
man Kluczynski I serve on that subcommittee as the ranking
Republican, and I have attended the sessions held in the 89th Con-
gress in the large cities on the problem of the small businessman in
the urban area, problems we have seen firsthand in Chicago, Rochester,
New York, and Atlanta
Under the leadership of Mr Kluczynski, in the 90th Congress, we
have been concerned about these problems in the rural areas. We went
to Kansas and Utah, and just a couple of weeks ago we were in my
district, in Wayne County, N Y I understand we are going to go to
more areas to look at this particular problem
I note, also, that some of your comments refer to the difficulties
experienced by small businessmen in rural areas. You indicate that
this is a problem we are trying to concentrate on with regard to
specific programs in these areas I want to stress the importance, in
my judgment, of this emphasis. With our urban areas so crowded,
with small businesses having to compete, as they do, in the urban
area, and with the impossibility in some instances for small business to
hold its head up and keep going, it seems to me that the future for
many of our small businesses is in the rural area or the nonurban area,
if you will.
PAGENO="0069"
65
I hope that the programs that you have mentioned here briefly,
and which I am sure we will go into, can be expanded so that they
can help small business.
My congressional district includes about half of the city of Roches-
ter, in Monroe County, and Wayne County, a rural area. We have in
my district the unusual situation of Rochester having one of the
lowest unemployment rates in the country, and Wayne County, on
the other hand, having a classification as a distressed, persistent
unemployment area. It has been so classified by the Economic De-
velopment Administration. They are trying to attract industry and
business out into the rural areas. This is why many of these programs
are so important.
The thrust of the programs that you have for the rural areas is
very important, and I want to emphasize my support and the support
of this, committee for this type of program, the encouraging of business
and industry into the rural areas.
I do want to ask you a few questions ab~ut the business loan
program. The matters that come across my desk would indicate that
the business loan program is depending principally upon private
sector financing. Many cases, I thought, were~ meritorious business
loan applications that should have been approved. They have been
turned down, however, because of the risk involved.
Basically, the risk was the risk that a bank would not assume. I
thought that the business loan program was directed to take some of
these small businesses that conceivably did have a higher risk and
help them, so that they could get back on their feet.
I do not want to go into specific cases, because I am sure you are not
familiar with them, but I would like to ask you to comment on the
business loan program.
The CHAIRMAN. We are going to have a full presentation by Mr.
Hendricks on that. If you want to ask the Administrator to testify
as to policy-
Mr. HORTON. Let's talk about the policy and not specifics. What
is the policy with regard to the small business loan program?
Mr. MooT. Congressman, it is a very important area, and I would
like to make one or two points. First of all, in our business loan
program, forgetting the other parts of the program that are funded
in our business loan and investment fund-nameiy, displaced business
loans, and economic opportunity loans, the business loan program-
we are under a mandate from the Congress to secure participation to
the maximum practical extent from the private financial ~ector,
financial institutions. This enables us to make our "funding go much
further, and enables us to build with the private banking institutions
the credit of small business, so that follow-on loans can be made
through banks, without our assistance, and allows us to move our
assistance over to newer, or to, as you say, higher risk concerns.
It is true, generally speaking, that the concerns that we deal with
are those concerns that are of somewhat higher risk, because there
is a problem of securing loans completely from the private sector.
On the other hand, generally speaking, what we are offering is not
a loan completely different, a business loan completely different from
a bank, but for a longer term primarily; and, secondly, at a rate of
interest which, as you know, is set by statute, at 5.5 percent.
PAGENO="0070"
Actually, we have progressively increased the private sector in our
business loan program from an opening of about 20 percent of approved
loan dollars back in 1960-this means either participation, part bank
money, part Treasury money, or up to a 90-percent guarantee by the
Government-from 20 percent to what we had in 1967, of 47 percent.
This means that of the business loan program, 53 percent of the dol-
lars were Treasury dollars, and 47 percent were private sector dollars.
We hope we will get to be about a 60-percent private sector funding
and a 40-percent Treasury dollar funding, which we think, if we can
properly manage our program, will allow us to provide more loans
of Treasury dollars to the higher risk spectrum of innovation loans,
new product development, where we need to encourage the develop-
ment. At the same time, there will be built credit know-how and
credit experience for our small business constituents with the banking
fraternity.
So that we think we have a right balance at the present time.
Now the higher risk loan, very high risk loan programs we are capa-
ble of covering in our other programs, other than our straight business
loan program.
Mr. HORTON. I would also like to know about the various programs
that you have relating to urban areas.
What is your policy with regard to assistance to business in the
inner city?
Are you trying to have or do you have any special programs to reach
out and help initiate new business enterprises, particularly in the urban
areas? I am talking about minority group ownership of businesses
in what you might call the inner city or hard-core areas.
Mr. MooT. Yes, sir. We have several specific programs aimed at
that objective. I wonder if you would like me to go into them now?
We do have a special-
Mr. HoRToN. I was referring to the general policies.
Mr. MooT. Yes, sir; we do have.
We recognize, just as you said, that at both ends of the spectrum-
the inner city problem and the rural problem-we need to keep our
programs in balance to prevent the outmigration-
The CHAIRMAN. This is one of the several new programs that
have been added to SBA by mandate of Congress.
Mr. MOOT. That is right, sir.
The CHAIRMAN. And Mr. Hendricks will speak in detail regarding
that. Basically, are you moving ahead?
Mr. MooT. We are moving ahead, sir.
Mr. HORTON. Now, one further question. I recently had a number
of small businessmen get in touch with me with regard to a question-
naire that was sent out by the Census Bureau. It asks a lot of detailed
information. These small businessmen were very upset by the amount
of detail that was required of them by the Census Bureau. In many
instances they indicated that it was going to cost them considerable
money in order to accumulate this information.
What are we doing about trying to help the small businessman with
regard to these questionnaires and all of the extra effort that he is
having to make with regard to reports to the Federal Government?
Many of them told me, "I have a little business here and I do not run
a bookkeeping firm. I just do not have the techniques to provide the
information."
PAGENO="0071"
What is your general policy with regard to `that?
Mr. MOOT. We are quite alert to that problem, Congressman
Horton. We have an interagency group within SEA among which
responsibilities it has is to constantly review the reporting requirements
placed by the Federal Government on the business community, and
particularly with impact on the small business community.
We have run studies. We have made progress.
Generally speaking, we have found that about a little less than 1
percent of the worktime effort of the small business concerns that we
work with goes toward reporting requirements, Federal forms, and
so forth.
We are making progress. We have not really licked the problem
yet. But we are very alert to the subject.
Mr. HORTON. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Administrator. Some time ago you inaugurated
a reorganization program within the structure of SBA. Has that been
finalized?
Mr. MooT. Yes, sir.
The CHAIRMAN. Do you want to tell the committee for the record
some of the major reorganization changes?
Mr. Moor. Yes; I will. Associate Administrator Hendricks covers
the financial assistance aspects of what we call our team approach
in his statement, which was the most significant of our operations, to
get a consolidated approach to our financial assistance, including
management assistance as a part of it.
Generally speaking, we have completed all of the reorganization
that we have in mind.
The only thing that we have done since the last time you looked
at this situation of any significance at all is to move the local develop-
ment company program down one step closer to the operations.
We have put it down, decentraljzed or it will be' as of July 1, down
at the regional level, so that the regional directors themselves will be
responsible for the operations of the local development company
prOgram.
Other than that, we are satisfied that we have a good organization,
well organized and with good people, and we think that now is the
time to capitalize on our improvements.
The CHAIRMAN. Under the previous system, loan applications had
to be initiated on the local level, reviewed at a regional level, and sent
to Washington for final approval, but now under the reorganization,
loans are made within the region. The decision is made, as I understand
it, by the regional office itself.
Mr. MooT. That is right, sir.
The CHAIRMAN. Is this up to a certain limit or are all loans
handled that way?
Mr. MOOT. Well, in terms of our normal, of our regular programs,
we are completely decentralized. There are one or two qualifications
where we are watching the program development of displaced business
loans, for example, where Mr. Hendricks likes to look at the final
approval of the larger amounts of loans.
The other programs, except for our small business investment com-
pany program, which is still centralized, as you know, because we feel
from the Washington level with the individual companies-
PAGENO="0072"
The CHAIRMAN. The SBIC loan program supervision is centralized.
What about the economic opportunity loan, the poverty loans in the
ghetto areas? Is that localized or is it centralized?
Mr. Moor. The economic opportunity loan program is completely
decentralized, Mr. Chairman.
The CHAIRMAN. The business loan programs are decentralized,
the economic opportunity loan programs are decentralized. The
decisions are made at the local level by the local regional offices.
Mr. Moor. That is right sir.
The CHAIRMAN. How many associate administrators do you have
under your reorganization plan?
Mr. MOOT. We have three associate administrators, one for fi-
nancial assistance.
The CHAIRMAN. Mr. Hendricks?
Mr. Moop. Administrator Irving Maness for procurement and
management assistance and Glenn Brown for the Investment Divi-
sion. Then, of course, we have our assistant administrators, one for
administration, which is the controller, accounting, and personnel
operations, one for planning and research, Dr. Wilford Garvin,
who is behind me here, and one for congressional and public relations.
So we have three assistant administrators, three associate ad-
ministrators and a general counsel.
They are the top organizations of the agency.
The CHAIRMAN. Personnelwise, how many branch offices do you
have all over the country and what is your total personnel picture?
Mr. MooT. We have 62 regional offices, and below that 13 branch
offices in certain sectors of the country, eight area supervisory offices,
and we have at the present time 4,197 permanent employees.
The CHAIRMAN. Do you have a regional office or branch office
in each of the 50 States?
Mr. MooT. We do, sir.
The CHAIRMAN. Puerto Rico and the District of Columbia?
Mr. MOOT. We do, sir.
The CHAIRMAN. One further question, and then we will suspend
on this subject: Under your old system, there was a complaint of a
timelag, taking a lot of redtape and consuming a lot of time I believe
that has been cut down and reduced What is your average processing
time now? Perhaps that should be confined to Mr Hendricks, but
generally under your reorganization and your decentralization, you
have speeded up the time on loan applications that are considered
Mr. MooT. Yes, sir.
From the receipt of an application to its approval or declination is
now taking an average of 19 days for our business loan programs. It
takes a little longer for our economic opportunity loan programs, 20
days, and generally speaking our disaster loan programs have been
averaging, through this heavy period this year, 8 days.
So we are more responsive in terms of our disaster program.
The CHAIRMAN. Our general counsel, Mr. Mitchell. Do you have any
questions of the Administrator?
Mr. MITCHELL. I have one, Mr. Chairman.
Mr. Moot, at the hearings of this committee in 1966 the agency
reported that in conjunction with the Bureau of the Budget it entered
into a contract with, I believe, a company called Operations Research
Inc., for an improvement management contract or study for improv-
ing SBA's administrative management.
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69
The recommendation of this committee, in its report 2339, recom-
mendation No. 11, stated:
Following the report of the special study being conducted under the manage-
ment improvement contract, the report and recommendations should be submitted
to the Congress for consideration.
Could you tell the committee what has happened on that manage-
ment improvement contract?
Mr. MooT. Yes, sir. The contract was terminated at the conclusion
of phase 1, so that the greater portion of the contract was never
*consumated.
Phase 1 of what was a two-phased contract was an exploration of
the various objectives and empha~es that we should be in SBA placing
on various programs. Phase 2 was how we should structure our opera-
tion in the agency, in order to implement those objectives.
We felt that as phase 1 developed, that we could probably do this
better in-house, in terms of improving our operations, so that with the
approval and agreement with the Bureau of the Budget, which was a
joint participant with us on the program, we terminated that contract
at the end of phase 1.
Mr. MITCHELL. Then you have arrived at no recommendations
that would require legislation or the attention of Congress?
Mr. MooT. No, sir, we have not.
Mr. MITCHELL. That is all, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. Administrator.
We understand you are going to be available as time goes on for
other questions as they may develop. We thank you and we will now
hear from your Associate Administrator, Mr. Logan Hendricks, who
is well and favorably known to this committee.
Mr. HENDRICKS. Thank you, Mr. Chairman and members of the
committee.
I welcome this opportunity to appear before the committee to discuss
several of the programs within my area of responsibility. Specifically,
I would like to report on our regular business loan program, our
displaced business loan program, our development company assistance
program, the new lease guarantee program, and our disaster loan
assistance programs. If it is your preference, I will stop as I complete
my remarks on each of the programs mentioned in the event that
committee members have questions at that point.
The CHAIRMAN. Very good. I think that is in the interests of good
order.
REGULAR BUSINESS LOANS-SECTION 7(a) SMALL BUSINESS ACT
Mr. HENDRICKS. The Small Business Administration's regular
business lending program continues to be of vital importance to the
small business community and our national economy and is essential to
help assure a healthy, competitive, free enterprise system-the objec-
tives of the Congress in authorizing the business loan program in 1953.
Since the inception of this program through December 31, 1967,
over 80,000 loans have been approved, for a total of $3.6 billion. Of
this amount $2.6 billion has been approved during the unprecedented
period of continued national economic growth which began in 1961.
The industry distribution of these loans has been wide and varied:
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70'
[Dollar amounts in millions)
Industry Number
Percent
Amount
Percent
Manufacturing
Wholesale
Retail
Services
Others
19,331
6, 706
29,005
15,243
10,497
24
8
36
19
13
$1,355
327
780
597
544
38
9
22
17
14
Total 80, 782
1
00
3,603
100
The CHAIRMAN. Concerning these 80,782 loans, again tell us for
what period does this embrace?
Mr. HENDRICKS. This would be from the inception of the program
back in 1954 through December 31, 1967.
The CHAIRMAN. Since the beginning of the SBA program, you have
made nearly 81,000 loans?
Mr. HENDRKCKS. That is correct, sir.
The Administrator has called to my attention that this is in the
category of 7(a) business loans as opposed to the other categories that
I have already mentioned in my first paragraph.
The CHAIRMAN. All of these are small business loans and the highest
percentage is in the retail field and the next highest percentage is in
the manufacturing field.
Mr. HENDRICKS. The "other" category, incidentally, Mr. Chair-
man, would include such industries as construction, recreational, and
various others that individually do not add up to a large percentage.
The $385.3 million of regular business loans approved in fiscal year
1967 was exceeded only once in the history of this agency, fiscal year
1965. The estimate for the current 1968 fiscal year, if achieved, will
set a new agency record which in turn is expected to be substantially
exceeded in fiscal year 1969. This indicates that as the national
economy grows, generating new business entries as well as business
modernization and expansion, the financial assistance provided
through th~ Small Business Administration's lending program also
expands. Such expansion not only is in Government dollars but also
involves private sector dollars in keeping with our legislation that "no
loan shall be made unless it is shown that participation is not avail~
able."
Over the years, we have maintained close liaison with members of
the American Bankers Association and the Independent Bankers
Association.
In accordance with this committee's recommendation, arising from
the 1966 hearings, conferences have been arranged between top SBA
officials and representatives of banking and financial institutions
throughout the country for the purpose of fully apprising the local
banking communities of the advantages in participating in loans with
SBA.
In addition, the primary purpose of our bank relations officers,
currently consisting of 24 retired bankers, is to contact banks in order
to promote our loan guarantee and participation programs. These
experienced men also have been a contributing factor to wider accept-
ance of SBA lending programs by the banking community.
The CHAIRMAN. I think it might be well to point out at this point
in the record that several years ago there was little or no banking
PAGENO="0075"
participation, and with this agreement with the American Bankers
Association, and the dissemination of news to the banking community,
that today you are able to inject more financing into the overall
economy by the cooperation arranged with banks.
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. And that SBA was unable to supply all the needs
but now the private sector is supplying I believe, as Mr. Moot said,
about 50 percent.
Mr. HENDRICKS. And we find, Mr. Chairman, an increasing interest
on the part of the banking industry to get into this type of lending.
The CHAIRMAN. Is it rather well accepted today, is it popularly
accepted, is it approved by the great majority of the financial com-
munity?
Mr. HENDRICKS. It is becoming very much accepted, I would say,
Mr. Chairman, but there is still a considerable amount of missionary
work that must be done. It may make the point a little more clear to
say that we have participated with approximately 7,000 to 8,000 of the
14,500 banks. This would indicate we still have a considerable distance
to go, but the improvement is very marked.
The CHAIRMAN. Very good.
Mr. HENDRICKS. In the latter part of fiscal year 1967 we implement-
ed the simplified bank guarantee plan -SBLG- which has been well
accepted by the banking community. This plan streamlines procedures
and reduces paperwork to the mutual benefit of banks and SBA. The
bank and SBA execute one blanket or master guaranty agreement
against which all subsequent transactions are written.
We continue to exercise surveillance over lending policies, size
standards and credit with the same care used in our other plans, bu1~
on an expedited basis. Improvements include:
(1) a one-page application form that the bank executes for the
guarantee,
(2) use of the bank's loan instruments, thus eliminating the
SBA forms,
(3) action on the application by SBA within 10 work days,
(4) simplified repayment and reporting procedures,
(5) servicing actions are handled almost entirely by the lender,
which is the bank,
(6) reduction from 90 to 60 days in the default period required
before the lender can make demand on SBA, and
(7) a commitment by SBA to purchase its guaranteed per-
centage within 20 days after receipt of lender's demand.
By December 31, 1967, there were 614 SBLG agreements signed
with banks, many of them the largest in the country, and 340 loans
approved for $26 million under the agreements.
I might ad lib, Mr. Chairman, that actually this figure stands
closer to 800 today, because there have been approximately 140
agreements which were in the process of being signed since the prepara-
tion of this statement.
This committee's report on the 1966 hearings urged that "extreme
caution should be exercised in imposing any fiscal restraints that will
limit financial assistance to the small business community."
I believe that the record loan level anticipated for fiscal years 1968
and 1969, as previously stated, should allay the committee's fear in
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this regard. And I would hasten to say it is not contemplated that our
guarantee and participation programs can ever substitute completely
for our direct loan program.
However, the greater emphasis being given to guaranteed and
participation loans not only enables us to expand our assistance to
the small business community in consonance with the desire of this
committee and the Congress, but it is to the advantage of the small
businessman. A bank guaranty or participation loan, as Mr. Moot has
already suggested, provides the small business borrower the opportu-
nity of building up a satisfactory credit record with the bank so that
after the loan is repaid the bank has a firmer basis for extending
necessary credit without enlisting the aid of the Government. Thus,
the bank participation type loan, if obtainable, is of more assistance
to the small businessman than a direct loan.
By statute, of course, we have already said we may not make a
direct loan if participation is available.
Although loan resources available to SBA for fiscal years 1968 and
1969 represent very substantial increases, they will still fall short of
demand. It therefore will be necessary to continue the administrative
limitations of $100,000 for direct loans and $150,000 as the SBA share
of immediate participation bans.
As the chairman may remember, these are increased amounts from
our report some 18 months ago, when they stood at $50,000 for direct
loans and $100,000 on the SBA share of an immediate participation.
The maximum of $350,000 will continue for guaranteed loans. How-
ever, these amounts will adequately meet the requirements of the
vast majority of demand
At the time of the 1966 hearings a rather stringent loan priority
system was in effect. As Administrator Moot has indicated, we are
convinced that a rigid priority system is neither feasible nor desirable.
We are equally convinced that we can maximize the returns from
our loan dollars if they~ are applied in the right areas, in the right
industries, and within the framework of well-developed plans designed
to improve the economy of a given area. These are the guidelines
under which we are operating today.
Loan applications are being accepted from all eligible small business-
men and loan approvals are made keeping in mind the need for
maximizing returns to the Nation and the economy.
The CHAIRMAN. Mr. Hendricks, I think the record should at this
point emphasize that what SBA is trying to do is to maximize the
loan dollar that is available to the small businessman. You are doing
it through your various programs, through participation with the
banks-the financial institutions. I assume it is absolutely impossible
to satisfy all the demands.
Mr. HENDRICKS. This is correct, sir, and it may be brought out
perhaps a bit more forcibly if we understand that in the current fiscal
year to date, the amount of dollars that are going into the business-
man's pocket, a very healthy segment, very nearly 50 percent, comes
from the private sector participation.
The CHAIRMAN. Two years ago when we had hearings you had set
up a priority system concerning which this committee was rather
critical since it was not written into the statute and was not directly
authorized by Congress. It was an administrative procedure that was
made necessary because of the demand, but Administrator Moot has
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said that this* is neither desirable nor feasible now and you are not
using a priority system now, but you have by administrative reguia~:
tio1~ s~t a, maximum limitation of $100,000 for direct loans, or $150,000
for SBA's' share of participation loans, whereas* the statute sets
$350,000 as the maximum loan that SBA ~may make.
Mr. HENDRICKS. This is correct, sir.
The CHAIRMAN. You make the $350,000 loan today, provided there
is participation?
Mr~ HENDRICKS. This is correct. `We make this under the guarantee
program, Mr. Chairman.
Perhaps .the reason for this is that again, just as the Administrator
has indicated earlier this morning, the greatest share of demand which
came to our door can be satisfied by these limitations.
The CHAIRMAN. Experience has shown that the great volume,
the great number percentagewise of requests are under or within the
$100,000 limitation?
Mr. HENDRICKS. This is correct, sir.
By number, the majority of loans can be accommodated by these
limitations. We did find, of course, in studying the past history of the
agency in lending, that the very few number of loans that desired a
larger amount of money did of course constitute in the aggregate a.
very healthy segment of our yearend budget, meaning by this that it
practically took one-third of our money to accommodate a very few
loans.
It naturally would appeal to the committee that a lot of these larger
loans may be very productive, and therefore should be accommodated.
Generally they represent the larger small businesses, which are
more sophiticated. They have more sophisticated records. And very
readily adapt themselves to the guaranteed program. They will have
almost immediate access to private credit in the entirety, or, because
of maturity features, with the assistance of our guaranty program,
they can be accommodated.
I would venture to say that very few viable small busii~iesses that
need the larger amount of money are denied.
The CHAIRMAN. Well, as a matter of policy, and to maximize the
dollars available, it appears that it is the policy or feeling of SBA that
you would rather accommodate 100 loans with a lesser amount than
50 loans for the full amount?
Mr. Moor. I might add, Mr. Chairman, that we have other pro-
grams that Mr. Hendricks will cover.
The CHAIRMAN. Yes.
Mr. Moop. Where we do go up to $350,000 of SBA's money, in a
different configuration.
The CHAIRMAN. You may proceed.
Mr. BROYHILL. Mr. Chairman, I have a question.
The CHAIRMAN. Mr. Broyhill of North Carolina.
Mr. BROYHILL of North Carolina. If you do not mind, I would
just like to ask a question, Mr. Chairman, of Mr. Hendricks.
You indicate in this paragraph on page 5 that you are convinced
that a rigid priority system is neither feasible nor desirable. It leaves
the implication in my mind that you still have a priority system of
one kind or another. Is this correct?
Mr. MooT. Perhaps I can answer that, Mr. Broyhill.
PAGENO="0078"
7~
We have decided, for our administrative purposes, that out best
approach is what we call a balanced economic growth concept, which
means to us that we take each region, each economic entity of the
country, and determine through working with the local officials and
our local office what is the best economic development plan for that
particular area, and therefore it is impossible for us to set national
priorities as to whether we should be providing loan assistance across
the country on one particular segment of industry.
We are designing the use of our resources to maximize the balanced
economic growth of all areas of the country, and to the extent that the
economic requirements of each area of the country differ, then our
priorities differ.
Mr. BROYHILL. Does this also apply to the allotment of money to
each area?
Mr. MooT. Yes, sir; it will become more and more sophisticated as
we become more and more capable of handling the techniques that
develop the economic planning of each area, but we `allocate our
funds to meet, within our capability of resources to meet the economic
development needs of the various regions of the country.
Mr. BROYHILL. Does this mean then that under this system that
you presently have in effect you would favor a loan from an indi~
vidual who wants to set up a manufacturing company as opposed to
a retail company?
Mr. MooT. It depends upon the economy of the region we were
looking at.
If the manufacturing proposal was a competitive market favorable
proposal for that particular area, and it had the greatest employment
potential, the answer is "Yes."
On the other hand, a manufacturing operation may be completely
infeasible in a particular region. It may be that a recreation attraction
or a concessionaire for a national park operation would be better. It
depends upon what the economic needs of the region are.
As you well know, in North Carolina we have used a good part of
our resources in development of local development companies, small
manufacturing operations; because this is the kind of an economic
growth potential that North Carolina has done so well with in the
industrial development.
Mr. BROYHILL. You state that these are the guidelines under which
we are operating today. Are these guidelines available to the members
of the committee and to the committee on a written basis, staff
instruction or instruction to the various offices?
Mr. MooT. We can give you, Congressman, our general directive
instructions to the field, and we will so provide for the record.
Generally speaking, we are still evolving what we are calling our
balanced economic growth, as you will hear as we go through the rest
of these hearings.
Mr. BROYHILL. Thank you, Mr. Chairman. I just thought we ought
to have a little more understanding.
The CHAIRMAN. Without objection, the response to the request
may be received for the record.
(The directive instructions follow:)
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PROMOTING BALANCED EcoNoMIc GROWTH
PART I-THE CONCEPT
A. Overall .ajency objectives
Embodied in SBA basic legislative authorities:
The Small Business Act,
The Small Business Investment Company Act of 1958,
The Economic Opportunity Act of 1964.
The authorities nnd responsibilities conveyed upon the SBA by these con-
gressional mandates may be translated into the following basic objectives of
SBA:
First: Assist in maintaining balanced economic growth on a national basis,
Second: Assist in maintaining a healthy competitive environment.
Third: Provide opportunity to ALL qualified individuals.
Fourth: Assist in the creation of new jobs.
Fifth: Achieve the foregoing at the State and local levels.
The foregoing five objectives which have been adopted by the Administrator
are in keeping with various statements by the President and the Congress-
three of which are quoted below:
The Small Business Investment Company Act of 1958, in its statement of
policy, states that the purpose is-"to improve and stimulate the national econ-
omy in general and the small business segment thereof in particular."
In speaking of community development ,the President has stated:
"* * * the sources of poverty vary from family to family, city to city, region
to region * * * we urgently need to bring together the many existing programs-
Federal, State, and local and private-and focus them more effectively in a
frontal assault on the sources of poverty. * * * Most important, we shall en-
courage and assist communities and regions to develop their own plans of action;
to mobilize their own resources as well as those available under Federal programs."
(1964 Economic Message.)
In speaking of rural America, President Johnson has said:
"Local leadership and initiative are necessary if rural development is to keep
pace with the needs of the people. But government can and should provide
information as well as technical and financial assistance which will speed progress."
(Labor: Smaller Communities Program booklet.)
B. Achieving the objectives
To assure accomplishment of the foregoing objectives in a manner which makes
maximum contribution to associated Presidential national goals, SBA must
align its assistance programs-financial, procurement and management-to the
carefully defined economic needs of the local communities and regional areas.
In short-SBA should encourage economic development planning at the local level
and offer its program resources as complementary assets in the resulting economic
balance sheet which lists community assets and liabilities in relation to needs or
requirements.
Accomplishment of our objectives must, of course, be achieved through the
small business community operating at the local levels. However, our assistance
to the small businevs community should, to the maximum extent possible, be
dovetailed with-
Organized economic development programs-state and local, and
Programs of other Federal agencies having the same economic growth
objectives.
This "dovetailing" is essential because:
1. SBA must have a sound basis for planning and distribution of $1 billion in
financial assistance throughout the nation.
2. There is a need to balance economic growth in accordance with the require-
ments and potential of all areas-rural, urban, and metropolitan. Only through
balanced application of resources can maximum accomplishment of objectives be
achieved. Only by looking at total needs vs. assets of a community can best use
of SBA financial, management and procurement assistance be made.
3. Utilization of SBA resources to meet defined and outlined economic pro-
grams of the community minimizes possible duplication of effort and resources
among SBA programs and among separate Federal agency programs. The role of
each is known in advance. The multiplication effect of programs working in con-
cert is enhanced.
4. We must recognize that there is varying economic potential from com-
munity to community and from region to region. The strengths of each area must
PAGENO="0080"
76~
be exploited if we are to secure maximum use of national resources and varying
approaches to economic growth must be recognized. We must be flexible in our
approach.
5. SBA and the communities must have a means of projecting resource require-
ments into future years in order that requirements can be justified and long-range,
dovetailed plans accomplished.
6. Community and regional involvement builds pride in progress, strength in
numbers, I)articipatioll by local financial institutions and minimum losses to the
Government.
7. Balanced community-wide economic growth builds economic stability which
best protects the small business community which is normally very sensitive to
adverse shifts in business activities.
S. There is already significant progress in state and local economic development
~~lanniiig. Similarly, there are several Federal agencies such as EDA, Agriculture,
Labor, IIUD, Regional Development commissions, etc. which are stimulating
local development planning and allocating resources to develop and execute plans.
Unless SBA aligns its programs with these economic development planning efforts,
we may well be out of step with progress and the current momentum for main-
tenance of a vibrant national economy.
C. Economic rationale
Exhibit I, attached, discusses the relationship of SBA programs to the Balanced
Economic Growth objective from an economic standpoint. The paper provides
additional background on the economic need for orderly programming of SBA
resources and clarifies some mistaken impressions concerning the application of
resources under the Balanced Growth Concept.
PART 11-THE STRATEGY
A. Background
The balanced economic growth concept has been in the evolutionary stage since
early in Calendar Year 1967. A cautious but well planned strategy was adopted
to assure-
First, that there would not he a major upheaval of agency policies or prac-
tices in favor of an untried and untested concept, and
Second, that SBA staff would have ample time to re-orient their thinking
to the new concept and be trained to operate effectively under whatever new
programming system was adopted.
The strategy contemplated a series of events and actions, described below,
each of which Was designed to test the validity and acceptability of the concept on
a progressive basis.
B. Regional/economic development/balanced growth conferences
Planning for SBA sponsored regional economic development conferences began
early in 1967. The first such conference was held in May in New England. The
attendance from three states consisted of Governors, members of Congress,
business and community leaders, state and local development planning officials
and representatives of other Federal agencies. The success of the conference and
the interest shown by local officials in balanced growth and community planning
led the Administrator to adopt a program for additional conferences.
The recent issue of the SBA Enterprise contained a run-down on the conferences
held in Utah, Nebraska, and Colorado.
In each conference, the Administrator's message was woven around the eight
points made under "The Concept" on pages 3, 4, and 5. He stressed the need for
local initiative, local planning, and local financing. He emphasized that we were
not economic planners and could not do the planning for the individual community,
state, or region. He pointed out how SBA assistance programs could contribute to
successful execution of locally developed plans.
C. Operation Impact
To test the validity of integrated programming of SBA assistance programs,
Operation Impact was launched in July 1967. It is an effort to make maximum
contribution to upgrading selected local economics by marshaling all SBA pro-
gramn resources in a closely coordinated and controlled manner. In addition, where
the local situation required, SBA would attempt to supplement its resources with
those of other Federal agencies having the same broad economic development
objectives and who could legally allocate resources to uplift the community. Five
"PILOT" projects were activated: Greenshurg, Kentucky: Pikeville, Kentucky;
Warsaw-St. Lawrence (Cincinnati), Ohio; Gila River Indian Reservation; and
ARVAC, Dardanelle (Russeliville), Arkansas.
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77
To assure proper coordination and control, the Adiüinistràtor designated an
"Operation Impact Project Officer" to be respoi~sible for the entire effort. In
addition, one man on the Washington staff was named to monitor each project.
The five pilot,.projects are in varying degrees of development and operatiorn
Documented time-phased project plans have been developed; actions are under
way to provide all with SBA assistance and get other agencies to cooperate where
appropriate. State `and Local development officials are working closely with SBA
staff. Project monitors are submitting bi-weekly progress reports on activity in
each community.
D. ljducation and orientation of 8B14. staff
In June 1967, the "National Change Team" was established. The basic mission
of tl~e' Team was to develop a mechanism for orienting SBA staff to the new
balanced economic growth concept. Essentially, the "change" to be effected was
one of attitude and approach of SBA staff to achieving SEA missions and objec-
tives-centered around community economic development with SBA participation
and assistance.
The "National Change Team" arranged with the Department of Agriculture
Graduate School to develop an "Economic Development Workship". Many
conference participants are graduates of the workshops or have staff members
who participated in the workshops conducted thus far. The feedback from work-
shop participants indicates that the course material and presentations by the
speakers have given them a broader perspective of economic development and
identified the potential role of SBA assistance programs in achieving locally
developed plans.
At the National level, a series of seminars and workshops on the Planning-
programming-budgeting System was recently completed to orient SBA staff on
the PPB System concepts and the progress made in implementing the system.
The curriculum included discussion of SBA's role in the national economic en-
vironment, regional economic trends, distribution of past year SBA' resources,
and the concept of balanced economic growth and its relationship to the PPB
System.
E. Program category structure
PPB System-SBA officially enters the governmentwide PPB System oii
January 1, 1968. The preliminary work accomplished during the past year will
assist considerably in SBA efforts to comply with Budget Bureau regulations on
the System. The first attempt at developing a Program Memorandum using the
Present Program Category Structure indicated that significant changes must be
made. Exhibit II is a new Program Category Structure which has the approval
of the Administrator. It' will be presented to the Bureau of the Budget for its
approval in the near future.
The new structure will be supported by pre-determined factors for (1) evalua-
tion of performance (workload units, staffing, costs, and unit costs) and (2) evalua-
tion of effectiveness (or benefits)-What benefits accured to the Government, the
nation, and the economy as a result of SBA's having utilized its resources to assist
the small business community?
The cost-benefit analysis discussion paper and the national and regional business
growth patterns distributed to the conference participants discuss the maj or
effectiveness factors to be used f or the loan programs.
F. Regional economic information system
All Area Administrators were advised of the activation of the Regional Eco-
nomic Information System by PRA memorandum dated December 12, 1967:
SBA Annual Economic Review-The Outlook for Small Business will be
published and distributed by the end of the month.
Action will be started on other elements of the system as soon as all replies
to the PRA memorandum are received.
While the material assembled and published by the Central Office will be useful
to regional staff, it must be emphasized that true knowledge of local economic
conditions can only be gained at the local level. It behooves all senior field officials
to ferret out more current data and become knowledgeable on current local
economic needs, the status of local economic planning, and the operations of other
Federal agencies in their geographic areas. It is hoped that the combination of
data furnished by the Central Office and that collected locally, will permit regional
staff to stimulate development of local plans and to develop recommended action
programs to the Central Office concerning their areas.
95-193-68-6
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78
G. Regional programming system
As indicated previously under "The Concept" (page 3)-it is essential that
SBA assistance programs be "dovetailed" with organized state and local economic
development plans, and with programs of other Federal agencies having the same
economic growth objectives-Because: SBA must have a sound basis for planning
and distributing $1 billion annually in financial assistance throughout the nation.
Stated another way, the Administrator must have some means of weighing the
annual (and supplemental) resource allocation requests of the eight areas and
sixty-two regions. On what basis would he approve, reduce or increase a request?
Should his actions or decisions be based solely on the economic needs of the area?
The unavailability of capital in the area? The performance capability of the SBA
staff in the area? The return to the Government or the national economy without
regard to local economic needs? To what extent, if any, should he consider the
input of other Federal agencies into each area? The successful achievement of the
agency overall objectives (page 1), the orderly implementation of the balanced
growth concept, and the evaluation of the effectiveness of SBA assistance programs
will depend in large part on the decisions made by the Administrator in allocating
SBA resources among the several area and regional offices. To provide a mechanism
for informed and intelligent decision making, the Administrator has directed
development of a Regional Programming System and established a Task Force
to study the matter and submit recommendations to him.
By letter dated December 22, 1967, all area administrators whose staff had
participated in the Economic Development Workshops were requested to submit
their ideas and concepts of how the Regional Programming System might operate
and the factors to be considered by the Administrator in making resource allocation
decisions.
To further assure that a true regional flavor be incorporated in development
of the system, three senior officials from area and regional offices have been
invited to participate in the Task Force efforts.
U.S. GOVERNMENT MEMORANDUM
To: All area administrators.
From: Robert C. Moot, Administrator.
Subject: 5Of~ poUcy.
I have been made aware that the present 502 Policy-Guidelines have been
very confusing indeed. I believe the attached revision should correct this situation.
This revision should not be interpreted as the opening of a "Pandora's Box"
but it should first, clarify our position and, second encourage more outside money.
The basic assumption, in determining the minimum LDC injection and the
allowable first mortgage money requirement, is that the size of the community
relates directly to the availability of private resources. I shall expect, regardless
of the size of the community, that our Economic Development staff make every
effort to obtain the maximum outside participation.
There shall be no more "Low Impact" businesses; however, I shall expect that
each 502 loan approved provide the very highest overall economic impact in
that particular community possible. All small businesses eligible under the
SBA Act of 1953 and the SBA Investment Act of 1958, as amended, shall be
eligible for 502 loans.
Since we are working with the TAPS of FIIA we have revised our community
size provision for 10% minimum LDC injection with that of FHA insofar as
rural areas are concerned.
The minimum 25 membership rule in LDC's is still in effect as well as the
restrictions on membership and ownership in the LDC by the SBC, its principals
and those having a pecuniary interest in the project.
The attached, revised policy shall take effect immediately, except in those
projects where SBA has made certain commitments during the development
stages of the project. If there is any question in this regard, the Area Admin-
istrators shall make the appropriate determination in writing and place it on
file. Area Coordinators shall make note of this on Form #603.
PAGENO="0083"
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502 POIJICY
LDC's injection
A. Minimum LEIC's injection per project
(1) Size of community: Percent
0 to 5,500 10
5,501 to 10,000 15
10,001 and over 20
(2) The LDC's area of operation and the location of the SBC must be the same
for the purposes of determining the minimum LDC's percentage of injection:
(a) If we have had one or more loans with the LDC, then the location of the SBO
shall be the determining factor as to the percent of LDC's injection.
(3) If the SBC to be assisted is located in, or is to be established in a so-called
"Ghetto Area" or in a `~Target Area", or in a "High Unemployment Area", then
the minimum 10% LDC injection may be allowed regardless of the size of the
community and of the LDC's Area of Operation. The Area Administrator shall
make this determination in writing and placed in the file. Area Coordinator shall
make note of this on Form #603.
Allowed first mortgage money
B. First mortgage plan
(1) Size of community: Percent
0 to 10,000 20
10,001 to 25,000 25
25,001 to 50,000 30
50,000 or over 40
(2) The location of the SBC shall determine the percentage of allowable First
Mortgage money.
(3) It is very hard to believe with the liberal policy above, and with our
Guarantee and regular participation plans that we should have any direct 502
loans at all. Before any direct 502 loans are approved, the Area Administrator shall
carefully review same to determine:
(a) That our Bank Relations Office has been contacted to encourage either
participation or First Mortgage money, and
(b) That he (the Area Administrator) is completely satisfied that this loan
should be approved on a direct basis.
Noru.-The above should be in writing, placed in the file and Form #603
noted as such.
C. No community may receive SBA loan funds in excess of $1,000,000 in any
one Fiscal Year, unless project is located in those areas described in paragraph
A-(3), above. This limitation applies to SBA funds only and does not apply to
obligations of SBA under the Guarantee Loan Program.
The CHAIRMAN. Mr. Horton, do you have a question at this point?
Mr. HORTON. The gentleman from North Carolina covered my
question, thank you.
The CHAIRMAN. Very good.
Proceed, Mr. Hendricks.
Mr. HENDRICKS. At this time I would like to briefly report on
another of this committee's recommendations arising from the 1966
hearing.
The reorganization under the team concept has been fully imple-
mented. Under this organization, all field specialists have been as-
signed to teams and each team is assigned a specific geographical area.
Each team is a self-contained unit and each member through cross-
training develops capability of performing all functions of the lending
program. Within its assigned territory, each team handles loan in-
quiries, processes loan applications, provides counseling and manage-
ment assistance, closes and disburses loans, and services them.
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In each regional office an accounting, clerical, and training-ACT-
division has been established which provides support to the teams and
relieves them of time-consuming but necessary routine operations and
clerical functions This structure provides these major improvements
and benefits
(1) It gives small businessmen better and more comprehensive
service from the time of initial interview until the loan is paid, sold, or
otherwise removed from our portfolio.
(2) It clearly defines areas of responsibility and accountability
(3) It provides for closer control of operations and creates standard-
l7ation in application of procedures
(4) By freeing our technical personnel of routine duties, it assures
more effective utilization of personnel
With regard to the committee's concern about operating uniformity
existing throughout all our regional offices, trained central office
specialists conduct in-depth surveys of each regional office to insure
that a loan applicant at one regional office receives the same considera-
tion and application of policies, regulations, and procedures as he would
in any other regional office.
The CHAIRMAN Mr Hendricks, from time to time there is called to
the attention of this committee by our various colleagues that there
appear to be more loans going into one area than another, or~ you are
not making any loans in one area, or are not making loans in another
area I think it should be emphasized at this point that itis your policy,
as you just pointed out here, that there is no discrimination as to area
or in the administration of loans
Mr. HENDRICKS. This is correct.
Mr CHAIRMAN One region receives the same consideration on
applications, some policies and regulations on loans as other regional
offices?
Mr HENDRICKS Yes, sir
The CHAIRMAN. If there are any charges to the contrary, they
should bring them forth to this committee, but this is the policy of
the Administration
Proceed
Mr HENDRICKS Thank you
With regard to cotton gins, I would like to report that by arrange-
ment with the National Cotton Council of America and several
ginners' associations, we met with their top representatives, and
individual cotton ginners, on March 1 in Memphis, Tenn., for an
all-day meeting to discuss the cotton ginners' problems, the financial
assistance available from the Small Business Administration to assist
the ginners and otherwise develop a better understanding of their
needs.
Our southeastern and southwestern area administrators, as well
as the 13 regional directors representing the principal cotton-producing
States, were in attendance at the Memphis meeting, as well as a
representative of the Department of Agriculture
The cotton gin associations have advised their members of the
assistance available from SBA, our policy and eligibility requirements
and procedures for requesting loan consideration
In addition, the National Cotton Council has arranged for industry
representatives to work with each of the regional offices.
PAGENO="0085"
81
In the event a cotton gin loan application is to be declined, our
regional director first will discuss the situation with the industry
representative. Before the file is sent to the area office for final action,
the industry representative may, if he does not concur in the proposed
`declination, submit for the file a report of his evaluation. We anticipate
that this cooperative effort will prove to be mutually beneficial.
One additional matter I would like to report on relates to the
alleged financial gap for certain enterprises that cannot be clearly
defined as either "agricultural" or "commercial."
The Chairman will remember that this has caused some question
in the past. This would be a situation where the applicant is not
considered eligible by either SBA or the agricultural credit agencies.
We have established with the Farm Credit Administration a mutually
satisfactory procedure to resolve this problem. Under the procedure
our regional office will furnish the essential information to the appro-
priate Federal intermediate credit bank.
If the bank determines that the operation primarily is agricultural
`and thereby eligible for production credit association financing, it
will advise our regional office of the name and address of the PCA to
which application should be made.
On the other hand, if the bank determines that the operation is not
primarily agricultural, it will refer the case back to our regional
`office for consideration under SBA financial assistance programs.
The CHAIRMAN. Mr, Hendricks, again before you move into other
areas, if a matter is identifiable as an agricultural loan, it is referred
to the Production Credit Association or to the Department of Agri-
culture. If it is a commercial loan, then it is referred to the Small
Business Administration?
Mr. HENDRICKS. This is correct.
The CHAIRMAN. So this liaison has been worked out. Each matter
is identified and referred to the appropriate agency for consideration?
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. Very well.
Mr. HENDRICKS. Our 7(a) business loan loss experience through
June 30, 1967, reflects actual losses of $31.4 million and estimated
losses of $34.7 million. Thus, total actual and estimated losses are
$66.1 million, which represents 2.86 percent of total disbursements,
up slightly from 2.58 percent as of June 30, 1966.
Our 7(a) business loan delinquency rate as of March 31, 1968, was
~3.6 percent, representing 1,349 loans out of our 37,037 7(a) business
loan portfolio. The rate as of June 30, 1967, was 7.1 percent. This
`substantial reduction in delinquencies primarily results from the
team-act approach I referred to earlier.
Administrator Moot, in his statement, referred to the extensive
analysis made of some 22,000 firms which had received assistance
through the business loan program since establishment of SBA in 1953,
in order to determine benefits to the borrower, cost to the Govern-
ment, and benefits to the economy. Details of this evaluation are set
forth on pages 2 through 6 of appendix A to the Administrator's
statement.
The CHAIRMAN. When you refer to the 22,000 that have received
assistance through loans, you are only referring in this instance to
the section 7(a) business-type loans?
Mr. HENDRICKS. This is correct, and it would be a portion of the
total loans made from the inception of the agency.
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82
In other words, a segment of 22,000 loans.
The CHAIRMAN. Of the 81,000?
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. Right.
Mr. HENDRICKS. For the first time we have a measurement of what
our 7( a) business loan program has and is accomplishing. Not only
are the results gratifying, but even more important their implications
will provide guidance to us for future program direction.
That constitutes, Mr. Chairman, the portion on the 7( a) business
loan part of my statement. We are ready to approach the displaced
business disaster loans.
The CHAIRMAN. Mr. Hendricks, let us place in the record at this
point the statutory authority for the section 7(a) business loans.
(The material referred to follows:)
SEC. 7. (a) The Administration is empowered to make loans to enable small-
business concerns to finance plant construction, conversion, or expansion, including
the acquisition of land; or to finance the acquisition of equipment, facilities,
machinery, supplies, or materials; or to supply such concerns with working capital
to be used in the manufacture of articles, equipment, supplies, or materials for
war, defense, or civilian production or as may be necessary to insure a well-
balanced national economy; and such loans may be made or effected either directly
or in cooperation with banks or other lending institutions through agreements to
participate on an immediate or deferred basis.1 The foregoing powers shall be
subject, however, to the following restrictions and limitations:
(1) No financial assistance shall be extended pursuant to this subsection
unless the financial assistance applied for is not otherwise available on
reasonable terms.
(2) No immediate participation may be purchased unless it is shown that
a deferred participation is not available; and no loan may be made unless
it is shown that a participation is not available.
(3) In agreements to participate in loans of a deferred basis under this
subsection, such participation by the Administration shall not be in excess of
90 per centum of the balance of the loan outstanding at the time of disburse-
ment.
(4) Except as provided in paragraph (5) (A), no loan under this subsection
shall be made if the total amount outstanding and committed (by partici-
pation or otherwise) to the borrower from the revolving fund established by
this Act would exceed $350,000; (B) the rate of interest for the Administra-
tion's share of any such loan shall be no more than 5~/~ p~r centum per annum;
and (C) no such loan, including renewals or extensions thereof, may be made
for a period or periods exceeding ten years except that such portion of a loau
made for the pttrpose of constructing facilities may have a maturity of fifteen
years plus such additional period as is estimated may be required to complete
such construction.2
(5) In the case of any loan made under this subsection to a corporation
formed and capitalized by a group of small-business concerns with resources
provided by them for the purpose of obtaining for the use of such concerns
raw materials, equipment, inventories, supplies or the benefits of research
and development, or for establishing facilities for such purpose, (A) the limi-
tation of $350,000 prescribed in paragraph (4) shall not apply, but the limit
of such loan shall be $250,000 multiplied by the number of separate small
businesses which formed and capitalized such corporation; (B) the rate of
interest for the Adminisifration's share of such loan shall be no less than 3 nor
more than 5 per centum per annum; and (C) such loan, including renewals and
extensions thereof, may not be made for a period or periods exceeding ten
years except that if such loan is made for the purpose of constructing facili-
ties it may have a maturity of twenty years pus such additional time as is
required to complete such construction.
(6) The Administrator is authorized to consult with representatives of
small-business concerns with a view to encouraging the formation by such
1 Public Law 89-794 gives the SBA direct responsibility for the economic opportunity loan program
(EOL) under title IV of the Economic Opportunity Act of 1964 as amended.
2 The maximum term on the portion of a loan made for constructing facilities was increased from ten to
fifteen years by section 103 of PL 90-104.
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s3
concerns of the corporation referred to in paragraph (5). No act or omission to
act, if requested by the Administrator pursuant to this paragraph, and if
found and approved by the Administration as contributing to the needs of
small business, shall be construed to be within the prohibitions of the anti-
trust laws of the Federal Trade Commission Act of the United States. A copy
of the statement of any such finding and approval intended to be within the
coverage of this section, and any modification or withdrawal thereof, shall be
furnished to the Attorney General and the Chairman of the Federal Trade
Commission when made, and it shall be published in the Federal 1~egister.
The authority granted in this paragraph shall be exercised only (A) by the
Administrator, (B) upon the condition that the Administrator consult with
the Attorney General and with the Chairman of the Federal Trade Commis-
sion, and (C) upon the condition that the Administrator obtain the approval
of the Attorney General before exercising such authority. Upon withdrawal
of any request or finding hereunder or upon withdrawal by the Attorney
General of his approval granted under the preceding sentence, the provisions
of this paragraph shall not apply to any subsequent act or omission to act by
reason of such finding or request.
(7) All loans made under this subsection shall be of such sound value or so
secured as reasonably to assure repayment.
The CHAIRMAN. You have identified the maximum loan and the
authority, and Mr. Moot has testified as to revolving fund, and your
administrative ceilings. These 7(a) business loans, are they all at the
same uniform interest rate throughout the Nation?
Mr. HENDRICKS. They are all on the SBA portion at the same
interest rate, 5~~2 percent, which is set up by statute.
The CHAIRMAN. At one time the statute used to provide whatever
was the going rate in the State?
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. And the States had varying interest rates, so the
Congress specified 5~~2 percent, and this is tied down.
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. By statute.
Mr. HENDRICKS. That was tied down in 1958 when the investment
amendment came into being.
The CHAIRMAN. What is the maximum term of these SBA business
loans, section 7(a) loans?
Mr. HENDRICKS. They average about six and a quarter years to
maturity. The maximum permitted by statute would be 10 years for
a regular business loan, but if construction is involved, then a 15-year
loan is permitted. This was accomplished, as the chairman knows,
through a recent amendment to the act. The maturity may be, of
course, as short as needed. We seldom see any maturity-
The CHAIRMAN. Five and one-half percent is the statutory interest.
Ten years is the maximum by statute.
Mr. HENDRICKS. Yes, sir; except where construction is involved, the
law now provides that the maximum of 15 years may be used as a
maturity.
The CHAIRMAN. What is the percentage of applications approved as
compared with the numbers filed in this type of loan?
Mr. HENDRICKS. Our rate is very high at this time, Mr. Chairman.
It runs about 76 percent for this fiscal year, and of those applications
approved, approximately 94 percent this fiscal year are disbursed.
The CHAIRMAN. About 76 percent-
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN (continuing). Of the applications filed are favorably
acted upon?
Mr. HENDRICKS. Yes, sir.
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The CHAIRMAN. Do you have a quota system in the allocation of
available funds by SBA to the various regions?
Mr. HENDRICKS. Well, we do allocate funds, but only after a studied
approach from each on the individual areas involved as to what their
needs would be for the ensuing months.
Mr. MooT. We do not have, in the sense of a quota, a resource
management system, Mr. Chairman. We allocate the total resources
we have based on the justified needs of the regions and the areas as
they come up to us.
The CHAIRMAN. It is an administrative figure that is not firm-that
may be adjusted?
Mr. Moop. Each area can adjust within its regions, within its total
resources. Of course there is an overall limitation which is a legal
restriction, which we cannot exceed.
The CHAIRMAN. Gentlemen, are there any questions at this point
on the regular business loan program?
Mr. Broyhill.
Mr. BROYHILL. To what extent is the SBA working with the
insurance industry on the guaranteed loan program?
Mr. KLUCZYNSKI. No questions.
Mr. Moorr. We are not doing as well as we would like to, Mr.
Broyhill. We have talked with the Life Insurance Association of
America, which is the executive secretariat for the industry, in an
effort to get closer cooperation, and we are making loans in participa-
tion with the insurance industry, particularly in our local development
company program, where there are facilities involved.
The insurance industry is interested in making relatively long-term
property loans, but is not interested in making short-term working
capital loans. So obviously the area of interest is somewhat limited.
We are very desirous of working closely with the insurance industry
iii our rural development program, as well as in our urban develop-
ment program.
Mr. BROYHILL. Thank you.
The CHAIRMAN. Mr. Kluczynski, any questions?
Mr. KLTJCZYNSKI. No questions.
The CHAIRMAN. Mr. Irwin, any questions?
Mr. IRwIN. It is my understanding that SBA will not grant a loan
to a small business concern if 50 percent of the net sales is derived
from the sale of alcoholic beverages. A letter which I received recently
from one of my constituents asserts that there is a need for some modi-
fication of this rule, and I ask that this letter be made a part of the
record of this hearing.
To this I would like to add that I believe the regulations prohibiting
the SBA from lending financial assistance to liquor stores are a little
anachronistic and reminiscent of the 18th amendment which was
repealed 34 years ago; and today, the drinking of alcoholic beverages
is approved, and the sale of liquor is considered by many as a legiti-
mate business. I question, Mr. Administrator, whether it is really
proper-or within the responsibilities of the SBA-to discriminate
against the legitimate liquor store owner. I believe that consideration
should be given to changing the regulation.
The CHAIRMAN. Without objection, the letter referred to will be
received into the record at this point.
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(The letter referred to follows:)
THE FEDERAL LIQUOR STORE,
Bridgeport, Conn., May 16, 1968.
Hon. DONALD J. IRWIN,
Longworth Building, Washington, D.C.
DEAR CONGRESSMAN IRwIN: I am a retail liquor merchant, owning the Federal
Liquor Store, 2410 Main Street, Bridgeport, Connecticut, for a period of 22 years.
Approximately seven years ago, my store was broken into and burglarized. The
following year the building in which my store is leased, caught fire and caused
damage resulting from heat, fire, water and smoke.
Eight months after the fire, the building had to be re-painted, repaired and
partially rebuilt by my landlord. It was during this period of reconstruction which
seriously reduced the volume of my business.
The loss resulting from the burglary and the fire coupled with the rebuilding,
totaled about $30,000. Insurance covered about 20 per cent. This entire disaster
forced me into a long period of desperate borrowing in order to remain in business.
I developed one loan upon another. This pattern resulting from the State Statute
whereby: All permittees must pay all purchases in thirty days. This thirty day
law is workable, provided a permittee has sustained and developed a good "work-
ing capital fund" throughout the years; otherwise it is essential to work through
a system of loans.
I have reached the stage where the only effective means for normal business
function is to refinance completely in the amount of $65 to $70 thousand dollars.
This would remove all loans of excessive interest rates, redevelop my working
capital and design a promotional program. This refinancing program was sub-
mitted to three banks and refused.
Congressman Irwin, I deeply ask you to give this business problem of mine
your kind consideration and submit this request to the Small Business Adminis-
tration for their consideration. Thank you very much for any interest you may
have in this matter.
Very truly yours,
MILTON S. COHEN.
The CHAIRMAN. Mr. Williams.
Mr. WILLIAMS. Mr. Chairman, I want to check one statistic that
was given. Seventy percent of loan applications are approved?
Mr. MOOT. 76 percent.
Mr. WILLIAMS. This is not to say that 70 percent of the people who
come in the door receive loans?
Mr. MOOT. No.
I think I might qualify that. That might be better. We have found
through long administrative experience that it is well to do a pre-
screening of interviews, as they come in, in order that we do not incur
costs for the applicant of getting accounting statements and so forth,
and furthermore, that we do not create a psychologically wrong
impression of handing out applications to everyone that comes in, and
then having to decline a good many, because a good many of the
interviews we conduct involve management assistance that Mr.
Maness provides rather than financial assistance. So it is true that we
are currently approving three out of every four applications that we
provide. On the other hand, this is not a complete story because we
are conducting about 400,000 1 interviews with small businessmen or
those who would like to be small businessmen each year throughout the
country. As you can tell from looking at our statistics, we are making
an average of about 20,000 2 loans in total, so that actually means that
we are making, about 5 percent of the inquiries are being translated
into specifically approved financial assistance loans.
Mr. WILLIAMS. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Mitchell, our counsel.
1 305,711, fiscal year 1967, all programs. 302,886, fiscal year 1968 (10 months), all programs.
2 13,867, fiscal year 1967, all programs. 23,989, fiscal year 1968 (10 months), all programs.
PAGENO="0090"
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Mr. MITCHELL. Mr. Moot, concerning the dialog had between
you and the chairman pertaining to allocation of funds or what might
be said to be a quota situation, does the situation ever arise wherein
it is necessary toward the end of the month or toward the end of
any period that you have to say to a specific regional office, "You
can approve no more applications this month because you are out
of your funds or have used your quota," or "you have got to slow down
in this area or that area"?
Mr. MOOT. This happens frequently, Mr. Mitchell, much more
frequently than I like as an Administrator. What we do is to grant
the money to the areas on a monthly basis during this particular
fiscal year. The area administrator in turn passes the money out
to the regions, based on need as I have previously described.
Now, if we have a regional director, who has a rush of business,
and makes all of his loans available, with the resources he has within
the first 15 days, he suddenly finds himself without funds.
He then goes to the area and the area administrator looks at his
other regions to see who is using funds at what rate, and where he
might logically reallocate funds within regions. If he has no addi-
tional funds, he comes back, in the case of the program we are talking
about, to headquarters, where Mr. Hendricks every other week
gets a report from all of the areas, and looks in total as to where the
funds are being used, and if it is possible to reallocate on a national
basis.
If this is not possible, then we can anticipate against next month's
funds, for example, to allow a particular region to continue operating,
but we do not encourage any region to make all of his funds available
in a very short period of time, rather than looking at what his month's
business is going to be.
We think that in order to do the job that you have charged us with,
to build the best possible economic growth throughout the country,
that we need to be somewhat selective within the total requirements
that are placed upon us.
Mr. MITCHELL. What is your total budget for regular business
lending program for fiscal year 1968, the present fiscal year-the total
amount of SBA funds budgeted for this program?
Mr. MOOT. For loans?
Mr. MITCHELL. For the 7(a) program.
Mr. MooT. We have for 1968 a budget of $537 million in total.
This is the gross amount.
Mr. MITCHELL. What is your budget, anticipated budget for fiscal
year 1969, the comparable figure?
Mr. MooT. $649,700,000.
Mr. MITCHELL. rfhere will be an increase anticipated of over $100
million.
Mr. MooT. Yes, sir; in fiscal year 1967, Mr. Mitchell, it was $385.3
million, so that shows a steady increase in the 3 years.
Mr. MITCHELL. Then actually in essence there is no curtailment in
any aspect of your regular business loan program?
Mr. MooT. No, sir. We were over $400 million at the end of April
through 10 months on a comparable figure, so that you can see we
are-
Mr. MITCHELL. Yes.
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Mr. MooT~ It is true that we have greater demands than we have
capability, but this will always be true if we do a good job of explaining
the program availability we have.
Mr. MITCHELL. As you perhaps know, the committee has received
some complaints through the years in specific areas on loans. There
is one situation that has come to the committee's attention that I
might let you mention on the record here. That is concerning loans
in Nassau County, N.Y. You are familiar with that situation, I believe,
where it has been represented to the committee that in fiscal year 1966
there were 66 loans. It dropped to 13 in fiscal year 1967. Is this a
unique situation? Are there peculiar circumstances in that instance,
or would you care to address yourself to that?
Mr. MOOT. Well, I will comment on it to this extent. With the
previous complaint that the committee had, we did sit down with our
New York regional director and asked him to put more emphasis in
terms of what we call our call program, which is calling at the local
level, and our circuit riding program, to make our programs more
available, and he is doing so.
However, I think there is equally as much truth and merit in the
fact that Nassau County is a fairly well-to-do, affluent area, and the
need for our assistance isn't as great as it is in some of the other areas
and boroughs of New York City, for example. So I think it is really a
combination. It is logical that a regional director, faced with a good
many demands and a lot of requirements in areas of great need, has a
tendency to concentrate on those areas, and perhaps we weren't
spending as much time in Nassau County.
We have corrected that, but I don't think really our program has
stepped up very much as a result of it.
Mr. MITCHELL. Mr. Chairman, since hearings were held in 1966
by your special subcommittee on small business problems under Chair-
man Neal Smith, the Small Business Administration pursuant to
recommendations of that committee and studies of the Small Business
Administration has initiated a machine tool lending program, both for
new and used tools. The committee has just received a letter from.the
Machine Tool Dealers National Association commending this program
highly, and setting out the publicity that has been given it, and with
your permission I would like to have that letter received intothe record
with its attachments at this time.
The CHAIRMAN. Does the letter indicate that the machine tool
industry is now happy or reasonably happy?
Mr. MITCHELL. It indicates that it is very happy with what SBA
has done in adopting this program.
The CHAIRMAN. Without objection this will be included in the
record, Mr. Reporter.
(The letter and attachments referred to follow:)
MACHINERY DEALERS NATIONAL ASSOCIATION,
Washington, D.C., May 9, 1968.
Hon. JOE L. EVINS,
Chairman, Select Committee on Small Business,
U.S. House of Representatives,
Washington, D.C.
DEAR CHAIRMAN EVINS: With reference to the used machine tool loan program
which, with the recommendation of your Committee, was adopted by the Small
Business Administration last October. We want to express our sincere appreciation
for your efforts on behalf of small businessmen in the metalworking industry, and
PAGENO="0092"
88
also to inform you of the steps this Association has taken to promote the new SBA
program throughout the industry
I have enclosed copies of three full-page advertisements giving details of the
program which appeared in the three principal trade publications of the used
machine tool industry Industrial Machinery News (published in Detroit), The
Surplus Record (published in Chicago), and Used Equipment Directory (published
in Newark). Please be advised that each of the publishers of these three publica-
tions, recognizing the value of this program to our industry and to the economy,
donated the space for the advertisements They also gave considerable editorial
coverage to the program
In addition to preparing the advertisements and issuing news releases, MDNA
has provided each of its members with comprehensive, printed procedures for
directing a potential machinery buyer to take advantage of the SBA's low interest
loan program Many members also featured details of the loan program in their
own company advertising. Copies of this material are also enclosed.
If you will recall, in our early meetings all were agreed that the success of this
program would depend to a great degree on how well it was promoted throughout
the metalworking industry We feel we have done our part in making known the
availability of the program throughout our membership of 300 companies as well
as throughout the entire metalworking industry.
Again, we thank you for recognizing the value of such a program and recom-
mending to the SBA that it be adopted. It remains to be seen how readily the small
businessman in the metalworking industry makes use of the program You may be
sure that we will keep you advised of any information that we receive in this
regard.
Very truly yours,
RICHARD L. STUDLEY, Executive Director.
[From The Surplus Record, January 1968]
AN OPEN LETTER TO INDUSTRY*
GOOD NEWS FOR MACHINE TOOL BUYERS!
The Small Business Administration has announced that small firms are now
eligible for SBA loans covering up to 80% of the cost of a used machine tool.
Here are some of the details
The used machine tool must have been manufactured after 1949
A 20% down payment is required of the purchaser with payments extending up to
5 years
The machine tool is the sole collateral for the loan
SBA will loan
up to $100,000 on a direct loan
up to $150,000 on a bank participation loan
guarantee up to $350,000 of a bank loan
To qualify, a firm must be able to give reasonable assurance of repayment
This new program is designed to assist tool and die shops and smaller metal-
working firms who are unable to obtain financing for purchases of used equipment
through normal channels at reasonaWe rates
Smaller manufacturers will now be able to expand rapidly for contracts that
won't wait for delivery of a new machine-and may not be large enough to justify
its purchase anyway SBA Administrator Robert Moot says, `We believe that
the extension of the program to include the purchase of good quality used ma-
chine tools will help many small producers upgrade their facilities and become
more competitive."
See your local machinery dealer for more details on the program or contact the
SBA regional office nearest you Take advantage of this outstanding new program
today!
MACHINERY DEALERS NATIONAL ASSOCIATION.
P.S.-In the event you are interested in financing an older machine or are
seeking funds for some other purpose, ask your local SBA office about it. Chances
are they will be able to accommodate you under another of their business loan
programs.
*Especiaiiy small metalworking firms.
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89
[From Iron Age, Philadelphia, Pa., Nov. 2, 1967]
SBA OFFERS NEw LOAN PLAN FOR UsED MACHINERY BUYERS
In con~unction with the Machinery Dealers National Assn., the Small Business
Administration announces that it is now making loans available to small metal-
working companies who buy used machine tools.
Details of the new plan were unveiled last week at MDNA's annual fall
conference.
According to SBA administrator Robert Blewitt, loans covering up to 80%
of a used machine tool will be offered under the plan providing the buyer puts
20% down with repayments not to exceed a five-year period. This, he said,
applied only to the purchase of machine tools that have been manufactured
during or after 1950, and which have been cleaned, painted and cycled.
He also pointed out that SBA will not authorize a loan unless the purchased
machine tool can be delivered to the buyer within five months of the approval
date. However, if a guaranteed loan is effected, the delivery restriction is dropped.
A guaranteed loan, Blewitt explained, is one of three types available to the
buyer. Under it, SBA will guarantee up to $350,000 of a bank loan for the pur-
chase of used machine tools. Other programs available include financing up to
$100,000 on a direct loan from SBA funds, and up to $150,000 on a bank par-
ticipation loan.
To be eligible for a loan, Blewitt noted that the purchasing company must
show financial soundness and offer reasonable assurance of repayment under
existing terms. He added that the only collateral the Administration requires is
a first lien on the machinery bought, and in some cases unsecured guarantees and
a lessor's agreement if the machinery is located on leased premises.
[From American Machinist Metalworking Manufacturing, New York, N.Y., Nov. 6, 1967]
USED MACHINE TOOL LOANS AVAILADLE
The Small Business Administration will allow loans to firms covering up to
80% of the cost of a used machine tool. This new plan is modeled closely after the
one adopted one year ago for new machine tools, the SBA said~
This program applies only to machine tools manufactured during or after 1950
and which have been cleaned, painted, and cycled. Purchasers of the machinery
must provide at least 20% of the cost, and the maximum term.of the SBA loan is
five years, amortized on a monthly basis, according to SBA.
The agency is prepared to lend up to $100,000 on a direct loan, up to $150,000
on a bank participation loan, and will guarantee up to $350,000 of a bank loan
made for the purchase of used machine tools.
Commenting on the program, Richnrd L Studley, executive director of the
Machinery Dealers National Assn (MDNA) said, "We are most gratified by
SBA's action. We feel the program will greatly assist the tool and die shops and
smaller manufacturing companies who find it difficult to obtain financing through
normal channels at a reasonable rate for their purchases of used equipment.
"This program could permit the smaller manufacturer to expand rapidly for
contracts that often won't wait for delivery of a new machine and may not be
large enough to justify its purchase anyway. The survival or failure of these
shops is often dependent upon their ability to tool up with little lead time. This
is one of the functions filled by used machines," Studley said.
[From Steel, The Metalworking Weekly, Nov. 20, 1967]
SBA LOANS 80% ON USED MACRINE
Loans covering up to 80% of the cost of a reconditioned machine tool are now
available to small businessmen through the Small Business Administration. SBA
is prepared to make direct loans up to $100,000. It will go up to $150,000 on a
bank participation loan; and will guarantee up to $350,000 of a bank loan.
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90
[From Metalworking News, New York, N.Y., Oct. 30, 1967]
MDNA, SBA TRADE VIEWS ON TOOL PLAN
(By Ron Schneiderman)
PnILADELPHIA.-Machinery Dealers National Association members and the
Small Business Administration gave each other a quick course last week in how
each conducts its business.
The results may not be overwhelming, but both organizations are likely to
prosper from the meeting.
It was MDNA's fall conference and their first meeting since the SBA ruled
just over a week ago that small firms are now eligible for SBA loans covering 80
per cent of the cost of a used machine tool.
A previous SBA program, initiated earlier this year, covered only new machine
tools.
Robert Blewitt, counsel for SBA in the Middle Atlantic region, told members
he had been directed to take their questions to Washington in hopes of clearing
up some local ends in the new SBA program.
The new plan, noted in these columns last week, requires a 20 per cent down
payment with payments extending over a period of five years, usually made on a
monthly basis.
SBA will loan up to $100,000 on a direct loan, up to $150,000 on a bank partici-
pation loan, and will guarantee up to $350,000 of a bank loan made for the pur-
chase of used machine tools.
Harold Goldstein, Cadillac Machinery Co., Chicago, Ill., and president,
MDNA, who spent the better part of the past two years developing the new loan
program with the SBA, said now that it is in effect, it is up to the `dealers to pro-
mote it.
This was the prevailing theme during `interviews by Metalworking News.
COULD BE A BOON
Eugene Golan, MacDell Corp., Chicago, said the program could be a boom to
the used machinery dealer if he got out and pushed it.
Mark Meyers, Valley Machinery Co., Pottstown, Pa., took a wait and see
attitude, noting that the new machinery loan program with the SBA has pro-
duced little results.
* * * * * * *
[From the Surplus Record, December 1967]
NEw SBA LOAN PROGRAM FOR USED MACHINERY APPROVED
Small firms are now eligible for Small Business Administration loans for pur-
chasing used machine tools. The new plan, annour~ced by SBA Administrator
Robert C. Moot, will cover up to 80 percent of the cost of a used machine tool,
which must have been manufactured during or after 1950. A 20 percent down
payment is required of the purchaser with payments extending over a period of
five years.
The program applies only to power-driven machines, not portable by hand, for
shaping or fçirming metals, and which have been cleaned, painted, and cycled; and
only if the machinery is to be, delivered within five months.
SBA will loan up to $100,000 on a direct loan; up to $150,000 on a bank par-
ticipation loan, and will guarantee up to $350,000 of a bank loan made for the
purchase of used machine tools.
SBA Administrator Moot said, "We believe that the extension of the program
to include the purchase of good quality used machine tools will help many samli
producers upgrade their facilities and become more competitive."
Small firms seeking funds for working capital, debt payment, tools, dies, installa-
tion costs, and other purposes are not eligible under the used machine tool financing
program, but may be eligible for a regular SBA business loan.
Announcement of the program culminates an intense effort by the used machine
tool industry to obtain a financing program to meet the needs of small metal-
working firms.
Commenting on the program, Richard L. Studley, executive director of the
Machinery Dealers National Association (MDNA), said, "We are most gratified
PAGENO="0095"
91
by SBA's action. We feel the program will greatly assist the tool and die shops
and smaller manufacturing companies who find it difficult to obtain financing
through normal channels at a reasonable rate for their purchases of used equip-
ment."
"This program could permit the smaller manufacturer to expand rapidly for
contracts that often won't wait for delivery of a new machine-and may not be
large enough to justify its purchase anyway. The survival or failure of these shops
is oftem dependent upon their ability to tool up with little lead time. This is one
of the functions filled by used machine tools," Studley said.
* * * * * * *
Machinery Dealers National Association has recently formed an Allied Member-
ship Committee to be composed of those from associated industries with common
interests to which MDNA can extend its services.
(From Used Equipment Directory, Jersey City, N.J.]
AN OPEN LETTER TO INDUSTRY
GOOD NEWS FOR MACHINE TOOL BUYERS!
The Small Business Administration has announced that small firms are now
eligible for SBA loans covering up to 80% of the cost of a used machine tool.
Here are some of the details:
The used machine tool must have been manufactured after 1949
A 20% down payment is required of the purchaser with payments extending `up to
5 years
The machine tool is the sole collateral for the laon
SBA will loan
up to $100,000 on a direct loan
up to $150,000 on a bank participation laon
guarantee up to $350,000 of a bank loan
To qualify, a firm must be able to give reasonable assurance of repayment
This new program is designed to assist tool and die shops and smaller metal-
working firms who are unable to obtain financing for purchases of used equipment
through normal channels at reasonable rates.
See your local machinery dealer for more details on the program or contact the
SBA regional office nearest you. Take advantage of this outstanding new program
today!
MACHINERY DEALERS NATIONAL ASSOCIATION.
INFORMATION FOR MDNA MEMBERS ON SBA USED MACHINE TOOL LOANS
Small firms are now eligible for Small Business Administration (SBA) loans
covering up to 80% of the cost of a used machine tool. Here are the details:
WHO IS ELIGIBLE?
A small business, for SBA loan purposes, is defined as independently owned and
operated, not dominant in its field, which meets the size standards developed by
SBA. The size standards state it is small business if employment does not exceed
250, including employees of any affiliates, large if it exceeds 1,000. If employment
is between 250 and 1,000, SBA bases its determination on a specific size standard
for your customer's type of business, depending on his end product. The nearest
SBA office, as listed here, can tell you what the standards are for your customer's
typeof business. (See partial listing pp. 7 and 8)1
MACHINE TOOLS ELIGIBLE
Financing is limited to used machine tools which:
(1) were manufactured during or after 1950;
(2) as a minimum will have been cleaned, painted, and run under power
prior to disbursement on the loan. (This excludes financing of a used machine
tool on an "as is" basis.)
(3) delivery of the machine tool must be made within 5 months from date
of approval.
Note: Loan applications which, in addition to the purchase of used machine
tools, include requests for any other purpose, such as working capital, debt pay-
1 See pp. 95-99 of this record.
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ment, tools, dies, installation costs, etc., are not eligible under this plan. If working
capital is required, or if a used machine tool manufactured before 1950 is involved,
apply for a regular SBA business loan.
TYPES OF LOANS
There are three types of SBA loans available under this program:
(1) Guarantee.-if a bank will make the loan under SBA's Guarantee program,
the Agency can guarantee up to $350,000 for the purchase of used machine tools.
(2) Immediate Participation.-if a guaranteed loan is not available, but a bank
will participate immediately, SBA can lend up to $150,000 in its Participation
program.
(3) Direct.-if no bank participation is available, SBA may through its Direct
program loan up to $100,000.
In each case the entire loan proceeds must be used to finance up to 80% of the
delivered cost of the used machine tool, and numerical controls may be included
in the financing.
TERMS
Purchasers of the machinery must provide at least 20% of the cost. An SBA
appraisal report shall be required to determine reasonableness of cost.
Payments may extend for up to 5 years, amortized on a level monthly payment
basis.
The only collateral required is a first lien on the machinery plus unsecured
guarantees in some cases.
INTEREST RATES
Interest rates on SBA's portion of Immediate Participations, as well as Direct
Loans, may not exceed 5~%. The bank sets the interest rate (not to exceed 8%
simple interest) on Guaranteed loans and its portions of Immediate Participation
loans.
CREDIT AVAILABILITY
One important requirement applies to all SBA loans. By law, the Agency may
not make a loan if a business can obtain funds under reasonable rates and terms,
from a bank or other private source. (The word reasonable is not clear cut and
must be interpreted by your local SBA office based on its local banking conditions.)
You therefore must first seek private fin~ncing before applying to SBA. This
means that you must apply for a loan to your local bank; if you live in a larger
city-one with more than 200,000 people-you must apply to two banks.
The company receiving the loan must be in sound financial condition, and there
must be reasonable assurance of repayment.
HOW TO APPL1~
To apply for SBA assistance, your customer must follow these steps:
1. Prepare a current Financial Statement (Balance Sheet) listing all assets and
all liabilities of the business-do not include personal items.
2. Have an Earnings (Profit & Loss) Statement for the previous full year and
for the current period to the date of the Balance Sheet referred to above~
3. Prepare a current personal Financial Statement of the owner or each partner,
or each stockholder owning 20% or more of the corporate stock in the business.
4. State amount of loan requested, and explain exact purposes for which it will
be used.
5. Take the above material to his banker and ask for a direct loan. If declined,
ask the bank to have the loan guaranteed under SBA's Loan Guarantee Plan or
to participate with SBA in a loan. If the bank is interested, ask the banker to
contact SBA for discussion of the application. In most cases, SBA will deal directly
with the bank.
6. Have available a complete description of the machine tool including year of
manufacture, serial, condition and other pertinent data.
WHERE TO APPLY
1. First, have your customer apply to his bank. If his bank is interested, they
will provide the necessary loan forms.
2. If a Guarantee or a Participation loan is not available through your bank,
write or visit the nearest SBA office.
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9~3
SBA has 73 field offices (listed herein) and in addition sends many loan officers
to visit smaller cities on a regularly scheduled basis or as the need is indicated.
To speed matters, make your financial information available when you first write
to or visit SBA.
SBA FIELD OFFICES
Agana, Guam Fargo, N. Dak. New Orleans, La.
Albuquerque, N. Mex. Hartford, Conn. New York, N. Y.
Anchorage, Alaska Hato Rey, P. R. Oklahoma City, Okia.
Atlanta, Ga. Helena, Mont. Omaha, Nebr.
Augusta, Maine Honolulu, Hawaii Philadelphia, Pa.
Baltimore, Md. Houston, Tex. Phoenix, Ariz.
Birmingham, Ala. Indianapolis, md. Pittsburgh, Pa.
Boise, Idaho Jackson, Miss. Portland, Oreg.
Boston, Mass. Jacksonville, Fia. Providence, R. I.
Buffalo, N.Y. Kansas City, Mo. Richmond, Va.
Casper, Wyo. Knoxville, Tenn. St. Louis, Mo.
Charleston, W. Va. Las Vegas, Nev. St. Thomas, V. I.
Charlotte, N. C. Little Rock, Ark. Salt Lake City, Utah
Chicago, Ill. Los Angeles, Calif. San Antonio, Tex.
Cincinnati, Ohio Louisville, Ky. San Diego, Calif.
Clarksburg, W. Va. Lubbock, Te~. San Francisco, Calif.
Cleveland, Ohio Madison, Wis. Seattle, Wash.
Columbia, S. C. Marquette, Mich. Sioux Falls, S. Dak.
Columbus, Ohio Marshall, Tex. Spokane, Wash.
Concord, N. H. Miami, Fla. Syracuse, N. Y.
Dallas, Tex. Milwaukee, Wis. Toledo, Ohio
Denver, Cob. Minneapolis, Minn. Washington, D. C.
Des Moines, Iowa Montpelier, Vt. Wichita, Kans.
Detroit, Mich. Nashville, Tenn.
Dover, Del. Newark, N. J.
SBA LOAN-QURSTIONS AND ANSWERS
The following questions and answers are excerpts from a presentation at the
1967 Fall Conference by Mr. Robert Blewitt, Philadelphia Area Conusel for
SBA. They should answer many of the questions that each of you may have
regarding the SBA program for financing used machine tools.
Q. Will the restriction on machine age move up to 1951 next year?
A. No, next year we hope it will remain 1950 unless we (MDNA) can manage
to get yet older machines included in which case it may go down into the 1940's.
Q. From the early part of your talk I got the impression that the government
was anxious to quicken the times from the application to the granting of the loan.
Is there any rule of thumb or any target date it would take to get the normal
machine tool loan through. How long do you think it should take in time?
A. I was asked that before and I do not mean to defend the government.
There is some difference between the government and a private lender. If you
were to come in and apply to us and it was the first time that we had ever seen
you, it would be different than with your bank. We have to start sort from of
scratch. They hope to speed up the used machine tool program by limiting the
collateral to the machine itself, without going into the borrowers remaining
assets and going out and appraising plant and equipment. It is hoped that the
applications can be processed and the authorization issued well within a 30-day
period. And I would say that is generous. But one more thing on that point.
It really is not only the government alone that determines the speed with
which an application is to be handled. Mr. Studley has asked me to talk to you
about what you can do to speed the handling of this sort of financing. We are
going to take a lien under the used machine tool program on the machine itself
and one of the things we are going to want to know is, an accurate description
of that machine. We would want to be assured that the delivery of that machine
can be accomplished within the time set here. If you make sure that your customer
has this information before he leaves the shop, you will aid materially in speeding
these things through. In a good many cases a man will come in who has no real
idea of what he wants to do and since the machine he wants to buy will be the
collateral for our loan we are not in a position to say that we will agree to loan
you so much money on some unknown machine. The sooner he knows what he
wants to buy and can come and tell us, the faster he is going to get his loan.
These are not "shopper" loans as the directive indicated. He should know what
he wants to buy before he comes to us.
95-193---.68-7
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Q. You talked about reasonable interest rates; our customer may be quoted a
figure of 6% but it normally is add-on. In other words it figures out to 11.5% or
ii-%% and in view of tight money situations with the banks, I question how often
this small purchaser can borrow money from the bank on a piece of equipment at a
simple 6%.
A. Add-on interest may bring it up. Our's is 544% simple interest and 11 or 12%
may, under the circumstances of this particular borrower (and he is the man we
judge, not small businesses as a whole) for him that may be an unreasonable rate
of interest. And he might qualify for our 544% rate of interest.
Q. If your interest rate is only 544% simple, what's going to happen to the
banks? I don't think anybody is going to want to visit the bank anymore.
A. The first basic eligibility requirement that we have is that your customer
establish that the bank won't give it to him and we will have a couple of letters and
our people will talk to the banks before we will make him his loan.
Q. Maybe the reason the bank's wouldn't give it to him is he has already bor-
rowed $30,000 and that's as much as he can borrow with his capital. Does that still
entitle him to come to you and get another $30,000?
A. Well, we are no different. These are public monies that we lend and it is a
business institution and not a qharitable organization. We have to have reasonable
assurance that that loan can be repaid from earnings.
Q. How about those who are willing to start a business? They don't have a pre-
vious record of earnings, yet they are or were capable employees with a firm who
decided to start a little business of their own.
A. We have a great many small businessmen who come to us and want to form a
company and have no background at all. In that case we have a rule of thumb in
regular business loans that the SBA would like to see them invest about 50% of
what is needed. If they have half, we will give them half of what is needed. As far
as their background goes, if they have no earnings and the business hasn't started,
the only thing a lender can do is look at the capacity of management and their
training and the reasonableness of their projection-what inquiries and evidence
have they established that they are going to have the business.
Q. What policing is this borrower subject to? May he borrow in the future with-
out going back to you to get permission and does he have to give you a profit and
loss report?
A. Oh yes. Like any lender we want to see their balance sheet and operating
statements, maybe annually. We have some pretty good financial men. The
rendering of the examination of that is often as helpful to the businessman as it
is to the lender. We do not, as a rule, impose limitations that prevent further
borrowing. But we do do this. A great many small business concerns get into
trouble because of going overboard on capital assets. And we may very well, and
frequently do, put a limitation in the loan saying, "This borrower will not buy
new machinery or equipment in excess of (well, let's say $20,000 in any one year)
without the prior written consent of SBA." And the only reason we would withhold
that consent would be if we didn't think he could handle it. If he can, fine, but
that is the only restriction. To answer your first question again, we do not gen-
erally restrict borrowing.
Q. Is there any pre-payment penalty?
A. No. On any SBA loan there can be pre-payment without penalty.
Q. How about the bank?
A. Any bank that participates with us has to accept pre-payment without any
penalty.
Q. You have said there is a time restriction of five months on delivery of the
machine tool. This will be ample in most cases. However, there will be instances
where machines will be sold that will have to be rebuilt and retooled. And in this
case it could well exceed the five month period. Is this an inflexible rule?
A. I think it reasonable to assume that if peculiar circumstances arise our people
will waive the particular contents of a directive. Now they will not waive them
automatically because if they were to do that, there would be no point in writing
them. But when a man comes in with a particular circumstance that would justify
waiver, our people will consider it.
Q. Are there any limitations as to domestic or imported machines?
A. This applies to all machinery which you gentlemen would have for sale.
Q. Does your office have technical men that can go out and appraise these
machines?
A. Yes, we do. We have engineers and we have some very able men. The
question came up before lunch. Our people (appraisers) are going to look at this
piece of machinery because it is the sole collateral for our loan in most cases. But
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their knowledge here is going to be derived generally from other dealers in the
trade such as members of your Association. We are not competent to go out and
look at a piece of machinery and decide what a reasonable price for it is. We are
going to have to depend upon you for this information.
There is one thing you might answer for me. I said at the beginning that we
would help finance the "basic machine." Well, I don't know what the basic ma-
chine is, and I don't think our own people know. We are going to have to depend
on you to describe what is the basic machine. On this decision the SBA is going
to have to go to your Association and others for these definitions because we do
not have the expertise and because we cannot, as a government agency, define
every particular transaction and every type of machine. It would be ridiculous.
We are going to have to depend upon you because this is a technical field, at least
for us.
I have enjoyed this very much. It is a new field for SBA and our expertise such
as we eventually accomplish is entirely yet to be developed. The assistance which
you give us in our problems is going to be a major factor in depending on how
successful this program is.
PARTIAL LISTING OF SBA INDUSTRY SIZE STANDARDS
SCHEDULE A-EMPLOYMENT SIZE STANDARDS FOR CONCERNS PRIMARILY ENGAGED IN MANUFACTURING
Census
classifica- Industry or cI
tion code
Employment
ass of products size standard
(number of
employees) I
Major group 36:
3631 Household cooking equipment 750
3633 Household laundry equipment 1, 000
3632 Household refrigerators and home and farm freezers 1, 000
3635 Household vacuum cleaners 750
3622 Industrial controls 750
3642 Lighting fixtures 250
3621 Motors and generators 1, 000
3644 Noncurrent carrying wiring devices 500
3652 Phonograph records 750
3612 Power, distribution, and specialty transformers 750
3692 Primary batteries, dry and wet 1,000
3651 Radio and television receiving sets, except communication types 750
3671 Radio and television receiving type electron tubes, except cathode ray 1, 000
3662 Radio and television transmitting-signaling, and detection equipment, and appa-
ratus 2 750
3693 Radiographic X-ray, fluoroscopic X-ray, therapeutic X-ray, and other X-ray apparatus and
tubes 500
3636 Sewing machines 750
3691 Storage batteries 500
3613 SWitchgear and switchboard apparatus 750
3661 Telephone and telegraph apparatus 1, 000
3673 Transmitting, industrial, and special purpose electron tubes 750
3623 Welding apparatus 250
Major group 34-Fabricated metal products, except ordinance, machinery, and transporta-
tion equipment:
3449 Architectural and miscellaneous metalwork 250
3452 Bolts, nuts, screws, rivets, and washers 500
3479 Coating, engraving, and allied services, not elsewhere classified 250
3496 Collapsible tubes 250
3421 Cutlery 500
3471 Electroplating, plating, polishing, anodizing, and coloring 250
3431 Enameled iron and metal sanitary ware 750
3499 Fabricated metal products, not elsewhere classified 250
3498 Fabricated pipe and fabricated pipe fittings 250
3443 Fabricated platework (boiler shops) 250
3441 FabrIcated structural steel 250
3423 Hand and edge tools except machine tools and hand saws 250
3425 Hand saws and saw blades 250
3429 Hardware, not elsewhere classified 250
3433 Heating equipment, except electric 500
3411 Metal cans 1,000
3442 Metal doors, sash, frames, molding, and trim 250
3497 Metal foil and leaf 500
3491 Metal shipping barrels, drums, kegs, and pails 500
3461 Metal stampings 250
3481 Miscellaneous fabricated wire products 250
3432 Plumbing fixture fittings and trim (brass goods) 500
3492 Safes and vaults 500
3451 Screw machine products 250
3444 Sheet metal work 250
3493 Steel springs 500
3494 Valves and pipe fittings, except plumbers' brass goods 500
See footnotes at end of table, p. 99.
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PAGENO="0103"
99
SCHEDULE A-EMPLOYME
NT SIZE STANDARDS FOR CONCERNS PRIMARILY ENGAGE
D IN MANUFACTURING-Con,
Census
classifica-
tion code
Industry or class of products
Employment
size standard
(number of
employees) I
Major group 32-Stone, clay, and glass products-Continued
3263 Fine earthenware (whiteware), table and kitchen articles 500
3211 Flatglass 1,000
3221 Glass containers 750
3231 Glass products made of purchased glass 250
3275 Gypsum products 1,000
3274 Lime 500
3296 Mineral wool 750
3295 Mineral and earths, ground or otherwise treated 250
3297 Nonclay refractories 750
3299 Nonmetallic mineral products, not elsewhere classified 250
3264 Porcelain electrical supplies 500
3269 Pottery products, not elsewhere classified 250
3229 PrGssed and blown glass and glassware, not elsewhere classified 750
3273 Ready-mixed concrete 250
3293 Steam and other packing, and pipe and boiler covering 500
3259 Structural clay products, not elsewhere classified 250
3261 Vitreous china plumbing fixtures and china and earthenware fittings and bathroom
accassories 750
3262 Vitreous china table and kitchen articles 500
Major group 22-Textile mill products:
2295 Artificial leather, oilcloth, and other impregnated and coated fabrics except rubberizad- 250
2211 Broad-woven fabric mills, cotton 1,000
2221 Broad-woven fabric mills, manmade fiber and silk 500
2231 Broad-woven fabric mills, wool: including dyeing and finishing 250
2279 Carpets, rugs, and mats, not elsewhere classified 500
2298 Cordage and twine 250
2269 Dyeing and finishing textiles, not elsewhere classified 250
2291 Felt goods; except woven felts and hats 250
2261 Finishers of broad-woven fabrics of cotton 500
2262 Finishers of broad-woven fabrics of manmade fiber and silk 500
2251 Full-fashioned hosiery mills 250
2256 Knit fabric mills 250
2253 Knit outerwear mills 250
2254 Knit underwear mills 250
2259 Knitting mills, not elsewhere classified 250
2292 Lace goods 250
2241 Narrow fabrics and other small-wares mills: cotton, wool, silk, and manmade fiber___ 250
2293 Paddings and upholstery filling 250
2294 Processed waste and recovered fibers and flock 250
2252 Seamless hosiery mills 250
2299 Textile goods, not elsewhere classified 250
2284 Thread mills 500
2296 Tire cord and fabric 1, 000
2272 Tufted carpets and rugs 500
2297 Wool scouring, worsted combing, and tow to top mills 250
2271 Woven carpets and rugs 750
2283 Yarn mills, wool, including carpet and rug yarn 250
2281 Yarn spinning mills, cotton, man made fibers and silk 500
2282 Yarn throwing, twisting, and winding mills, cotton, manmade fibers and silk 250
Major group 21-Tobacco manufactures:
2111 Cigarettes 1,000
2121 Cignrs 500
2131 Tobacco (chewing and smoking) and snuff 500
2141 Tobacco stamming and redrying 500
Major group 37-Transportation equipment:
3721 Aircraft4 1,500
3722 Aircraft engines and engine parts 2 1, 000
3729 Aircraft parts and auxiliary equipment, not elsewhere classified 5 1, 000
3723 Aircraft propellers and propeller parts 1, 000
3732 Boat building and repairing 250
3741 Locomotives and parts 1, 000
3717 Motor vehicles and parts 1 1, 000
3751 Motorcycles, bicycles, and parts 500
3742 Railroad and street cars 750
3731 Shipbuilding and repairing 1, 000
3791 Trailer coaches 250
3799 Transportation equipment, not elsewhere classified 250
3713 Truck and bus bodies 250
3715 Truck trailers
tThe "number of employees" means the average employment of any concern add its affiliates based on the number
of persons employed during the pay period ending nearest the last day of the 3rd month in each calendar quarter for the
preceeding 4 quarters.
2 Guided missile engines and engine parts are classified in SIC 3722. Missile control systems are classified in SIC 3662.
8Together with its affiliates does not employ more than 1,000 persons and does not have more than 30,000 barrels-
per day capacity from owned and leased facilities.
4 Includes maintenance as defined in the Federal Aviation Regulations (14 CFR 1.1) but excludes contracts solely for
preventive maintenance as defined in 14 CFR 1.1. As defined in the Federal Aviation Regulations.
PAGENO="0104"
100
The CHAIRMAN. Let us now take up displaced business disaster
loans, Mr. Hendricks.
(The legislative authority for displaced business disaster loans was
received into the record at this point:)
SECTION 7(b)(3) OF SMALL BUSINESS ACT
DISPLACED BUSINESS DISASTER LOANS
(3) to make such loans (either directly or in cooperation with banks or other
lending institutions through agreements to participate on an immediate or
deferred basis) as the Administration may determine to be necessary or appropri-
ate to assist any small business concern in reestablishing its business, if the
Administration determines that such concern has suffered substantial economic
injury as a result of its displacement by a federally aided urban renewal or highway
construction program or by any other construction conducted by or with funds
provided by the Federal Government; and the purpose of a loan made pursuant
to this paragraph may, in the discretion of this Administrator, include the pur-
chase or construction of other premises whether or not the borrower owned the
premises from which it was displaced;
Mr. HENDRICKS. Yes, sir. Displaced business disaster loans-sec-
tion 7(b)(3) Small Business Act.
Section 7(b)(3) was added to the Small Business Act in 1961. This
legislation authorizes loans to assist small business concerns in reestab-
lishing their businesses if they suffered substantial economic injury
as a result of physical displacement by a federally aided urban renewal
or highway construction program or by any other construction pro-
gram conducted by or with funds provided by the Federal Government.
This authority was expanded by the 1964 legislation which provided
for the purchase or construction of other premises "~ * * whether or
not the borrower owned the premises from which it was displaced."
This displaced business disaster loan authority provides for: (1) no
limit on the maximum amount of a loan: (2) a formula for annually
computing the interest rate on the Government's share of the loan-
currently 4-3i~ percent for fiscal year 1968; (3) a maximum maturity
of up to 30 years, and (4) no specific collateral requirements
As required by our legislation, we establish early contact with small
businesses that are to be displaced. Close liaison is maintained with
Housing and Urban Development's Office of Relocation assistance
and the Department of Transportation's Bureau of Public Roads, as
well as State highway departments.
Business displacement is basically a small business problem, particu-
larly in urban areas. Its greatest impact is expected to be felt in the
next few years when it is estimated that some 13,000 businesses will
be displaced annually by Federal and federally assisted programs.
Our regulations permit displaced business disaster loans to be made
for (1) purchase of land, (2) purchase of buildings and cost of neces-
sary improvements, (3) new building construction, (4) purchase of
machinery, equipment, and fixtures, (5) moving expenses, (6) increased
rental costs or fixed charges in lease quarters in the new location,
and (7) working capital. Up to 33~ percent upgrading or expansion
is permitted on equipment and square footage of building space in
the new location. Because of local codes and ordinances, primarily
relating to parking space, a 50-percent expansion is permitted in land
area.
Displaced business loan approvals have increased substantially.
The $32 7 million of approvals in fiscal year 1967 represents a 78-
percent increase over the previous fiscal year of 1966. During the
PAGENO="0105"
101
current 1968 fiscal year, through March, approvals totaled $32.9
million. The program for fiscal year 1969 calls for $56 mfflion, in-
cluding private sector participation. We are concentrating our efforts
on increasing private participation in order to better meet the demand.
As of June 30, 1967, actual and estimated losses totaled 1.52 percent
of disbursements since the 1961 inception of the program.
As of March 31, 1968, there were 22 loans delinquent out of the
portfolio of 1,031 loans, which represents a delinquency rate of 2.1
percent.
That concludes the remarks on the displacement loan program.
The CHAIRMAN. Very good, Mr. Hendricks. That again is a special
legislative authority for displaced business disaster loans as referred to
by our colleague Mr. Kluczynski, where interstate highways are built
or there is urban renewal. The law as we understand it, as the corn-
mittee understands it, provides that where a business is displaced,
if it is a disaster, a loan may be made to reinstate such a business.
The law does not go so far as to provide for loans for damaged business.
Suppose that the small business is just off the interstate. The inter-
state doesn't take his property but the traiffic is diverted another
way and his business hurts although he is not displaced. What is the
situation with respect to that condition?
Mr. HENDRICKS. I understand that there is legislation that is
either pending or has been or will be considered that takes this
problem into consideration. I think that the Housing and Urban
Development people probably have an interest in this type of victim
or this type of person that is hurt, when they are beyond the confines
of the urban renewal area.
The CHAIRMAN. You indicate that there are estimated to be some
13,000 businesses which will be displaced annually. How do you
arrive at that figure?
Mr. HENDRICKS. It is not an easy figure to arrive at, Mr. Chairman,
but working together with the Housing and Urban Development
people, whose job it is, of course, to pass on these various projects,
we have elicited this figure, which they feel is a rather sound projection.
The CHAIRMAN. Is the majority of this displacement to be through
urban renewal? The interstate highway is more than 50 percent
completed. Is it the interstate, or is it urban renewal, or both.
Mr. HENDRICKS. It is both, of course, but urban renewal will
probably receive added emphasis in the next 2 or 3 years, par-
ticularly in view of the current innercity problems we are facing.
The CHAIRMAN. There is no maximum per loan limit on this type
of loans?
Mr. HENDRICKS. No, sir.
The CHAIRMAN. And the interest rate is the cost to the Treasury
at the time plus one-fourth of 1 percent?
Mr. HENDRICKS. This is correct. It is by formula, sir, but it is
based ultimately or actually on the cost of money to Government.
The CHAIRMAN. And what is the maximum term for these loans?
Mr. HENDRICKS. Thirty years, sir.
The CHAIRMAN. And again dollarwise how much in amount has
been loaned through this type of loan?
Mr. HENDRICKS. Well, to recount, in 1967, $32.7 million, which was
a 78-percent increase over the prior year.
PAGENO="0106"
102
Mr. MOOT. We could put on the record, Mr. Chairman, that since
the inception of the program in 1961, through December of 1967, a
total of 1,308 loans for $96.9 million have been approved. This year
we have available to us, for this particular program, $54 million,, and
next year we will have available $56 million.
The CHAIRMAN. A very good summary.
Mr. Reporter, place in the record just prior to Mr. Hendricks'
statement on the displaced business disaster loan the statutory author-
ity pertaining to those loans.
Mr. KLUCZYNSKI. Mr. Chairman, while we are on the subj ect, we
had a disaster area just outside of Chicago only a year ago last week,
and I was very happy to be a member of this committee and member of
Congress, because the Small Business Administration was in the vicin-
ity before the Red Cross got there. I want you to know that, Mr.
Moot, that you have a wonderful office in Chicago, and they did their
share and I was very happy to see that this agency was very active
at this time.
Mr. MOOT. Thank you, Congressman Kluczynski.
The CHAIRMAN. Very good. Now, the development loan assistance
program.
(The legislative authority for State and local development company
loans was received into the record at this point.)
SMALL BuSINESs INVESTMENT ACT OF 1958, AS AMENDED
TITLE V-LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES
SEC. 501. (a) The Administration is authorized to make loans to State develop-
ment Companies to assist in carrying out the purposes of this Act. Any funds
advanced under this subsection shall be in exchange for obligations of the de-
velopment company which bear interest at such rate, and contain such other
terms, as the Administration may fix, and funds may be so advanced without
regard to the use and investment by the development company of funds secured
by it from other sources.
(b) The total amount of obligations purchased and outstanding at any one
time by the Administration under this section from any one State development
company shall not exceed the total amount borrowed by it from all other sources.
Funds advanced to a State development company under this section shall be
treated on an equal basis with those funds borrowed by such company after
the date of the enactment of this Act, regardless of source, which have the highest
priority, except when this requirement is waived by the Administrator.
SEC. 502. The Administration may, in addition to its authority under section
501, make loans for plant construction, conversion or expansion, including the
acquisition of land, to State and local development companies, and such loans
may be made or effected either directly or in cooperation with banks or other
lending institutions through agreements to participate on an immediate or de-
ferred basis: Provided, however, That the foregoing powers shall be subject to the
following restrictions and limitations:
(1) All loans made shall be so secured as reasonably to assure repayment.
In agreements to participate in loans on a deferred basis under this subsection,
such participation by the Administration shall not be in excess of 90 per
centum of the balance of the loan outstanding at the time of disbursement.
(2) The proceeds of any such loan shall be used solely by such borrower
to assist an identifiable small-business concern and for a sound business
purpose approved by the Administration.
(3) Loans made by the Administration under this section shall be limited
to $350,000 for each such identifiable small-business concern.
(4) Any development company assisted under this section must meet cri-
teria established by the Administration, including the extent of participation
PAGENO="0107"
103
to be required or amount of paid-in capital to be used in each instance as is
determined to be reasonable by the Administration.
(5) No loans, including extensions or renewals thereof, shall be made by
the Administration for a period or periods exceeding twenty-five years plus
such additional period as is estimated may be required to complete con-
struction, conversion, or expansion, but the Administration may extend the
maturity of or renew any loan made pursuant to this section beyond the
period stated for additional periods, not to exceed ten years, if such extension
or renewal will aid in the orderly liquidation of such loan. Any such loan
shall bear interest at a rate fixed by the Administration.
Mr. HENDRICKS. Development company assistance programs-
sections 501-502, Small Business Investment Act of 1958.
SBA is authorized to make loans to State and local development
companies to assist in promoting economic development of communi-
ties or areas on condition that they use the proceeds of the loans to
assist eligible small businesses. The intent of the programs is to
increase the flow of private equity capital and long-term loans to
small business concerns to finance their operations, growth, expansion,
and modernization.
State development corporations (sec. 501)-these corporations are
authorized by special acts of the State legislatures, privately organized,
owned, and operated, and initially financed from private sources.
While the progress of this program might appear to be slow, an
analysis of the activities of State development companies is en-
couraging.
Because borrowings from SBA are limited to an amount equal to
the borrowings from other Sources, these companies do not come to us
until they have committed their own corporate funds and those funds
that they have been able to borrow from other sources.
The following 39 States have enacted legislation authorizing the
establishing of State development corporations:
Alaska, Arkansas,' Arizona, Colorado,' Connecticut, Florida,'
Hawaii, Illinois, Indiana, Kansas,' Kentucky,' LOuisiana, Maine,'
Maryland,1 Massachusetts,' Michigan, Minnesota, Mississippi,'
Missouri, Nebraska, New Hampshire,' New Jersey,' New Mexico,
New York,' North Carolina,' North Dakota, Ohio, Oregon, Pennsyl-
vania,' Rhode Island,' South Carolina,' South Dakota, Tennessee,
Vermont,' Virginia,' Washington,' West Virginia, Wisconsin,' and
Wyoming.
Twenty-one of these companies are still active and the 18 others
are in various stages of organization and funding.
The CHAIRMAN. In other words, some 39 States have enacted
enabling legislation through their general assemblies to form a State
development corporation for development programs?
Mr HENDRICKS. Yes, sir.
The CHAIRMAN. And of the 39 authorized, 21 are active and have
development associations.
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. When you say they are active, this means that
they are sharing in a loan?
Mr. HENDRICKS. They may not all have shared with us. I have a
list, Mr. Chairman, of the companies that have shared in loans,
and I think it numbers seven companies of the 21.
`~ctive companies.
PAGENO="0108"
104
The CHAIRMAN. The purpose of these development associations
is to stimulate the private economy, to stimulate local initiative,
and to have private capital injected into them to provide jobs and
employment. SBA makes loans to assist them where applications
are presented How many applications have been presented and how
many have been acted upon?
Mr HENDRICKS The number of applications-
The CHAIRMAN. These are the State development corporations.
These may be included in the record.
Mr. HENDRICKS. Yes-23 loans for $14.5 million have been made to
seven of these companies:
First Arkansas Development Finance Corp., Industrial Develop-
ment Corp. of Florida, Development Credit Corp. of Maryland, New
York Business Development Corp., the Business Development Corp.
of North Carolina, Business Development Corp. of Rhode Island,
Wisconsin Development Credit Corp.
The CHAIRMAN. It had been my understanding several years ago
in a prior review that the States of North Carolina and Minnesota
were the two leading States utilizing the State development associa-
tion. What is the situation? Which is the most active? Which is the
most successful? Which is the pioneer? Which is setting the pattern
by being the most successful?
Mr. HENDRICKS. Do you perhaps have reference to the 502 pro-
grams when you mention Minnesota?
The CHAIRMAN. I may have been referring to the 502, but now I
would like to address myself to the 501. Perhaps Mr. Hendricks
doesn't wish to state which is leading.
Mr. HENDRICKS. If the chairman will note from my statement-
The CHAIRMAN. My question is concerning the numbers of jobs
and the growth. Perhaps that would be the best indicator.
Mr. HENDRICKS. I am not sure that-
The CHAIRMAN. You could supply some additional information for
the record on this.
Mr. HENDRICKS. Very well. I will do that, Mr. Chairman.
(The information referred to follows:)
LOANS (22) APPROVED BY SBA UNDER SEC. 501 BY STATES, BY FISCAL YEARS
Rhode
North
Net loan
Fiscal year Island New York
Maryland Carolina Florida Wisconsin Arkansas amounts for
all States
1959 - $313,750 $313,750
1960 300,000 $1, 000, 000 1,300,000
1961 160,000 $1,000,000 1,000,000 $330,000 2,490,000
1962 130,000 12, 000, 000 500, 000 2 $750, 000 2, 380, 000
1,000, 000
1963 500,000 500,000
1964 a 1,000,000
1965 200,000 200,000
1966 1,000,000 - 490,000 350,000 1,840,000
400, 000
1967 $500, 000 750, 000 $750, 000 2, 000, 000
Total net loan
amounts 1, 603, 750 3, 000, 000 500,000 3, 250, 000 750, 000 420,000 1, 500, 000 11, 023, 750
1 Not drawn down, canceled after 3 months.
Originally for $1,000,000. After 12 months $250,000 not drawn down was canceled.
Not drawn down, canceled after 4 months.
4 Originally for $170,000. After 12 months $80,000 not drawn down was canceled.
PAGENO="0109"
105
The CHAIRMAN. Proceed.
Mr. HENDRICKS. Nineteen companies have formed the National
Association of State Development Corporations. As of September 30,
1967, the association reports that members have made 836 loans for
a total of $76.4 million and that 90 percent of these loans have gone
to small businesses. It is evident then that approximately $68.7
million has been made available to small businesses with an invest-
ment of Government funds of only $14.5 million or 21 percent.
We require that the State development companies maintain out-
standing balances in loans to or investments in small businesses in a
amount equal to 1333/2 percent of the amount due SBA. In this way
we are assured of private sector participation in a substantial degree.
The 501 program has the advantage of being extremely flexible.
They can put together a financial package to accommodate the require-
ments of almost any kind of a business situation including direct
equity investments.
We have no delinquent 501 loans and no indication that there will
be any in the foreseeable future.
We expect this program to grow. Through the efforts of the National
Association of State Development Corporations the program should
become better known and recognized as a source of funds by busi-
nesses requiring financing and by communities desiring to develop
their economies.
The willingness of member banks to finance operations of these
companies has resulted in a minimum demand for SBA funds. We
expect this healthy condition to continue through fiscal year 1969
and, accordingly, our budget calls for a modest $5 million for this
program in fiscal year 1969.
The program of loans to local development companies is pre-
eminently a local, self-help program. While a State development
company, as provided for under section 501 of the Small Business
Investment Act, may perform the function of a local development
company, its interest is statewide. The local development company
as provided for under section 502 normally confines its activity to a
given local community, a town, city, a township or a county. While
communities may overlap political boundaries, the average local
development confines its operation to a single well-defined community.
Each company must be principally composed of and controlled by
persons residing in the community.
Loans are made to local development companies for the benefit of
identifiable small businesses. Maximum SBA exposure is $350,000
for each such business assisted. A development company may have
more than one project and indeed many of them do. The use of pro-
ceeds of the loans are restricted to land, building, machinery, and
equipment. Section 502 loan funds may not be used for working capital.
In identifying a small business concern for the purposes of this
program, we may use the regular small business size standards as
established for the business loan program, or the more flexible stand-
ards generally used for small business investment companies. A busi-
ness is therefore considered to be small if its total assets do not.
exceed $5 million, its net worth $23'~ million and net profits $250,000
averaged over the past 2 years.
The CHAIRMAN. Mr. Hendricks, for emphasis and review at this
point, I think it is well to emphasize this. Many times the question
PAGENO="0110"
106
arises as to what is a small business. What is the definition of small
business. Of course this committee has previously explored this
problem at hearings SBA has held hearings trying to arrive at defi-
nitions. The size standard depends upon the industry. But generally
your definition is as you have stated it here, that the total assets of
the company do not exceed $5 million, that the net worth of the com-
pany does not exceed $2.5 million, and the net profit does not exceed
$250,000 per year for a period of 2 years.
Mr. HENDRICKS. Averaged over the 2-year period; yes, sir.
The CHAIRMAN. This is a definition that is arrived at through
SBIC's, through SBA and is the general broad definition.
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. Very good. Proceed.
Mr. HENDRICKS. From a modest beginning in 1959, when only 14
loans were made for $1,671,000, the program has financed through
December 31, 1967, a total of 1,556 loans for projects costing $305
million. Of this amount the local development companies raised $69
million and private lending agency participation totaled $17 million,
thus leaving the SBA share at $219 million.
The smail businesses financed under this program have provided
about 65,000 employment opportunities which means that for every
$3,400 in SBA seed money, a job opportunity was created or sustained.
This is a most remarkable record. Furthermore, if we assume the
average wage to be $4,000 annually, these payrolls would run to over
$250 million a year, thus generating local economic growth and added
tax revenues.
The majority of these development company loans are made in
small communities. To illustrate this, I would like to cite a few
statistics on our fiscal year 1967 activity:
Loan projects Job opportunities
Community population
Number Percent Number Percent
146 43.1 6,199 53.0
48 14.1 1,566 13.4
44 13.0 1,211 10.4
28 8. 2 930 7. 9
72 21.6 1,778 15.3
Total 338 100.0 11,684 100.0
The CHAIRMAN. I think it is well to allude to this table. Communities
with a population under 2,500 have received 43.1 percent of the loans.
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. This is really helping the smaller communities.
Mr. BROYHILL. And 53 percent of the job opportunities, Mr.
Chairman.
The CHAIRMAN. And 53 percent of the job opportunities, as my
colleague has indicated. And your earlier figure pointed out that local
funds raised were $69 million. This is by the company. And you say
that private lenders have loaned to these companies an additional
$17 million, and the total of these two, if my figures are correct, is
$86 million raised locally.
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. The amount of local funds that have been raised
for these local development companies, $86 million locally, added to
SBA funds amounts to a total of $305 million.
Under 2,500 --
2,501 to 5,000.
5,001 to 10,000~
10,000 to 25,e"
Over 25,000_
PAGENO="0111"
107
Mr. MOOT. That is right, sir.
The CHAIRMAN. 1 think these hold great promise.
Proceed.
Mr. hENDRICKS. During 1967, 23.4 percent of these loans were
placed in depressed areas such as Appalachia. Some were used to assist
communities in diversification of their industries. Others were used to
expand businesses to stimulate economic growth in the community.
Forty-one percent of the funds loaned in 1967 went into new business.
The 338 projects financed in 1967 covered a wide range of industries:
Manufacturing, 189; transportation, 12; wholesale-retail, 45; services,
83; construction, recreation and other, nine.
Among the domestic problems that confront us today are the mass
exodus of young people from the small rural communities of our
Nation and the plight of ghetto area residents of our big cities. Realiz-
ing this, our local development company policy is more lenient in
these two cases. For example, in communities having a population of
5,500 or less and in a ghetto or depressed target area of a big city, all
the local development company needs to raise toward the total cost of
the project is 10 percent of its cost.
Because of the involvement of the community in these 502 loans,
we have a very low rate of delinquency. If a small business concern
that benefits from a loan to a local development company should fail,
the community usually goes into prompt action to find a substitute
small business concern. The soundness of these loans can best be
illustrated by the fact that losses as of December 31, 1967, were one-
fifth percent of funds advanced, and that projected losses including
those actually taken are only ninety-three one-hundredths of 1 percent.
With its proven capacity to stimulate economic growth at the local
level, this program will cøntinue to be given a high priority in our
operations. We have recently revised our criteria to encourage greater
private participation in the program. A new flexible first mortgage plan
has been instituted which permits a bank to participate with as little
as 20 percent and up to 40 percent (de~pending upon the size of the
community) in our loans and obtain a first mortgage position on the
property. This new plan has stimulated active participation: In 1967
only 16 first mortgage loans were made; in the first half of 1968 we
have already approved 34 such loans.
Our program goal for fiscal year 1968 is to approve 413 projects
with a total cost of $79 million exclusive of local development company
contributions. For fiscal year 1969 the comparable goals are: 479
projects costing $84.7 million.
The CHAIRMAN. Thank you, Mr. Hendricks. The committee has
always been impressed with the 502 local development company
program as a means of stimulating the local economy, providing for
local capital and participation, and I notice in your statement here
that you state that less than one-fifth of 1 percent of the funds
advanced have represented a loss. That is probably the lowest ration
of any of your programs.
Mr. HENDRICKS. This is correct, sir. That is against the total funds
disbursed. One reason that we think accounts for this is the active
community interest in the particular project.
The CHAIRMAN. If a local development company begins to look a
little bit shaky, the local community pride in it will sometimes cause
the community to inject new management or new capital to keep the
industry surviving.
PAGENO="0112"
108
Mr HENDRICKS Yes, si~r
The CHAIRMAN. You have been having some growth in this area,
but how widespread is it acknowledged? How well known? What is
the demand? What is the pressure on the agency for loans in this area?
Mr. HENDRICKS. Currently, Mr. Chairman, we are trying to carry
the word on that program to a great many more sources which we
feel could use it to good advanatage, through what we call economic
development conferences I think there was one in Nashville held some
2 months ago. There was widespread interest. It was well attended,
and from all reports, there was a very good cross section of the sur-
rounding communities that attended and hoped to be able to implement
this program with others to their advantage
These conferences have been held at various geographic spots
throughout the country, just as one means to convey the word on
this program. Our field offices are constantly conducting smaller
seminars and carrying the word on this program. We feel that the
word is getting around very substantially on the program.
The CHAIRMAN The legislative authority for the 501 and 502 local
development company will be placed at the beginning of Mr
Hendricks' testimony with respect to this program
The CHAIRMAN. The revolving fund authorized is $300 million?
Mr. MooT. Yes, sir. It was just increased $100 million this past
session.
The CHAIRMAN The maximum amount for each loan of this type
is $350,000.
Mr. MooT. That is right, sir.
The CHAIRMAN. And the maximum term is 25 years.
Mr. MOOT. That is right, sir.
The CHAIRMAN. Is that correct?
Mr. HENDRICKS. Correct.
The CHAIRMAN And what is the interest rate?
Mr. HENDRICKS. Five and one-half percent, sir.
The CHAIRMAN. Has there been any attempt to correlate statistics
pertaining to the economic growth in those areas which have local
development companies as against those areas which do not have local
development companies?
Mr. MooT. We haven't actually correlated it yet. We have what
we call a local economic planning system under development, Mr.
Chairman, which is aimed at, among other things, that very purpose of
determining the value of our programs as they equate to the economic
growth of the community, and this, as you mentioned earlier, is a
program that we think very highly of, and in our budget allocations
we are allocating even more funds to the next year rather than the
increasing level that we have been continuing over the past several
years.
The CHAIRMAN. Does the SBA have a local development company
specialist in each of the regions of the Nation?
Mr. MooT. Yes, sir. As I mentioned earlier, we have recently de-
centralized this program to get it down closer to the operational level
among the 62 regions, and we will have in each of the regions a 502 or
local development company expert, so that we can actually add im-
petus and stimulus to this program.
The CHAIRMAN. How many of your personnel are assigned exclu-
sively to this purpose?
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109
Mr. HENDRICKS. Approximately 104, Mr. Chairman.
The CHAIRMAN. Has SBA declined any local development company
loans because of insufficient funds? I assume that there would be decli-
nation if the corporate structure wasn't set up properly, or it wasn't
sound, but have you declined any for lack of funds?
Mr. MooT. We haven't declined any because of lack of our resources.
We have declined projects that did not look viable to us because of
various aspects of the proposal.
The CHAIRMAN. Gentlemen, we have two other programs, the lease
guarantee and the disaster loan program, and if it is the wish of the
Administrator and his associates, we will proceed. We do have per-
mission to sit this afternoon. We have been in session more than 2 hours.
Would you like to continue?
Mr. Moor. We are at your pleasure, sir.
The CHAIRMAN. Proceed with the Lease Guarantee Program, Mr.
Hendricks.
Mr. HENDRICKS. Thank you, sir.
The Lease Guarantee Program. In 1965 Congress authorized the
original lease guarantee program. The initial legislation was limited
to small firms that had been forced to relocate because of federally
financed urban renewal, highway, or other construction programs, or
to small firms that would qualify for assistance under SBA's economic
opportunity loan program.
New legislation which became effective on January 9 of this year
extended this program to all small businesses eligible under SBA's
business and economic development loan programs. The program was
designed to assist small businesses in obtaining leases of prime com-
mercial and industrial property. Specifically:
The lease guarantee program enables the qualified small business
to be selective in its choice of a site. It increases the number of possible
selections, thus improving the small firm's chances of success in the
new location.
All types of eligible small businesses stand to benefit from the
program-manufacturers, wholesalers, retailers, and service trades.
The program is designed to preserve and promote competition. In
particular, it enables small businesses to compete with large firms and
thus helps to strengthen the position of small business and to open up
new avenues of expansion for the seasoned smaller enterprise.
The various safeguards written into the program are assurance that
losses should be small and covered by the premiums.
We expect the program will result in both the lending institutions
and the landlords becoming more interested in accommodating small
business. This will come about because the small businessman armed
with a lease guarantee represents even greater security than a triple
A rated tenant.
We believe that as this new program gathers momentum the insur-
ance companies and perhaps other financial institutions will develop
supplemental programs of their own.
The program enables the small businessman to compete without
having to finance heavy real estate purchases or be handicapped by
crippling construction costs.
These are the chief reasons that make lease guarantee an important
factor in the future growth of the small business sector of the economy.
95-193-68----8
PAGENO="0114"
110
SBA can issue a lease guarantee only when "there exists a reasonable
expectation that the small business concern, in behalf of which the
guarantee is issued, will perform the covenants and conditions of the
lease." In other words, we are not to take undue risks.
The legislation also requires that the SBA share of the fee for the
lease guarantee protection cannot exceed 2 3'~ percent per annum of
the minimum annual guaranteed rental.
As a result of this legislation, the rates established from actuarial
studies in effect limit SBA to direct lease guarantee protection for
periods of 15 years or longer, since the higher risks in the early years
of a lease require a larger premium.
To underwrite leases for a shorter period-S to 15 years-SBA
must participate with a private insurance company, with SBA as
reinsurer.
The legislation also provides that the program must be self-sustain-
ing-the fees or premiums that SBA charges must cover the costs of
the program.
Some of the basic conditions under which the lease guarantee
program operates are:
There must be a lessor-lessee relationship; that is, there must be a
bona fide lease involved.
The lessee applicant must show that it cannot obtain the lease with-
out a guarantee and that it was unable to obtain a lease guarantee
from a private source upon reasonable terms meeting the requirements
of the applicant.
SBA seeks the widest possible participation with private insurance
companies in this program. In such participations, leases may be
guaranteed for a minimum of 5 years up to a maximum of 20 years,
with SBA as reinsurer.
Premiums are calculated as a percentage of total minimum rent
guaranteed and range from 6.5 percent for a 5-year lease to 2.1 percent
for a 20-year lease.
Premiums are payable in advance, and there is no refund provision.
The lessee must pay 3 months' rent in advance, to be held in escrow,
repayable with 4-percent interest at lease termination unless used to
pay rent defaults.
In case of default, the landlord must satisfy certain requirements,
such as prompt notification of default to insurers, before he can make
a claim. He must also look to the escrow first to satisfy default rentals.
If private participation is not available, SBA may make direct lease
guarantees. However, as I have mentioned, the legislative limitation
of 2.5 percent on the SBA share of the risk prohibits our guaranteeing
directly leases with terms of less than 15 years.
Since this is a self-sustaining insurance program, it became neces-
sary to develop rate levels and premiums which would support the
risks and exposures anticipated. Various actuarial studies have been
completed. In these studies, expected rates of default are determined
by analysis of key business characteristics, the influence of general
economic conditions, and months' rent lost in default. Basic risks are
related to management experience, financial structure, location factors,
normal economic fluctuations, and the risk of depression and recession.
A uniform rate for all leases of the same terms was established.
The gross premium includes a "load factor" of 20 percent to cover
administrative costs and a fair profit to the participating company.
PAGENO="0115"
111
Lease guarantee has an impact on the redevelopment of our cities
by helping to provide commercial space in urban renewal areas for
desirable small businesses.
Lease guarantee also provides support for companies displaced by
urban renewal projects and other federally aided projects. It has
been estimated that roughly 13,000 businesses will be displaced
annually by Government programs, of which 60 percent will be small
businesses. Studies indicate that at least 25 percent of these small
businesses do not relocate, but go out of business. Lease guarantee
can help those in this group who have viable businesses but discontinue
because they* are unable to. find adequate rental facilities.
In smaller communities and rural areas lease guarantees should
attract investment in enterprises significant to the growth of local
economies.
All parties in a lease guarantee transaction may benefit. For lessees
the lease guarantee plan elevates the credit status of competent small-
firm operators, thereby enabling them to compete with large busi-
nesses for prime space. Additional security provided by the lease
guarantee allows the tenant to lease these premises on more favorable
terms, which may include lower rentals.
For lessors the coverage provides a secure stream of rentals from
each guaranteed space. This enables them to obtain more favorable
mortgage financing from institutional mortgage investors. Since the
guarantee provides these investors with additional security, land-
lords enjoy more latitude in choosing tenants for their rentable space.
A competent small business tenant fortified with a lease guarantee
may be more acceptable to a mortgage lender than a larger tenant
without such a guarantee.
For mortgage investors the coverage provided by the lease guarantee
insurance policy enables financial institutions to make more favorable
mortgage commitments to their customers while increasing their loan
security at the same time. The program makes it possible for lenders
to be assured the receipt of rental income in an amount at least
equal to the required mortgage payments.
The act provides: "Any such guarantee may be made or effected
either directly or in cooperation with any qualified surety company
or other qualified company through a participation agreement with
such company." The act further provides: "The Administration shall,
to the greatest extent practicable, exercise the powers conferred by
this section in cooperation with qualified surety or other companies
on a participation basis."
In conformity with this provision of the act, we seek participation
on the part of private companies, with SBA standing in the role of
reinsurer. We also urge the development of the private companies
of lease guarantee programs without Government participation.
One basis for participation agreements suggested by the program
is that the insurance companies take 100 percent of the losses or
claims up to an amount equal to 12 months of guaranteed monthly
rental, and that subsequent losses be shared 80 percent by SBA and
20 percent by the participating company.
The CHAIRMAN. That is a very good agreement for the insurance
companies, a good deal for them if they can get it, isn't it?
Mr. HENDRICKS. We think so, Mr. Chairman.
The CHAIRMAN. Good for the insurance companies. Is it good for
the SBA?
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112
Mr. MOOT. Mr. Chairman, I think it is. I think it is good for the
Government. What we have attempted to do is to posture ourselves
so that we are taking a long-term loss and not the short-term loss.
What we are really saying is that the Government will insure against
an economic depression or recession situation, and the insurance
industry will cover the normal vicissitudes of turnover of business.
The CHAIRMAN. Proceed, Mr. Hendricks.
Mr. HENDRICKS. Thank you.
In participating in this manner, SBA will be guaranteeing excess
losses which may be associated especially with a severe economic
recession. Thus, our reinsurance operates as a stabilizing influence in
the insurance market by absorbing some of the impact of an economic
dip which the carriers would be unable to underwrite.
We feel, however, that it is important for the insurance company to
maintain a significant interest in the guarantee throughout its life.
We are prepared, however, to proceed with a direct program in the
event private participation is not available.
Insurance industry reaction, to this point, has been largely that of
cautious observation. As the program moves along, and after ground
has been broken by smaller of innovative companies, the larger com-
panies and groups will probably begin more seriously to consider
participation. We are stressing the need for insurance industry partici-
pation, and this promotional activity has a high priority on our time
and effort.
While progress in this direction has been slow, there have been some
results. Three reinsurance treaties have been signed, and others are
being negotiated.
The CHAIRMAN. Would you denominate them as treaties?
Mr. HENDRICKS. That is insurance company parlance, and we have
become addicted to it, sir.
The CHAIRMAN. It must be a treaty with anybody doing business,
I think, with some of the insurance companies.
Proceed.
Mr. HENDRICKS. It bears repeating that the law provides that no
lease guarantee shall be issued directly or in participation "unless
the Administration determines that there exists a reasonable expec-
tation that the small business concern * * * will perform the cove-
nants and conditions of the lease." This performance requires much
more than a financial determination of an ability to repay the rent.
To comply with this provision a grading or measurement system has
been developed to evaluate the risk of default by the applicant.
After a careful examination of the principal sources of risk, there
was general agreement among SBA officials and outside experts that
the major sources of risk arose in four categorical designations. These
were agreed upon as:
1. The ability and experience of management;
2. The financial position or structure of the organization repre-
sented by the lessee;
3. The viability of the location of the premises being leased; and
4. The appropriateness of the terms of the proposed lease.
In preparing a method or procedure for grading or measuring each
of these sources of risk, consideration has been given to all the data
and information which are basically taken into account in judging
the character and ability of management, the soundness of the finan-
PAGENO="0117"
113
cial structure of a business, the quality of a location, and the character
and appropriateness of the principal features of the lease itself. SBA
specialists in each of the three fields of location, management, and
finance rate each of these risks separately. A "chief underwriter"
then rates the transaction in its totality and a composite rating of the
risk is arrived at.
It is our feeling that this method of analysis of the prospect of
business performance, when improved by experience, may prove to
have a much wider use than in the guarantee of leases and may
constitute a considerable contribution to business practices, especially
in the extension of credit and in credit insurance.
The following is a record of our commitments and policies issued in
this program through March 1968.
Mr. Chairman, I have there listed on page 27 of that statement
that particular data if it may be included in the record.
The CHAIrMAN. The table may be included in the record but I
think you should summarize the table.
(The table referred to follows:)
1. NUMBER OF LEASE GUARANTEE POLICIES/REINSURANCE CERTIF
ICATES ISSUED
Number Amount of Premium
guarantee
SBA share
Amount of
escrow
Direct 1 $337, 200. 00 $9, 441.60
Reinsurance 1 475,000.00 14,725.00
$9, 441.60
3,165.88
$5, 620.00
9,375.00
Total 2 812,200. 00 24, 166.60
12,607.48
14,995.00
2. NUMBER OF LEASE GUARANTEE COMMITMENTS
Direct 35 $7, 521,749. 40 $74, 522. 50
Reinsurance 9 3, 264, 367. 39 101, 255. 75
$74, 522. 50
21, 820. 90
$100, 458. 88
65, 566. 05
Total 44 10,786,116.79 175,778.25
96,343.40
166,024.93
Note: An increasing number of projects are in process.
Mr. HENDRICKS, Very well, sir. We have lease guarantee policies on
a direct basis. One of these has been issued. The amount of the guaran-
tee is $337,000 in round figures, the premium is $9,000 in round figures.
SBA's share of this is $9,441, and the amount of escrow is $5,600.
Reinsurance, we have one issued, a~d again the amount of guarantee
is $475,000. The premium is $14,700. SBA's share $3,100, and the
amount of escrow is $9,300.
I would like to mention along with this the number of lease guaran-
tee commitments issued which of course is a much better figure. I can
give the total, 44 for a total of $10,786,000, premiums $175,700, the
SBA's share is $96,343 and the amount of escrow $166,000.
Mr. MooT. The reason, Mr. Chairman, that commitments are im-
portant in this program is because there is usually construction in-
volved, and we do not issue a policy. We only issue a commitment until
the man is ready to occupy the premises, and that is the reason the
activity is more properly reflected in the commitments than in the
policies issued.
The CHAIRMAN. Do you have the figure for the total amount of the
commitments and the lease guarantees?
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114
Mr. MOOT. The grand total is the bottom line there, Mr. Chairman,
44.
The CHAIRMAN. In other words, there is a total of agreements and
commitments of 44.
Mr. MOOT. That is right, sir.
The CHAIRMAN. And the amount of the guarantees to date are
$10,786,000.
Mr. MOOT. That is right, sir, over the term of the lease.
The CHAIRMAN. This is the annual premium?
Mr. Moop. No, sir, that is the lump sum premium.
The CHAIRMAN. That is the total premium?
Mr. Moop. That is the total premium.
The CHAIRMAN. Is $175,000?
Mr. MooT. Yes, sir.
The CHAIRMAN. $175,778.25.
Mr. MOOT. That is right, sir.
The CHAIRMAN. You have a total premium payment of $175,000
for the 44 small businesses that will receive prime space in shopping
centers under the lease guarantee program, where heretofore they
were not permitted to acquire space.
Mr. MooT. That is right, sir.
The CHAIRMAN. To the insurance companies?
Mr. MooT. That is right, sir. You can judge the effect of that total
premium because on the last column ovr'r there, the amount of escrow
represents 3 months' rent for those small business concerns, so that
you can see that the premium is about equal to 3 months' rent.
The CHAIRMAN. Proceed, Mr. Hendricks.
Mr. HENDRICKS. We now approach the disaster loan assistance.
The CHAIRMAN. We want to ask some questions on this practice
before proceeding to the disaster loans.
Orginally the lease quarantee program was written by Congress
to provide limited assistance to small firms that were disrupted by
urban renewal, and then later Congress extended the program to
include all small businesses.
Mr. HENDRICKS. This is correct, sir.
The CHAIRMAN. So that any small businessman that may be,
shall we say, discriminated against in being able to get a desirable
location-top-rated location in shopping centers or other areas-now
may be able to do so through the lease guarantee program.
Mr. HENDRICKS. Yes, sir.
The CHAIRMAN. This only began in January of this year, it is one
of your very new programs-
Mr. HENDRICKS. It is interesting to notice. Mr. Chairman, that
we have some 240 or 250 starting with the inquiry stage and progress-
ing to something a little more final, that will, I think, increase this
total that we are naming today of 44.
The CHAIRMAN. Whereas heretofore a small business concern
might not be able to get into a good or desirable shopping center,
now, with the Government guaranteeing the lease, he might be
more attractive to the landlord than some other business concern.
Mr. MooT. Not only that, Mr. Chairman, it is very important,
We are also hopeful that we will encourage the flow of construction.
long-term industrial mortgage funds, to build facilities which we can
provide lease guarantees for small business, so we are hoping that we
PAGENO="0119"
1~15
will attract new investment funds in areas that need small business
facilities.
The CHAIRMAN. What is the tenure, the term of the average lease
being considered in these centers?
Mr. MOOT. Fifteen years is the average, sir; not the average, but
the most popular.
The CHAIRMAN. I will have our counsel, Mr. Mitchell, ask questions
at this point.
Mr. MITCHELL. Mr. Chairman, could we have inserted in the record
at this point title 4 of the Small Business Investment Act of 1958, as
amended, which is the legislative authority.
The CHAIRMAN. Without objection it may be included.
(The information referred to follows:)
SMALL BUSINESS INVESTMENT ACT OF 1958, AS AMENDED
TITLE TV-LEASE GUARANTEES
AUTHORITY OF TEE ADMINISTRATION
SEC. 401. (a) The Administration may, whenever it determines such action to
be necessary or desirable, and upon such terms and conditions as it may prescribe,
guarantee the payment of rentals under leases of commercial and industrial
property entered into by small business concerns to enable such concerns to
obtain such leases. Any such guarantee may be made or effected either directly
or in cooperation with any qualified surety company or other qualified company
through a participation agreement with such company. The foregoing powers shall
be subject, however, to the following restrictions and limitations:
(1) No guarantee shall be issued by the Administration (A) if a guarantee
meeting the requirements of the applicant is otherwise available on reasonable
terms, and (B) unless the Administration determines that there exists a
reasonable expectation that the small business concern in behalf of which the
guarantee is issued will perform the covenants and conditions of the lease.
(2) The Administration shall, to the greatest extent practicable, exercise
the powe;rs conferred by this section in cooperation with qualified surety or
other companies on a participation basis.
(b) The Administration shall fix a uniform annual f cc for its share of any
guarantee under this section which shall be payable in advance at such time
as may be prescribed by the Administrator. The amount of any such fee shall
be determined in accordance with sound actuarial practices and procedures, to
the extent practicable, but in no case shall such amount exceed, on the Admin-
istration's share of any guarantee made under this title, 2'/2 per centuin per
annum of the minimum annual guaranteed rental payable under any guaran-
teed lease: Provided, That the Administration shall fix the lowest f cc that experi-
ence under the program established hereby has shown to be justified. The Adminis-
tration may also fix such uniform fees for the processing of applications for
guarantees under this section as the Administrator determines are reasonable and
necessary to pay the administrative expenses that are incurred in connection
therewith.
(c) In connection with the guarantee of rentals under any lease pursuant to
authority conferred by this section, the Administrator may require, in order to
minimize the financial risk assumed unde~ such guarantee-
(1) that the lessee pay an amount, not to exceed one-fourth of the minimum
guaranteed annual rental required under the lease, which shall be held in
escrow and shall be available (A) to meet re~ital charges accruing in any
month for which the lessee is in default, or (B) if no default occurs during
the term of the lease, for application (with accrued inter~st) toward final
payments of rental charges under the lease;
(2) that upon occurrence of a default under the lease, the lessor shall,
as a condition precedent to enforcing any claim under the lease guarantee,
utilize the entire period, for which there are funds available in escrow for
payment of rentals, in reasonable diligent efforts to eliminate or minimize
losses, by releasing the commercial or industrial property covered by the
lease to another qualified tenant, and no claim shall be made or paid under
PAGENO="0120"
116
the guarantee until such effort has been made and such escrow funds have
been exhausted;
(3) that any guarantor of the lease will become a successor of the lessor
for the purpose of collecting from a lessee in default rentals which are in
arrears and with respect to which the lessor has received payment under a
guarantee made pursuant to this section; and
(4) such other provisions, not inconsistent with the purposes of this title,
as the Administrator may in his discretion require:
POWERS
SEC. 402. Without limiting the authority conferred upon the Administrator
and the Administration by s~ôtion 201 of this Act, the Administrator and the
Administration shall have, in the performance of and with respect to the functions,
powers, and duties conferied by this title, all the authority and be subject to the
same conditions prescribed in section 5(b) of the Small Business Act with respect
to loans, including the authority to execute subleases, assignments of lease and
new leases with any person firm organization, or other entity, in order to aid in
the liquidation of obligations of the Administration hereunder
FUND
SEC. 403. There is hereby established a revolving fund for use by the Admin-
istration in carrying out the provisions of this title. Initial capital for such fund
shall consist of not to exceed $5,000,000 transferred from the fund established
under section 4(c) of the Small Business Act: Provided, That the last sentence
of such section 4(c) shall not apply to any amounts so transferred. Into the fund
established by this section there shall be deposited all receipts from the guarantee
program authorized by this title. Moneys in such fund not needed for the payment
of current operating expenses or for the payment of claims arising under such
program may be invested in bonds or other obligations of, or bonds or other obli-
gations guaranteed as to principal and interest by, the United States; except that
moneys provided as initial capital for such fund shall be returned to the fund
established by section 4(c) of the Small Business Act, in such amounts and at
such times as the Administration determines to be appropriate, whenever the
level of the fund herein established is sufficiently high to permit the return of
such moneys without danger to the solvency of the program under this title.
Mr. MITCHELL. Mr. Hendricks, this is concerning the premiums
that will be charged to small business concerns-
Mr. HENDRICKS. Yes, sir.
Mr MITCHELL I believe the act provides that in no case shall such
amount exceed, on the administration's share of any guarantee made
under this title, 2~ percent I understand your interpretation is that
on the portion that SBA guarantees, it cannot charge a premium of
more than 2.5 percent.
Mr. HENDRICKS. Yes, sir.
Mr. MITCHELL. I believe also that you have explained here that as
a result of your actuarial studies, it has been determined that an
adequate fee of 2~ percent would not be a large enough fee to sustain
a policy of less than 15 years.
Mr. HENDRICKS. This is our finding to date.
Mr Moor It is about 13 years where it breaks, Mr Mitchell
Mr. MITCHELL. As a result I gather from your statement that SBA
will not make a direct guarantee for less than 15 years.
Mr. HENDRICKS. This is our position to date, Mr. Mitchell.
Mr. MITCHELL. And on any period under 15 years it must be either
in participation with or reinsuring an insurance company.
Mr. HENDRICKS. Yes, sir.
Mr. MITCHELL. I believe you state in setting these fees that the
insurance company may charge, which you reinsure, fees running from
the smallest, about 2 1 percent on a 20-year lease, up to around 6 5
percent on a 5-year lease?
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117
Mr. HENDRICKS. Yes, sir.
Mr. MITCHELL. Let us project that in just a moment to what it
will cost a small businessman. Let's assume a small businessman had
a 5-year lease, wants a 5-year lease in a development center-and
many small businessmen do operate on 5-year leases, especially in
suburban and rural areas. I believe from what you have testified that
the premium would be 6.5 percent. Is that premium on the total
amount of the full lease period?
Mr. MooT. Yes, sir.
Mr. MITCHELL. A small business concern with a $300 a month
lease for 5 years, would have a total lease payment of $18,000 for the
full term. I believe computation would show that his premium on this
insurance policy would be around $1,170. I believe you also state that
that full premium must be paid in advance.
Mr. HENDRICKS. Correct.
Mr. MITCHELL. To the insurance company. Now, what is the fee
that is charged for the application-
The CHAIRMAN. To the insurance company.
Mr. MITCHELL. Yes, to the insurance company. Now, what is the
application fee charged for a small businessman who is applying for
a lease guarantee, in addition to the premium, your application fee?
Mr. MooT. If it is a direct application, Mr. Mitchell, and therefore
the Small Business Administration is exclusively involved, there is
no application fee.
Mr. MITCHELL. We are speaking of a 5-year lease where the insur-
ance company would be participating.
Mr. Moor. If the insurance company is involved in the loan on a
participation basis or a straight insurance basis, we have allowed in
our regulations up to a $50 processing fee.
Mr. MITCHELL. Then the small businessman on a 5-year lease must
put up $1,170 as a premium?
Mr. MooT. That is right, sir.
Mr. MITCHELL. He must put up a $50 application fee. Now, in
addition to that, I believe that you provide that the small business
concern, to get a lease guarantee, must put up 3 months rent.
Mr. Moor. In escrow.
Mr. MITCHELL. Which he deposits. It can get it back at the end of
the period but it must put it up in cash?
Mr. Moor. That is right, sir.
Mr. MITCHELL. On the lease that I am talking about here, then they
would have to put up an additional $900 in cash to apply and to get a
lease?
Mr. Moor. That is right, sir.
Mr. MITCHELL. In adding that up, we arrive at a figure of $2,120
that a small business concern must put up in cash to get a lease
guarantee for 5 years, is that correct?
Mr. Moor. You state it as a must, Mr. Mitchell. It is not either
our experience or our expectation that it will be a must situation.
There are several alternatives.
In the first place, the cost of the lease guarantee can be, and we are
advised frequently will be a part of the rental structure, and the pay-
ment will actually be made initially by the landlord, who is looking
for this kind of assurance, so that instead of a lump sum payment by
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118
the small business concern, it will be paid by the landlord and dis-
tributed through his base rental structure.
Mr. MITCHELL. Will it be added to the original $300 a month rent?
Mr. Moop. Yes, sir, it will be an additional cost.
Mr. MITCHELL. An additional cost to the small businessman.
Mr. MooT. Yes, there is no question about it. Now, we have eval-
uated the cost of the lease quarantee versus the benefits, and there is
no doubt in our mind by providing a triple A credit rating to the small
business concern, thereby making him eligible for prime facilities,
either little industrial or shopping center facilities, that we are en-
hancing his ability to increase his sales and therefore his profits much
beyond the cost of the lease. This, however, is something that must
be judged on the risk rating of the lease guarantee teams, which look
at the liability of the location as well as the management and the
financial situation of the individual.
We think that between the increase of profit potential by the space
availability, the cost distribution which will largely be, we hope,
through the rental structure, and not out-of-pocket cost, that this is
going to be a viable situation for the small business community.
Generally speaking we think that the leases will be somewhat longer
than 5 years, however. At least our experience to date has been gen-
erally that these leases are in the 15-year period.
Mr. MITCHELL. But the premium will be just degraduated gradually.
Mr. MooT. That is right.
Mr. MITCHELL. Under a 10-year lease it would be somewhere around
probably 4 percent or 5?
Mr. MOOT. That is right, but you see under the situation you can get
the cost of a 15-year lease for about the same cost as you can for a 5-
year lease, because, as you know, this committee knows better than I
do, the high percentage of business failures are in the early years of its
inception, so that the failure rate is high in the first 5 years. Therefore
the exposure cost is high in the first 5 years.
Mr. MITCHELL. Mr. Administrator, I believe you also have a pro-
vision whereby the insurance company which insures one of these
leases will sustain all the loss in the first 12 months, but after that
12 months, SBA will sustain 80 percent of the loss.
Mr. MOOT. That is right, sir.
Mr. MITCHELL. Now, on the breakdown that we had here, assum-
ing they pay, as you said in the original statement, they pay the full
fee at the beginning, but at any rate it is charged to them in the cost
in some way or another, the total with premium and escrow funds
amounts to approximately 12 percent of his total $18,000 rental,
assuming that that is fully paid to the insurance company. And in
addition to the 3 months' rent that is put up, the $1,170 premium is
equal to more than 3 months' rent, taking administrative costs out
of it. Well, there is 6 months' rent, nearly 7, that the small business-
man has put up, and after a 12 months' loss period, SBA would move
in and take 80 percent of the loss.
In addition to that, there are provisions that the landlord must
attempt to get another renter if there is default. An insurance com-
pany could not lose one penny, according to counsel's computation,
if the renter were to not be in default more than 6 months-and not
then if another renter could be obtained-and then would lose only
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119
up through the 12-month period, when SBA would then take 80
percent of the loss.
Now, how can an insurance company lose in a matter like this?
Mr. MOOT. Well, I think the answer, Mr. Mitchell, is that unless
you expect, which we do not, that there are going to be periods of
sharp recession or economic depression, and therefore long-term sus-
tained vacancies, that the recurring losses will be predominantly the
insurance company's loss, as will the administrative costs of the
program. The complete servicing of the program is going to be the
insurance company's cost, so that we are expecting actually that this
will be a program which we would consider in a few years, perhaps
even shorter than a few years, depending upon our experience, that
we would be recommending to ourselves thar we reduce the Govern-
ment's premium cost actually rather than its proportionate share.
We would expect that this is going to be a very fine program for the
taxpayer.
Now, we think it is also going to be very good for the small business-
man or we wouldn't be advocating the program or trying to promote
it as we are. He doesn't have any alternative. He can't get in the space
these days. So we believe that to the extent that we can show him that
he is going to gain, and that we can do a good risk rating job so that
we pick viable sites that are not going to dry up or die through stag-
nation, that everybody is bound to gain on this program, and we would
hope that we could, as we have with the private banking institutions,
we can convince the insurance industry that it can do this kind of
thing on its own, that it doesn't need a Government program.
Mr. MITCHELL. Then you mean your position is that a small
businessman can in effect, on top of his other costs, pay 11 to 12
percent on his rental money, and do business that way successfully,
and compete?
Mr. MooT. We wouldn't give him an up-check or a go signal on
this kind of a risk rating unless we thought so. As a matter of fact,
when we risk-rate this man, and if the landlord does not elect to pay
the premium in advance, and if it looks like a good situation, we are
perfectly willing to lend the man the money to pay the premium.
Now~ this may look as though it is out of one pocket into the other;
but if we reach the situation where we think it is good for this com-
munity, for this particular facility to be encouraged with small business
properly balanced, then we are willing to invest the Government's
money in the program.
Mr. MITCHELL. It would appear, would it not, that it would be
better to lend him the money for his rent at 5~ percent if he is that
good a credit risk.
Mr. MooT. But Mr. Mitchell, he can't get this space today. The
reason for the legislation is because the man is shut out of this space.
We are providing him in effect with this guarantee. We are providing
him the equivalent of triple-A credit, which he cannot get unless he
was a large business.
Mr. MITCHELL. Of course the question is not concerning his need
to get in the space. Congress has decided that, and you are very
properly implementing it.
The question arises as to the cost, and whether a small businessman
that is in that position can put up $2,000 to get a 5-year lease.
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I believe the essence of my question goes also to this point. Mr.
Hendricks, you stated in your statement that this program must be
self-sustaining, that SBA can or must participate with an insurance
company in any lease under 15 years because of this cost factor.
Would it not be anticipated that in beginning a program like this,
under the rules that Congress has set out, that you could take some
small chances, instead of guaranteeing a 20-percent load factor for
an insurance company? Are you held by that word "must"? You say
it must be self-sustaining. Do you interpret the act to mean that?
Mr. MOOT. No, sir. The Congress, as you know, provided a $5
million working capital fund.
Mr. MITCHELL. Yes.
Mr. MooT. The Congress also said that this $5 million should be
paid back to the fund from which it came, the business loan invest-
ment fund, as soon as is practicable. We take that to mean that we
can use it to operate and to pay early losses under the program. We
did not take it to mean that you intended or Congress intended that
we subsidize this program over any period of time.
Mr MITCHELL I believe in speaking of this fee, the act states that
"sound actuarial practices procedure to the extent practicable may be
used"
Mr. MOOT. That is right, sir.
Mr MITCHELL It states that you will participate with the insur-
ance companies "to the greatest extent practicable."
Mr. MooT. That is right.
Mr. MITCHELL. The question that the committee is now asking is,
Do you think it is practicable for small business concerns to pay the
type of premiums for the insurance companies that we have been dis-
cussing here, in order to be able to get in one of these leased places?
Mr. MooT. Yes; we do, Mr. Mitchell. We think it is good for them.
I would like to mention one thing, because I think it is well to put it
on the record. The total cost, as you have derived it, I am sure you
appreciate has a portion of investment as well as cost. The $1,100
figure that you mentioned, which is the escrow payment, at a 4-per-
cent interest rate, comes back and is actually rental payments, so that
it is not a total cost to the man.
Mr. MITCHELL. Excuse me. I believe the $1,170--
Mr. MOOT. Is the $900.
Mr. MITCHELL. Is the premium that is paid in full in advance. The
$900 in escrow, they get 4 percent back on it.
Mr. MooT. I am talking about the $900. I stand corrected.
Mr. MITCHELL. Does that $900 go to the insurance company in
escrow?
Mr. MOOT. Well, it depends upon whether it is a direct loan or re-
insurance. If it is reinsurance, the insurance company is responsible
for investing it and paying the interest.
Mr. MITCHELL. Now, at the end of the period, the insurance com-
pany returns that $900.
Mr. MOOT. It is an offset against the rental cost at the end of the
lease.
Mr. MITCHELL. At 4 percent interest.
Mr. MOOT. At 4 precent interest.
Mr. MITCHELL. And the insurance company can utilize that fund,
making anywhere from 5~ to 6 percent interest today.
PAGENO="0125"
121
Mr. MOOT. That is right, sir. Now if we find again that the oppor-
tunity cost of money changes, as we move along, then we will renego-
tiate, such as we have authority to.
The CHAIRMAN. You will enter into another treaty?
Mr. MOOT. We would have to enter into another treaty, sir.
Mr. MITCHELL. I have one other question, Mr. Chairman, on this,
if I might develop it. You mentioned that you have put on top of
the costs involved here in arriving at this premium a 20-percent load
factor that is to take care of administrative cost plus profits, plus the
profit to the insurance company. Now, I don't really know too much
about it, but do you have any idea how much of that 20-percent load
factor is based upon what you refer to as administrative cost?
Mr. MOOT. I don't really know, Mr. Mitchell. We went into this in
quite some depth, trying to understand the industry practices, and
that is how we arrived at the 20 percent. But I am afraid I can't
make-I could possibly try to find some data, I can't make-an
intelligent separation between administrative cost and profit, if that
is the thrust of your question.
Mr. MITCHELL. The thrust of my question is concerning the size of
the load factor, as is the thrust of all of my questions here concerning
the large, which would even be perhaps called a "windfall", to the
bright insurance company if they would grab this and run with it,
which we would hope they would do. Isn't 20 percent quite a large
quaranteed profit and administrative cost factor in any type of busi-
ness?
Mr. MooT. No, sir. You must remember we are talking about a
regulated industry here.
The CHAIRMAN. Regulated by whom, Mr. Administrator?
Mr. MooT. By the States, Mr. Chairman; and, incidentally, I
am not here to defend the insurance companies. Congress, in its
wisdom, told us to work with the insurance companies.
The CHAIRMAN. Mr. Administrator, the insurance companies are
the least regulated industry in this Nation. They have no Federal
regulation, no Federal regulatory statute. The SEC tells you they
don't have any jurisdiction, and without reference to your fine agency
or the percent matter, I am saying generally that the one industry
that needs to be regulated in this country is the insurance companies.
They are going to own the world one of these days. You have to enter
into "treaties" with them.
Mr. MITCHELL. Are many insurance companies entering into this
program with you?
Mr. MooT. We have three.
Mr. MITCHELL. Three large companies?
Mr. MooT. We have three; and, as a matter of fact-
Mr. MITCHELL. Are any new insurance companies coming in to
specialize in this? Frankly, counsel wonders why they are not running
to get in-
Mr. MOOT. Quite frankly, we thought we would have much more
interest from the insurance industry. We went around the country
feeling that this is what Congress had directed us to do, and we held
seminars with the insurance industry around the country. We found
that between the casualty companies and the surety companies, that
this is a program that they sort of felt didn't fit anybody's particular
portfolio, so that we have had difficulty.
PAGENO="0126"
122
We have two southern companies and one midwestern company,
and actually you can tell from the statistics we have to date that we
haven't had much reinsurance interest.
Mr. MITCHELL. Had you thought that the SBA might move on
into this field and become a type of yardstick to establish this particu-
lar phase of the industry and lead it?
Mr. MooT. As a matter of fact, that is exactly what we are doing,
because you will note that out of the 44 commitments we have 35 of
them are direct. What we are hopeful of, and quite frankly we have
had outstanding national consultants, with national reputations in
this field, working with us. It is our hope that we can, over a short
period of time, do another actuarial study, and see if we can't reduce
the cost rates here.
Mr. MITCHELL. One more question, Mr. Chairman, concerning the
charging of this premium fully in advance. I believe section 401(b)
of the act states, "The administration shall fix a uniform annual fee
for its share of any guarantee under this section." Do you think it
is following the legislative mandate to charge the full premium in
advance rather than a uniform annual fee?
Mr. MooT. I think there is very good reason for it, Mr. Mitchell.
No. 1, it would sharply increase the cost, if we didn't collect the
lump-sum premium and put it to work in terms of invested funds.
Secondly, because of the interpretation that we placed upon this,
we did, as you know, come up and informally with the staff go over
this point and our entire approach to this program as well as the
Senate counterpart, and we felt that we were in agreement with the
committee on this approach, because it did reduce the cost of the
entire program, and it was our intent to encourage the landlord to
spread the base of this cost throughout his rental structure, and also,
as I previously mentioned, if it was necessary we intended to provide
small loans to the extent necessary in order to pay premiums.
Mr. MITCHELL. That is all I have.
The CHAIRMAN. Mr. Administrator, the Congres~ has responsibility
in this. The goals and objectives are good. Yoi~ indicate in Mr.
Hendricks' testimony that very few companies are evidencing much
interest. There are no companies specializing in this area. They have
to be encouraged, to use a mild term, to participate. Is this program
available through all the regional offices?
Mr. MooT. It is available. We are decentralizing it. We have gone
through our training period, and we are decentralizing as of July 1,
so that the authority will be in the field. Mr. Chairman, I think I
need to correct for the record one misunderstanding that I caused.
There is one company that has formed, as a wholly owned subsidiary
of a larger company, for the purpose of guaranteeing commercial
leases. It was a company that was working on this program prior to
this legislation, and it is one of the three companies that has signed
the reinsurance agreement with us.
The CHAIRMAN. We want to commend you, Mr. Administrator, in
your diligent work in this, and suggest that you sharpen your pencil
when you sit down at the "treaty" table with them. Let's take up,
gentlemen, if there are no further questions, the disaster loan program,
and then we will suspend for awhile. We consider this lease guarantee
program a major advance for small business if we can go forward with
it.
PAGENO="0127"
123
Mr. Hendricks, tell us about your disaster loan program~
(The legislative authority for its disaster loan program was received
into the record at this point.)
SMALL BUSiNESS ACT
* * * * * * *
(b) The Administration also is empowered-°
(1) to make such loans (either directly or in cooperation with banks or
other leading institutions through agreements to participate on an immedi-
ate or deferred basis) as the Administration may determine to be necessary
or appropriate because of floods or other catastrophes; 10
(2) to make such loans (either directly or in cooperation with banks or
other lending institutions through agreements to participate on an immedi-
ate or deferred basis) as the Administration may determine to be necessary
or appropriate to any small business concern located in an area affected by
a disaster, if the Administration determines that the concern has suffered
a substantial economic injury as a result of such disaster and if such disaster
constitutes-
(A) a major disaster, as determined by the President, under the Act
entitled "An Act to authorize Fedeial assistance to States anci local
governments in major disasters, and for other purposes", approved
September 30, 1950, as amended (42 U.S.C. 1855-1855g), or
(B) a natural disaster, as determined by the Secretary of Agriculture
pursuant to the Consolidated Farmers Home Administration Act of
1961 (7 U.S.C. 1961);"
(3) to make such loans (either directly or in cooperation with banks or
other lending institutions through agreements to participate on an immediate
or deferred basis) as the Administration may determine to be necessary or
appropriate to assist any small business concern in reestablishing its business,
if the Administration determines that such concern has suffered substantial
economic injury as a result of its displacement by a federally aided urban
renewal or highway construction program or by any other construction
conducted by or with funds provided by the Federal Government; and the
purposes of a loan made pursuant to this paragraph may, in the discretion of
this Administrator, include the purchase or construction of other premises
whether or not the borrower owned the premises from which it was displaced; 12
(4) to make such loans (either directly or in cooperation with banks or
other lending institutions through agreements to participate on an immediate
or deferred basis) as the Administration may determine to be necessary or
appropriate to assist any small business concern in reestablishing its business
if the Administration determines that such concern has suffered substantial
economic injury as a result of the inability of such concern to process or
market a product for human consumption because of disease or toxicity
occurring in such product through natural or undetermined causes."
No loan under this subsectipu, including renewals and extensions thereof,
may be made for a period or periods exceeding thirty years: Provided, That the
Administrator may consent to a suspension in the payment of principal and
interest charges on, and to an extension in the maturity of, the Federal share
of any loan under this subsection for a period of not to exceed five years, if
(A) the borrower under such loan is a homeowner or a small-business con-
cern, (B) the loan was make to enable (i) such homeowner to repair or replace
his home, or (ii) such concern to repair or replace plant or equipment which
was damaged or destroyed as the result of a disaster meeting the requirements
of clause (A) or (B) of paragraph (2) of this subsection, and (C) the Ad~.
ministrator determines such action is necessary to avoid severe financial
hardship: Provided further, That the provisions of paragraph (1) of subsec-
tion (c) of this section shall not be applicable to any such loan having a
maturity in excess of twenty years. The interest rate on the Administration's
P.L. 89-11 extended the maximum term of disaster loans to 30 years, and provided for suspension of
repayments in certain hardship eases.
1~ Public Law 89-339 provided for partial forgiveness of Hurricane Betsy disaster loans in the States of
Florida, Louisiana, and Mississippi.
11 Public Law 88-264 extended par. (2) beyond its former scope relating solely to drought and excessive
rainfall disasters.
12 Public Law 87-70 added par. (3) and Public Law 88-560 added the phrase after the word" Government."
`5 Public Law 88-264 added par. (4).
PAGENO="0128"
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share of any loan made under this subsection shall not exceed 3 per centum
per annum, except that in the case of a loan make pursuant to paragraph (3),
the rate of interest on the Administration's share of such loan shall not be
more than the higher of (A) 2~ per centum per annum; or (B) the average
annual interest rate on all interest-bearing obligations of the United States
then forming a part of the public debt as computed at the end of the fiscal
year next preceding the date of the loan and adjusted to the nearest one-eight
of 1 per centum, plus one-quarter of 1 per centum per annuj. In agreements
to participate in loans on a deferred basis under this subsection, such partici-
pation by the Administration shall not be in excess of 90 per centum of the
balance of the loan outstanding at the time of disbursement
Mr. HENDRICKS. Would it be the chairman's wish that I read the
entire statement of some six or seven pages?
The CHAIRMAN. You might put the entire statement in the record
and highlight the disaster loan program for the committee. The entire
statement may be included.
Mr. HENDRICKS. Yes, sir.
DISASTER LOAN ASSISTANCE
Sections 7(b) (1), 7(b) (2), and 7(b) (4) of the Small Business Act,
as amended, empowers the Small Business Administration (1) to make
loans to individuals, businesses of all sizes, churches, charitable and
nonprofit organizations, private schools, colleges, universities, and
hospitals which have damage to or loss of real or personal property as
a result of floods or other catastrophies: (2) to make loans to small
business concerns which suffered substantial economic injury as the
result of a disaster in connection with which there has been a declara-
tion by the President or the Secretary of Agriculture; and (3) to make
loans to small business concerns which suffered substantial economic
injury as a result of inability to process or market a product for human
consumption because of a disaster or toxicity occurring in such product
through natural or undertermined causes.
During the last full fiscal year 1967, 2,105 loans for a total of $25.5
million were made under these programs In this same period, there
were 43 disasters declared in 30 states. This was a very considerable
reduction from the all-time high of 30,920 loans for $199.2 million
made in fiscal year 1966 during which there were 46 declarations in
25 States.
In fiscal 1968 through March 31, 1968, there were 12,510 loans
approved for $99 million. Of these, 8,044 loans for $30.3 million were
made in the southwestern area primarily as a result of Hurricane
Beulah in Texas There were 3,393 loans for $57 6 million made in the
Pacific coastal area mainly as a result of the disastrous flood in Fair-
banks, Alaska The total of these two disasters, 11,437 loaiis for $87 9
million, represents about 90 percent in number of loans and dollars of
all disaster activity in fiscal 1968 through March 31, 1968 During this
same period there were 30 disaster declarations in 24 States
In previous fiscal years 1954 through 1966 there had been 57,867
loans approved for $511.7 million. During this period there were 534
declarations The total activity through March 31, 1968, amounted to
72,482 loans approved for $636 2 million
From the time SBA was created in 1953 through March 31, 1968,
there have been 606 physical disaster declarations The smallest
number, 11, was declared in fiscal 1954, with the largest number, 62,
declared in fiscal 1961 for an average of 41 declarations per year. These
PAGENO="0129"
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have involved areas of various sizes in all 50 States as well as Guam,
Puerto Rico, and the Virgin Islands. Every State except Vermont has
had two or more declarations with the largest being 51 made in Texas.
California ranked second with 44 and Kansas and Illinois third with
32 each.
Our disaster programs, by providing funds not available from any
other source, have given a very substantial economic uplift to many
stricken areas. SBA has received warm approval and commendations
from individuals, businesses, and public officials for our disaster lending
activities.
Effective for declarations made after March 19, 1968, in order to
comply with the desire to improve management practices and to
conserve Federal funds to the extent feasible, a number of changes
were made in the operating procedures applicable to the SBA physical
and economic injury disaster programs. The newly adopted procedures
are as follows:
LOANS TO HOUSEHOLDERS
1. The limit of SBA share of loans to any one household group may
not exceed $20,000 for repairs or replacement of structures. Up to
$10,000 in addition to or separate from funds for structures may be
approved for repair of replacement of household goods. The total for
both purposes combined, however, cannot exceed $25,000 SBA share.
2. No refinancing of debt of any type is permitted, except on exist-.
ing SBA disaster bands made as a result of a previous disaster, in
order to provide better ability to repay the total debt to SBA. This
requires no additional outlay of SBA funds and aids in loan adminis-
tration by having only one loan to service.
3. Private credit to the extent it can be obtained on reasonable
terms and costs shall be used by any householder where the gross
income is in excess of $10,000 plus $600 additional allowance for each
dependent other than the applicant. Procedures have been established
to require use of both cash and liquidable assets held by householders
to the extent it exceeds the total number of members of such house-
hold by $600 each.
LOANS TO BUSINESS
1. In no event will a loan to any firm or business-classed entity
be in excess of $100,000 SBA share. Loans on a bank/SBA guarantee
basis can be made for any amount with the SBA guarantee being
provided for up to 90 percent of the loan.
2. Where a firm has total equity of three times total debt, privately
supplied funds must be obtained for any excess over this ratio to the
point the assets to liabilities fall below the 3-to-i ratio. After such
private credit is obtained to this extent, a disaster loan may be con-
sidered for additional funds needed.
3. The foregoing paragraph 2 shall not apply to any firm with a
post disaster adjusted net worth of less than $10,000. None of the
requirements of this section on business loans is applicable to churches,
hospitals, privately owned schools and colleges or eleemosynary
institutions, although loans to such entities are considered business
loans.
4. Any other assets not required in the normal operation of the
business, which can be liquidated for 90 percent value, must be die-
95-193---68-9
PAGENO="0130"
126
posed of and funds used to alleviate disaster losses. Where time is
needed to liquidate, the proceeds, when obtained, must be applied
to reduce the principal amount of the loan made.
5. Iii addition to insurance recovery, cash and securities con-
vertible to cash, owned by the business or by a firm controlled by
applicant, must be used to the extent that the total available is in
excess of funds needed to meet normal payroll requirements for a
period of 30 days.
GENERAL-APPLY TO BOTH HOUSEHOLDS AND BUSINESS
1. No funds will be provided to repair, rep] ace, or rebuild, which
will increase the size or capacity of any structure, except as may be
required by applicable ordinances.
2. No funds will be provided to repair or replace household goods or
machinery and equipment which would upgrade the quality, size, or
capacity of the repaired or replaced item.
3. Where a firm or individual uses its own labor to restore property,
funds may be approved for materials only. Whenever a controlled or
affiliated contractor is used, funds shall be approved only for the
actual labor and materials used for the work. No profit or overhead
costs shall be allowed.
4. Disbursements will be made only based on submission to SBA
of bills and cost records covering work completed and/or materials
and equipment delivered except, up.. to $1,000 can be disbursed in
advance of purchase, to householders to buy items of replacement
furnishings and equipment costing not more than $50 each.
ECONOMIC INJURY LOANS
Loans to small firms for economic injury where there is an agri-
culture, Presidential, or SBA disaster products declaration will be
made on the same basis as previously, except that the use of avail able
resources and credit shall apply and the loans shall be limited to
$100,000 to any one firm or group of affiliated firms for combined
injury under any one disaster.
This concludes my formal stat.ement. If there are further questions,
I will try to answer them.
The CHAIRMAN. Mr. Hendricks, maybe we can get at this by a few
pointed questions.
The disaster loan program is available to businesses and to mdi-
viduals who have been damaged by a disaster, a flood, or a tornado.
Is this basically the statutory authority?
Mr. HENDRICKS. This is basically true.
The CHAIRMAN. And we can never predetermine the number or
the extent. What is the maximum amount that can be loaned on a
disaster loan?
Mr. HENDRICKS. The maximum amount of loan that may be made
to a business is $100,000, as was indicated earlier this morning. The
maximum amount to a homeowner or a householder would be either
$20,000 or $10,000, respectively, but not more than $25,000. In other
words, $10,000 would be for personal prop~erty, for a loss by a house-
holder.
PAGENO="0131"
127
The CHAIRMAN. You say for a business the maximum loan that
may be made resulting from a disaster is $100,000?
Mr. MooT. This is an administrative restriction, Mr. Chairman.
The CHAIRMAN. Yes. Now, the maximum to a homeowner is-
Mr. MOOT. Is $25,000, sir
Mr. HENDRICKS. That would be $25,000.
The CHAIRMAN. In certain areas it is $10,000 and in other areas it is
$25,000. Where is the line of differentiation?
Mr. MooT. There is $25,000 for the real property damage limitation
for a home and $10,000 for the household furnishings, for the contents.
The combination, however, under no circumstances can exceed $25,000
under our current administrative limitation.
The CHAIRMAN. And these are term loans of how many years?
Mr. MooT. These can be up to 30 years, sir.
The CHAIRMAN. What is the interest rate?
Mr. MooT. The interest rate is 3 percent, sir.
The CHAIRMAN. Would a riot such as occurred in the District of
Columbia be considered a disaster?
Mr. MooT. It could be, sir.
rfhe CHAIRMAN. In the definition of the law or interpretation
by SBA?
Mr. MooT. Yes, sir. The law, as you know, reads certain specific
natural disasters or other disasters.
The CHAIRMAN. The Office of Emergency Planning, in testifying
before another subcommittee on which I serve, said that they only
make loans and grants for natural disasters, and they say a flood or
tornado is a natural disaster, and they don't state that their juris-
diction runs to riots and violence. The SBA has a different definition,
a different interpretation?
Mr. MooT. Under 781, Mr. Chairman, we have a definition which
has been legally ruled, and this is the physical disaster, as to include
a manmade disaster. Under 782, which is economic injury type of
disaster, which is declared in the case the President declares it-
(Discussion off the record.)
The CHAIRMAN. Read the definition into the record.
Mr. MOOT. (reading):
The administration is also empowered to make such loans, either directly or
in cooperation with banks or other lending institutions through agreement to
participate on an immediate or deferred basis, as the administration may de-
termine to be necessary or appropriate because of floods or other catastrophies.
Now, it has been construed legally, Mr. Chairman, that "or other
catastrophies" does give us the authority to declare-
The CHAIRMAN. The Office of Emergency Plannjn~ statutory
authority refers to natural disasters.
Mr. Moop. Yes, sir.
The CHAIRMAN. The words "natural disaster" are not included
in your statutory language.
Mr. MooT. It is not, Mr. Chairman.
The CHAIRMAN. It refers to floOds or other catastrophes.
Mr. MooT. That is right, sir.
The CHAIRMAN. And your counsel has in a formal opinion advised
you that destruction of a business from a riot through violence or
arson could be within the category of other catastrophes such as a
flood?
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128
Mr. MOOT. That is correct, sir.
The CHAIRMAN. Has there been any court interpretation of that
opinion?
Mr. MOOT. No, sir. We did testify last summer, in late July, sub-
sequent to the Detroit problem, before the House Banking and
Currency Committee, as to our legal interpretation of this language,
and the report of the committee concurred in our legal interpretation
of it. This was the House Banking and Currency Committee report, sir.
The CHAIRMAN. Therefore you now believe you are empowered to
make loans not only for flood and tornadoes, but also as a result of
riots and violence?
Mr. MooT. Yes, sir. We haven't in the recent disturbances, but
we do think we have the authority to.
The CHAIRMAN. I think you did a marvelous job in New Orleans
in Hurricane Betsy. You moved in there and thousands of loans were
made and businesses were reestablished. I understand in the earth-
quake in Alaska that probably you made 4,000 loans and perhaps one
has been criticized out of the 4,000, so that is a rather good record
also, I would say.
I am not so sure of the soundness of your lawyer's opinion with
respect to this other. From a humanitarian point of view it is good,
but from a legal point of view I am not so sure, because the whole
question is open in the Congress now as to whether or not there
should be riot insurance or other insurance as a result of some of the
current wave of problems that we are having.
Mr. MooT. Well, I might point out, Mr. Chairman, that--~-
The CHAIRMAN. The lawyers disagree, you know.
Mr. MooT. Yes. Actually a disaster declaration is probably not the
best approach for this kind of assistance at any rate. First of all, we
can't provide for economic injury, for the loss of business, under our
disaster declaration. Only for the physical property loss.
Secondly, the problem generally is related to urban renewal, more to
the displaced business loan, where the entire area is under redevelop-
ment, and I think at the moment that we are much better off to do it
on an orderly redevelopment basis, where you have given us authority,
to where there is a designated urban renewal section, to bring into play
the four and a quarter percent 10-year loan for displaced business loans.
That would be 7(b)(3) as you look on down.
The CHAIRMAN. This language which you have read was enacted
in 1967, last year?
Mr. MooT. No, sir. This is original language.
The CHAIRMAN. This has been there?
Mr. MooT. Yes, sir.
The CHAIRMAN. For a number of years?
Mr. Moop. Yes, sir.
The ChAIRMAN. And you indicated to us in testimony that this had
been discussed by both the committees of the House and Senate, the
authorizing committees, in their reports?
Mr. MOOT. No, sir, just the House, although we have advised the
Senate committees, but the House committee held a specific hearing
on this section subsequent to the Detroit problem of last year.
The CHAIRMAN. Have there been any loans made in this area for
reestablishment of businesses?
Mr. MooT. Yes, sir.
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129
The CHAIRMAN. Following the ridts?
Mr. MOOT. Yes, sir.
The CHAIRMAN. How many, what volume?
Mr. MOOT. We made in the combination Detroit and Newark, of
last summer, we made just one or two under 200 loans for about $3.5
million. We have no declarations or no loans as a result of the April 4
and the ensuing days' disturbances of this calendar year.
The CHAIRMAN. You would not propose to make any loan for a
business destroyed by fire or riot or violence unless the area had been
declared a disaster area? Would that be a first prerequisite?
Mr. MooT. Our first prerequisite has been, and we have received
requests specifically from the mayor of Washington, and from the
mayor of Baltimore to declare both cities a disaster area to the extent
that they were damaged in the civil disturbances. My reply to both
mayors has been I would like to see from them their plans for relating
the damaged areas to their current urban renewal plans, again relating
to the authority you have given us for urban renewal assistance
namely, the displaces business loans.
I have talked informally with both cities. They thoroughly under-
stand the problem, the question, and they are developing information.
In the meantime we are making our conventional programs available,
and to the extent that the physical capability of these areas allows
restoration of businesses, the businesses are going back in, and to the
extent that we can provide assistance to those businesses, with our
regular programs, we will provide such assistance.
To the extent that the physical damage is such that the businesses
can't go in without new construction, there, is nothing that we can
do at the moment in terms of relating our programs to the city's
redevelopment program until the city, in each case, does its planning.
The CHAIRMAN. In the two instances in which loans have been
made, Newark and Detroit, they followed a declaration of disaster
and it was tied in with your urban renewal programs?
Mr. MooT. That is right, sir, except you will recall that this was
prior to any model city designation last summer, and prior to the
development of urbaii renewal designations, such as we now have.
In other words, urban revewal is much further downstream now than
it was last summer.
The CHAIRMAN. What is the time factor involved in the processing
of these types of loans? Whatwas your experience?
Mr. MooT. How long did it take us to process?
The CHAIRMAN. Yes.
Mr. MOOT. We established an office in Detroit in the area of the
greatest damage, and we processed loans, they didn't come in very
quickly, frankly, sir. I mean the requests were held., pending the
determination of insurance companies.
The CHAIRMAN. These loans were made to reestablish the businesses?
Mr. MooT. To reestablish the business.
The CHAIRMAN. Have the busine~sés been reestablished in the
instances where you have made the loans?
Mr. MooT. Yes, sir.
The CHAIRMAN. Under your new regulations will you make disaster
loans to small businesses to refinance existing indebtedness?
Mr. MOOT. No, sir; we will not. As a matter of fact, we have an
administrative restriction against using SBA disaster loan authority
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130
to refinance any existing indebtedness, unless it happens to be a
SBA loan.
Mr. MITCHELL. May I ask a question?
The CHAIRMAN. Mr. Mitchell.
Mr. MITCHELL. I had misunderstood, I suppose. I understood that
your new limitations prevented you from making loans to any busi-
nesses or individuals or homeowners under the authority of section
7(b)(1), to refinance existing indebtedness, but you are saying now
that it also applies to small businesses. You will not make a small
business disaster loan, which includes refinancing?
Mr. MooT. That is right, sir. Now, what we will do, however, is to
configure our small business disaster loan so that it picks up after or is
worked in conjunction with his current indebtedness, so that the man
can continue in his business. In other words, we are not aiming at
creating a situation that is going to put him out of business by simply
loading our loan on top of another indebtedness. But what we do not
want to do is to convert 8 or 9 percent money into 3 percent money.
The CHAIRMAN. Do you have any questions, Congressman Klu-
czynski?
Mr. KLUCZYNSKI. Mr. Chairman, just one question to satisfy
myself. On relocation, I hope you can answer this. On urban renewal,
I believe for families in business, the families are allowed $3,000, is
that it? Would you know that?
Mr. MooT. This, of course, is not-
Mr. KLuCZYNSKI. I understand it is not you.
Mr. MOOT. I am not sure I understand. I think it varies, doesn't it?
Mr. KLtTCZYNSKI. Is it $3,000? Is there a limit on the business?
The CHAIRMAN. This is in the area of urban renewal.
Mr. KLIJCZYNSKI. I understand, under HUD, I know that. I thought
I would get that information.
Mr. MOOT. I really don't know, and I will be glad to find out and
put it in the record on the per family.
Mr. KLTYCZYNSKI. No; I just wanted it for the committee.
Mr. MOOT. For business moving there is a maximum moving cost
grant of $25,000.
Mr. KLUCZYNSKI. $25,000 for business and I believe it is $3,000 for
families.
Mr. MooT. It could very well be, sir.
Mr. KLuCZYNSKI. Under the highway construction the families
get only $300, I believe. The reason I ask that, we are going to have
hearings on highway legislation and I would like to put it the same as
urban renewal. I thought you had the answer at your fingertips.
Mr. MOOT. I should have.
The CHAIRMAN. Do you want to check this out and supply it for
accuracy for the record? It would be appreciated.
Mr. MooT. I will, sir.
Mr. KLUCZYNSKI. You don't have to do it now. This afternoon is
all right or sometime tomorrow. Thank you.
Mr. MooT. I will, sir.
(The information referred to follows:)
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131
RELOCATION PAYMENTS FOR INDIVIDUALS AND BUSINESSES DISPLACED BY FED-
ERAL HIGHWAY PROGRAMS AND BY ACTIVITIES OF r~as DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT
HIGHWAY P~IOGRAMS (FEDERAL-AID HIGHWAY ACT OF 1982)
Residential, $200 maximum; Business, $3,000 maximum.
Only available if authorized by State law. Relocation costs are considered part
of the construction costs and are reimbursable by the Federal Government pro-rata
according to the respective Federal/State shares of the construction costs up to
the above maximums.
Currently, 37 states, the District of Columbia and Puerto Rico have legislation
authorizing relocation payments.
About 20 state laws are substantially in accordance with the Federal provisions.
Some are considerably more liberal than the Federal maximum (i.e., up to $500 for
residential moves and up to $25,000 for business moves in Pennsylvania); some are
more stringent (i.e., Connecticut makes relocation payments only on projects that
have more than 20 families to be displaced). Fifteen states have no authorizing
legislation.
HUD PROGRAMS (RELOCATION CAUSED BY ANY ONE OF 11 PROGRAMS)
Residential-up to $200 for individuals and families for moving expenses includ-
ing storage costs and loss of property.
Business-(and nonprofit organizations):
(1) up to $3,000 for moving expenses, including storage costs and reimburse-
ment for property loss incurred in the move;
(2) if moving expenses exceed $3,000, reimbursement for actual moving
expenses may be made, up to a maximum of $25,000. Payments in excess of
$25,000 may be made if shared by the locality.
Note: Payment for a combination of direct property loss incurred because
of the move and moving expense is limited to $3,000.
(3) Small Business Displacement Payment-payment of $2,500 in addition
to any of the above for eligible business. Generally eligible if average annual
net earnings before taxes is less than $10,000, provided gross annual receipts
are in excess of $1,500.
The CHAIRMAN. Mr. Williams, any questions?
Mr. WILLIAMS. No questions, thank you.
The CHAIRMAN. Mr. Mitchell, any questions?
Mr. MITCHELL. Mr. Administrator, concerning your new regula-
tion that 3 percent disaster loans are limited to $100,000 on direct
loans, now a small business firm that gets that 3 percent disaster loan
at $100,000, is he still then eligible for your regular direct small
business loan. up to $100,000 at 5.5 percent?
Mr. MooT. Under the criteria for a regular business loan.
Mr. MITCHELL. The regular business loan?
Mr. MooT. Yes, sir.
Mr. MITCHELL. In other words, the $100,000 limitation is cumula-
tive?
Mr. MooT. That is right. One loan program does not mutually
exclude application under another.
The CHAIRMAN. Mr. Administrator, you know the answers. You
are on top of your program and your agency, and I think you are one
of the finest Small Business Administrators that we have had.
We are going to suspend these hearings until 10 o'clock in the
morning, at which time we will want to talk about the antipoverty
programs of which Mr. Greenberg, I believe, is the coordinator.
Unless there are further questions, we will stand adjourned until
10 o'clock tomorrow.
Mr. MooT. Thank you very much.
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132
The CHAIRMAN. Thank you, gentlemen. Our colleague Representa..
tive Herbert Tenzer has submitted a statement to the committee on
the loan program and asked that it be placed on the record. Without
objection his statement with exhibits will be received into the record
at this point.
(Representative Tenzer's statement follows:)
STATEMENT OF HERBERT TENZEE, A MEMBER OF CONGRESS FROM TIlE STATE OF
NEw YORK
Mr. Chairman, I appreciate this opportunity to appear before the members of
the House Select Committee on Small Business this morning and to testify on the
business loan program of the Small Business Administration.
Last year, in a letter to the distinguished Chairman of this Committee, I
expressed my concern with the alarming decline in the number of small business
loans approved by the SBA. I have attached copies of my letter of September 5,
1967 to my testimony (Exhibit A).
This Committee has made several recommendations which I believe would
strengthen the Small Business Administration and provide more realistic assistance
to the small businessmen of America-the backbone of our economy.
The first proposal concerns the so-called priority system of SBA. While the
priorities of SBA may not be formal, they are observed in a manner which has
discriminated against the small businessman in the literal sense-the man who
operates a small store located in an average community and who does not hire
disadvantaged persons.
The priorities which give a preference to defense-oriented industries, to loans
which result in a substantial increase in employment, loans to businesses contrib-
uting to reductions in our balance of payments, to reduction of air and water
pollution and loans in areas of high unemployment, may be desirable, but should
not be exclusive.
The intent of Congress in establishing the Small Business Administration was
not to single out particular industries for favoritism but to foster competition in
general.
The priority system has violated the intent of Congress and should be modified
or eliminated. As SBA ha~ attempted to implement, their existing authority, it
has become crystal-clear that the limited eligibility has hampered the develop-
ment of a sound program and private company participation.
An example of how the priority system has affected SEA's loan policies can be
seen by comparing the allocation of loan funds among the 50 States.
New York State with 9 percent of the population of United States and con-
tributing 19 percent of the total federal tax revenue, received only 225 of the 8,086
business loans approved during fiscal year 1967. New York State also, received
only $13.7 million of the $383 million in loan funds allocated by SBA during this
same period.
The following States received more loans:
EDollar amounts in millionsi
State
Loans
Amount
1. California
305
~12. 0
2. Colorado
227
9. 3
3. Florida
4. Kansas
5. Massachusetts
443
257
309
21. 4
12.3
16.7
6. Mississippi
7. Missouri
.
282
322
12. 4
16. 9
8. South Carolina
225
11. 1
9. Texas
10. Puerto Rico
407
457
17.7
10, 4
I do not question the need for SBA assistance to small business in these and
every State, but I do question the authority under which the Small Business
Administration establishes priorities and allocates its funds. While I recognize
the need for economic guidelines in connection with determining which loan
application to approve, those guidelines should not result in the inequitable
distribution of loan funds among the 50 States.
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133
Without the priority system, New York State would have received much more
than the 2.5 percent of loans and the 3.5 percent of the funds distributed by SBA.
Moreover, it is disturbing to note that small business loans in Nassau County
dropped from 66 in fiscal year 1966 to 13 in fiscal year 1967 and that on a nation-
wide basis the number of direct loans dropped from 10,404 to 8,086. I have also
discovered that more than 1,550 requests for loans from business concern in
Nassau County were recorded by SBA. This figure includes all loan inquiries-even
though applications may not have been filed. Since SBA has refused to accept
applications which do not fall within their guidelines, this statistic-as opposed
to the number of processed loans-is a more realistic appraisal of the need for
SBA assistance in Nassau County.
In my letter of September 8, 1967 to Robert C. Moot, Administrator of the
Small Business Administration, which I have attached to my testimony (Exhibit
B), I urged a review and revisiOn of the allocation system employed by SBA to
assure a more equitable distribution of loans throughout the 50 States. In addition,
I called for a more informative statistical reporting system so that Congress can
effectively exercise its watchdog function and for the elimination of priorities based
on the type of business applying for assistance.
SBA Administrator Moot, in reply to my letter, admitted that Nassau County
loans had sharply declined by stating: (Exhibit C-full text of letter with attach-
ments)
"With respect to Nassau County, you are quite correct in pointing out that there
has been a substantial decrease in the loan activity * * * there is no reason not
to anticipate an upward trend in loan activity for fiscal year 1968 in consideration
of our substantially higber projections for that fiscal year."
In 1966 this distinguished Committee recommended the elimination of the
priority system. To date, I believe that recommendation has been consistently
ignored. This priority system continues to deprive small businessmen from
receiving SBA assistance. The nationwide loan program and policies must he
strengthened so a more equitable distribution system can be established and put
into operation.
I am pleased that this Committee is fully aware of the problems attending the
small business industry and I am hopeful the Administration will make recom-
mendations which will establish a profitable, well regulated industry within the
goals of the Small Business Administration. This is the only federal agency whose
sole mission is to promote the welfare of our 5,000,000 small business concerns
and is considered by many to be the Magna Carta of our free enterprise system.
ExHIBIT A
SEPTEMBER 5, 1967.
Hon. JOE L. EVINS,
Chairman, Select Committee on Small Business,
Rayburn House Office Building,
Washington, D.C.
DEAR MR. CHAImrAN: As the Congressman from a district with approximately
20,000 small businesses, I have been concerned with the activities of the Small
Business Administration. My examination of SBA programs reveals a startling
drop in the mmber of SBA loans nationwide and in Nassau County, New York,
part of which I represent.
Statistics furnished by the SBA show that the number of Section 7(a) loans
in Nassau County dropped from 66 in fiscal year 1966 to 13 in fiscal year 1967.
On a nationwide bases, the number dropped from 10,404 to 8,086 loans.
I have been unable to find any satisfactory explanation for these statistics.
In addition is is apparent that the number of banks, willing to participate in
SBA loans, has also decreased to an alarming point.
I respectfully request the assistance of the Select Committee on Small Business
in 1) investigating this matter in Washington, and 2) sending a representative
to Nassau County to explore it fully at the local level.
I would appreciate any assistance you could give me in this matter.
Sincerely,
HERBERT TENZER,
Member of Congress.
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134
EXHIBIT B
SEPTEMBER 8, 1967.
Mr. ROBERT C. MOOT,
Administrator, Small Business Administration,
Washington, D.C.
DEAR MR. MOOT: I am writing to express my concern about the apparent
decline in the SBA's direct loan program and to offer some suggestions which I
believe will strengthen the program.
The statistics which your office furnished me on August 15th reveal the follow-
ing:
(1) The number of section 7(a) small business loans-nationwide-dropped
from 10,404 in fiscal 1966 to 8,086 in fiscal 1967. Even if Economic Oppor-
tunity loans are added, the total number dropped from 12,093 to 11,124.
(2) In Nassau County, New York, the number of 7(a) loans dropped from
66 to 13.
(3) In New York State the number of 7(a) loans dropped from 1473 to
225.
(4) Of the more than $386 Million in 7(a) loans approved by SBA in fiscal
1967 only 13.7 Million went to businesses in New York State and only 2.5
percent of the total number of 7(a) loans approved were spent in a State
with 9 percent of the population of the United States and which contributed
19% of the federal tax revenues.
In light of these statistics on September 5, 1967, I requested the House Select
Committee on Small Business to inquire as to the reasons for this decline in the
number of 7(a) loans.
Because of my concern over the decline in loans, I would like to suggest the
following changes in procedure which I believe would benefit the Small Business
program and the Congress. They are:
(1) Elimination or modification of the present priority system under which
preferences are given to defense oriented industries; loans resulting in substantial
increase in employment; loans to businesses contributing to reduction in balance
of payments through export sales; businesses contributing to reduction in air and
water pollution; and loans based on local economic needs. While I recognize the
need for guidelines, these categories of priorities must not become exclusive,
The intent of Congress in creating the SBA was not to single out particular
industries for priority but to foster competition and strengthen the small business
community in general. The priority system has violated the intent of Congress
and should be modified or eliminated.
(2) A change in SBA's reporting system to include in its annual report to the
Congress more realistic statistics regarding the total number of loan requests
received by SBA.
SBA officials have admitted in congressional hearings that SBA's application
statistics are meaningless since many loan requests are turned down before appli~
cations are processed and these are not reported to the Congress. Congress should
have this information in order to effectively exercise its watchdog functions. I
urge you to change the reporting procedures of SBA accordingly.
(3) Review and revise the allocation system employed by SBA to assure a
more equitable distribution of loans throughout the 50 States. It is certainly
strange that New York State with 9 percent of the total population of the United
States received only a little more than 2 percent of the small business loans
approved this year. If this is a result of the priority system then I am more
convinced that SBA has strayed far afield from the intent of Congress in creating
the SBA.
I make these suggestions because of my concern for providing to the small
businessman, who is the backbone of American industry, an effective independent
agency which will carry out the intent of Congress. I urge you to review these
proposals and invite your comments.
Sincerely yours,
HERBERT TENZER, Member of Congress.
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136
EXHIBIT C
SMALL BtTSINIISS ADMINIST1~ATION,
Washington, D.C., September 13, 1967.
Hon. HIIRBERT TENSER,
House of Representatives,
Washington, D.C.
DEAn CONGRESSMAN TENSER: I have read with interest your letter of Septem*
ber 8, 1967, as well as a draft bill to amend the Small Business Act, which waS
separately furnished by your staff.
I would like to take this opportunity to outline more fully the statistics with
respect to the loan activity of the Small Business Administration and to discuss
the provisions of your proposed bill.
Attachment No. 1 indicates our financial assistance programs (excluding
disaster loans) for the fiscal years 1966, 1967, and 1968. Assistance provided to
small business companies under the SBIC Program has not been included al-
though such financing represents in excess of $200 million a year.
It should be noted that the current year program, approved by the President
and the house of Representatives with Senate action now in process, contemplates
the highest level of loan activity in the history of this Agency. Programmed loan
activity for fiscal year 1968 is numbered and in dollar value is 60 percent and 47
percent higher respectively than the comparable levels for fiscal year 1967. For
all three years, the dollar value of all programs, except Displaced Business Loans,
shows a consistent increase. Displaced Business Loans, as you know, are made
only when federally financed urban renewal or highway construction programs
are involved and the volume of such loans is directly related to the level of activity
under such construction programs.
It is clear, therefore, that not only is there not a decline in the level of loans to
be made in terms of value, but rather a 57 percent increase from 1966 to 1968. We
look forward, as previously stated, to the highest level of loan activity in history
for the financial assistance programs indicated in the tabulation.
With respect to loans in the State of New York~ the high level of programmed
activity in fiscal year 1968 will likewise be experienced in this state. To the extent
that need is demonstrated by qualified applicants, we expect to reach a new high
in financial assistance this year. With respect to the disproportionate number
of loans between fiscal year 1966 and fiscal year 1967 which your letter accurately
cited, I would like to state that large numbers of loans in 1966 were occasioned by
the transit strike in that year. However, on a dollar value basis, even including
loans made on account of the transit strike, the total was $24.5 million for fiscal
year 1966 and $22.4 million for fiscal year 1967, a difference of only $2.1 million.
In addition, under the Small Business Investment Program, which has a different
yearend reporting period, financings in the State of New York are the second
highest of any state and exceed $30 million per year.
With respect to Nassau County, you are quite correct in pointing out that
there has been a substantial decrease in the loan activity. Attachment Number 2
recapitulates the situation. As in each of the cases cited above, when the total
financial assistance program is viewed, the reduction is not quite as large as
indicated for the 7a loan program alone. Similarly, there is no reason not to
anticipate an upward trend in loan activity for fiscal year 1968, in consideration
of our substantially higher projections for that fiscal year.
It should be noted that by law we are not allowed to provide financial assistance
when funds are available in the private sector. If follows, therefore, that areas and
communities with significant economic strength and well~being cannot qualify
for financial assistance to the same extent as communities with greater economic
need despite comparative population density.
I would now like to address the provisions of the proposed bill. As you know,
loan funds available for small business assistance must be provided within the
total resources available in the President's Budget and our utilization of these
funds must be in accordance with sound management control procedures in order
to assure fiscal responsibility. With respect to Section I, while we do not believe
that funds can be specifically allocated by population and by relationship to
percentage of Federal Revenue alone, we are making allocations on an equitable
geographic basis taking into account such economic factors which have been
established by or relate to the intent of Congress in assisting the small business
community. We believe that the distribution of more than a billion dollars requires
the exercise of judgment on the part of SBA in the administration of these
programs.
PAGENO="0140"
136
With respect to Section II of your proposed bill, we do not have at the present
time in effect a priority system in the sense of mandatory instructions to our loan
officers. In your letter you state that "While I recognize the need for guidelines,
these categories of priorities must not become exclusive " The loan objectives
which we have given to our field offices are in the nature of guidelines, a restate-
ment of the mandates (competitive environment, economic growth, balanced
employment, etc.) given to us by the Congress for the conduct of this program
and not an exclusive list of priority categories The funding of national goals as
described in your letter is covered in our program reporting system in order that
we may learn the intended use of Government funds. However, SBA regulations
have historically prohibited loans to various kinds of business enterprises I am
attaching (Attachment No. 3) Part 120 of SBA Rules and Regulations which,
under Subsection 120.1(d), Subsections 5, 6, 7, 8, 9, 10 and 12, indicates the types
of such restrictions. Since the inception of this Agency these restrictions have
been in effect and, although reviewed at frequent intervals, there has not been
sufficient justification to warrant revision An amendment as broad as that pro
posed might require SBA to make such loans in which the public interest might
not be well served The Congress has in effect directed this Agency to conduct
its affairs under fairly specific policies Therefore, our job is delimited, if you will,
by certain basic considerations which affect the geographic distribution of our
funds as well as the categories of small businesses to which such funds are made
available May I list a number of them
1 Availability of credit-credit generally is more readily available in
centers of financial institutions and in areas of economic well-being, thus the
need for SBA funds is normally greater in areas of economic stagnation and
smaller financial institutions This is true desite the comparative population
totals in these areas.
2. Without recognition of the economic needs of an area-areas with slow
growth rate could be penalized.
3 Industry structure is not well distributed geographically-states such
as those in the South and Rocky Mountain areas which need new industry
could be penalized due to lack of capital-states with industry needing
modernization such as textile industry in New England could be denied
critically needed funds
4 Bank lending practices are not uniform throughout the nation, par
ticularly in non-urban areas Banks tend to be interested in certain lines of
business activity, thus new industry needed in non urban areas could be
denied funds.
5. In the area of R & D, the technologically based entrepreneur does not
follow a geographic equality pattern-his type is usually found in university
and research centers-geographic distribution of funds would limit financial
assistance to firms interested in new products and innovative ideas.
6. Capital markets are unevenly distributed in the United States-largely
concentrated in New York, Illinois, California, and Texas-this has impact
on. supply of equity on long term capital.
Your proposed amendment in Section III to require certain reporting informa-
tion in our annual report we believe is unnecessary since such requests may be
handled administratively We are always responsive to the requests of our select,
legislative and Appropriation Committees of the Congress In addition, if at any
time you have any problems with respect to the operations of the SBA and require
certain information we will be happy to develop the information and furnish it to
you.
In summary, we believe that our loan program is not on the decline but rather
will enjoy the biggest year in its history in 1968. We have a system of fund manage-
ment which will provide on an equitable basis an appropriate distribution of funds
to small businessmen throughout the country. We must in the conduct of our affairs
establish guidelines so that the resources which are available to us may be dis-
tributed to accomplish the stated objectives of the Congress. This will be done
recognizing the needs in certain geographical areas and in certain categories of
business. Judgment and administrative flexibility are needed by an operating
agency within, well defined guidelines to carry out the intent of the Congress. It is
my considered judgment that the matters with which you are concerned can be
handled on a mutually acceptable basis within the authority of our present
legislation.
I would like to express to you my appreciation for your interest on behalf of the
small business community of this country.
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137
I share this concern and I assure you that this Agency will be ever alert and
responsive to the needs and problems of small business.
Sincerely yours,
ROBERT C. Moor, Admfrcistrator.
SBA~WlDE LOANS APPROVED
(Dollar amounts in mlIllonsJ
Actual, fiscal year Actual, fiscal year Estimated, fiscal year
1966 1967' 19682
Number Amount Number Amount Number Amount
Business 7(a) 10,404 $354.8 8, 070 $385.3 12, 828 $590.2
Economic opportunity 1,689 17.6 3, 034 31. 9 5,328 60. 0
Displaced business 753 48.4 385 32. 7 370 35. 0
Development compamy 317 54. 1 341 56. 7 389 58.9
Total 13,163 474.9 11,830 506,6 18,915 744.1
`Subject to final adjustment.
2 Included in fiscal year 1968 budget pending before the Congress.
NASSAU COUNTY, N.Y., LOANS APPROVED
Fiscal year 1966 !is~1 year 1967
Number Amount Number Amount
Business (7a) 65 $1, 197, 000 13 $527, 000
Economic opportunity 27 249,000 16 109,500
Displaced business 4 355,000
Total 92 1,446, 000 33 991,500
The CHAIRMAN. Unless there are further questions, we will stand
adjourned until 10 o'clock tomorrow.
(Whereupon, at 1:10 p.m., May 20, 1968, the committee recessed to
reconvene at 10 a.m., Tuesday, May 21.)
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ORGANIZATION AND OPERATION OF THE
* SMALL BUSINESS ADMINISTRATION
(1968)
TUESDAY, MAY 21, 1968
HOUSE OF REPRESENTATIVES,
SELECT COMMITTEE To CONDUCT STUDIES AND
INVESTIGATIONS OF THE PROBLEMS OF SMALL BUSINESS,
Washington, D.C.
The committee met, pursuant to call, at 10 a.m., in room 2359,
Rayburn House Office Building, Hon. Joe L. Evins (chairman)
presiding.
Present: Representatives Evins, Patman, Kluczynski, Dingell,
Smith, Corman, Addabbo, Conte, Horton, and Burton.
Also present: Richard L. Mitchell, special counsel; Myrtle Ruth
Foutch, clerk; Beth Russell `Schuitheis, staff assistant; and John J.
Williams, minority counsel.
The CHAIRMAN. The committee will come to order~
We will resume our hearings this' morniiIg. `We `have with us~ the
Deputy Administrator of the Small Business Administration, Mr.
Howard Greenberg. He is the coordinator and director'of all, the anti.-
* pOverty programs within the agency.
Yesterday we had a review of a~ great number of programs, the
regular' business `loan~ programs, the development company loans, the
lease guarantee program, insurance, and other discussion~ with an
~o'verall presentation by Administrator Moot.'
Mr. Administrator, if you wish to proceed with Mr. Greenberg, we
`will nOw be pleased tohear him.
TESTIMONY OP ROBERT C. MOOT, ADMINISTRATOR, SMALL BUSI-
``NESS ADMINISTRATION, ACCOMPANIED BY HOWARD GREEN-
BERG, DEPUTY ADMI1~ISTRATOR, AND CLYDE B. ~OT'1tMER,
DEPUTY ASSOCIATE ADMINISTRATOR FOR PROCUREMENT AND
MANAGEMENT ASSISTANCE
Mr. MOOT. I would like' to make an opening comment on the
record, Mr. Chairman.
Largely through the efforts of the chairman of this committee,
and the members of the committee, the responsibilities of the Small
Business A~dministration were both strengthened and expanded with
the passage of the Economic Opportunity Act Amendments of
1967.
The added responsibilities of SBA in this regard were directed to
poverty pockets in both the rural and the urban and intercity areas,
(139)
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140
and aimed at improving these areas through strengthening small
business enterprises and entrepreneurships in these particular target
areas.
Upon the passage of the Economic Opportunity Act Amendments
of 1967 in December, SBA reviewed and evaluated the programs it
then had, which were aimed at the objectives of Congress. And we
have revitalized and redesigned our programs to make them more
effective to meet the objectives of the Congress.
As you stated, Mr. Chairman, the Deputy Administrator has
been the coordinating focal point for these programs. And he does
have a prepared statement. And with your permission, he will now
address the committee with that statement.
The CHAIRMAN. Mr. Greenberg, the committee will be most pleased
to hear you. And you may proceed as you wish.
Mr. GREENBERG. Thank you, sir.
Mr. Chairman and members of the committee, I am glad to have
this opportunity to report to you on the actions and plans of the Sn.iall
Business Administration in carrying out a mission assigned by the
Congress and underscored as to importance in the Economic Opportun-
ity Act Amendments of 1967.
The need to develop and expand entrepreneurship in poverty pockets
and among minority group citizens is well known. So well known, in
fact, that for me to dwell upon the need would be redundant.
Suffice to say, I assure you that we who have the responsibility for
creating, safeguarding, fostering, and encouraging small business
enterprises are well aware of the requirement.
We have developed what I believe to be an effective and balanced
approach. And we have plans to progressively expand our approach as
experience and resources permit.
I would like to describe the tools we have, how we have been using
them, and what plans we have for the future.
At the outset, let me say that the Congress has given us the legis-
lative authority we need to do the job.
First, I would like to describe a new SBA activity known as our
community economic development program.
We know that one of the main aims of our disadvantaged citizens in
both urban and rural areas is to become a part of the economic owner-
ship structure.
It is the typical and truly American desire to be a manager and an
operator of one's own means of earning a living.
To help in achieving this objective, SBA has established a new
effort-additive to our others. Its aim is very specific: to bring about
the creation or expansion of existing resident-owned, operated and
managed substantial enterprises located in deprived areas.
By substantial enterprises, we mean those which are concerned with
light manufacture or wholesaling; enterprises which involve a consid-
erable number of local residents not only as workers but shareholders
as well.
We mean enterprises which community residents either wholly
own, or in which they initially have a strong position amid eventually,
through positive divestiture arrangements, gain control.
We mean enterprises which will reverse the adverse balance of pay-
ments in the depressed area by exporting goods and services outside
the area aiid bringing th.e revenue into it.
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141
Every slum area in the Nation is a target for the endeavor. Every
underdeveloped rural community which is losing its youth to the cities
is a target for the endeavor. However, we have thought it prudent
to proceed at first on a limited scale, in order to not overly diffuse
our resources and so that we can objectively review first results.
Therefore, we have selected seven locations in which to begin.
These are the cities of Boston, Philadelphia, Washington, D.C., Los
Angeles, and Chicago, and-for rural balance-the 10-county Elk
and Duck Rivers area of Tennessee and the Navaho Indian Reserva-
tion in northern Arizona.
We have emplaced specially trained three-man teams of SBA
employees to work exclusively on developing proposals for this pro-
gram. They have full knowledge of SBA's financial, technical, and
management assistance programs as well as assistance available from
other agencies.
One of the team members is a community resident who has the
respect of the community because it recommended him.
The three-man teams will not work out of our ~egu1ar offices. They
will be physically located in the center of each area being assisted.
The team will work with a local organization having the most
effective impact on the community. This may be a small business
development center group, or other local organization which has a
demonstrated record of effectiveness and ability to communicate.
The teams will work with local residents in attempting to de~relop
specific proposals for substantial enterprises.
The CHAIRMAN. If I may interrupt you there; we have county
agents who assist in agricultural matters who are assigned to the
county. Do you sort of envision the small business specialists as county
agents or development program specialists?
Mr. GREENBERG. I think this would be the same kind of approach,
working in the community, knowledgeable of the prtblems of the
community.
The CHAIRMAN. They will live in the community?
Mr. GREENBERG. They will be located directly in the community
and working with the community itself.
The CHAIRMAN. There are three assigned to each of the seven
selected locations?
Mr. GREENBERG. That is correct, sir.
The CHAIRMAN. And will all three of them live there among the
people, or just one?
Mr. GREENBERG. They will all be located in the areas in which
they will be working.
The CHAIRMAN. Proceed. Thank you.
Mr. GREENBERG. The teams will do more than explain and apply
potential SBA financial and management assistance. They are fully
conversant with resources available from other Federal agencies as
well, since part of their responsibility is a close liaison with other
Federal agencies at the regional level.
The teams will also attempt to interest other resource sources to
assist the banking and insurance community, the educational institu-
tions, and the business community. In fact, the team will fully explore
the entire potential within the target city for assistance.
If resources are required which are not available in the local area,
the team has direct and immediate access to SBA-Washington to
request resources from the national level.
95-193-68--------1O
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~1.42
One of the key ingredients of the program is our requirement that
the local residents, who are going to own and operate what is created,
invest their substance.
We will help form local development companies. We will assure
maximum Federal participation. We will urge private sector capital
to assist. But we also will require that the local community, to the
extent possible, raise and put into the plan as much of its own funds
as it can.
Even though the new program has been launched recently, I am
heartened to report that the response has exceeded our expectations.
A number of proposals, show great promise.
If the results prove we have projected accurately, we will soon ex-
tend the number of target cities to include an additional eight. And
if our resources permit, during fiscal year 1969 we will move across the
Nation so as to have more than 70 teams at work in underprivileged
areas, both rural and urban.
This program we hope will effectively harness our entire resources,
and the applicable resources of other agencies who have indicated a
willingness to work with us. We have tested this technique in the past
few months through the development of some 12 actual projects in
various parts of the country. We are satisfied that the approach is
feasible and that it will prove productive.
Next I would like to outline our plans for using another authority
which the Congress has provided us in, the Economic Opportunity
Amendments of 1967.
These amendments reinforce and expand our existing authority to
provide maiiagement and technical assistance to small business con-
cerns.
While authorization has been given, necessary funds. are required
to put the program into effect.
Now we are authorized to finance private and public organizations,
under contract, to broaden the scope of our management and tech-
nical assistance activities to small businesses.
Now we can go in strength and in depth to the low.income area
small concerns and provide expertise in basic business practices.
* .Now we can specifically tailor our help to the struggling enterprise,
or the new enterprise, by contracting for and supplying in sufficient
scope and duration the expert advice, help, and training the small
businessman needs to develop entrepreneurial and managerial self-
sufficiency.
Now we can contract with private and public organizations to work
continuously with SBA, the local business community and the poten-
tial entrepreneur, in the identification and development of new
business opportunities.
In the coming fiscal year, the authority to fund local organiza-
tions-that is, small business development centers or other similar
groups-has been granted to SBA.
If financing is provided for contractual management and technical
assistance and to staff local organizations, we intend to significantly
increase the program support level to small business in depressed
communities.
We plan to fund the local organizations at modest levels and direct
their efforts to working with the target area SBA teams in the develop-
ment of small substantial businesses. The wider scope of our manage-
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143
ment and technical assistance will be available to all small businesses
in the areas.
We will be working with our own SCORE teams, and trade associa-
tions and cooperatives in the application of this new assistance.
Not the least of the resource now vested in SBA by virtue of the
authorities of section 406 is our expanded opportunity to look toward
the youth of the minorities and provide for entrepreneurship training.
We can begin to implement a long sought agency objective of in-
depth programs of manager-4rainee programs. Under these, potential
entrepreneurs can be placed in work-study situations to become pro-
ductive managers. And then to become productive owners or part
owners of small enterprises.
This would be nothing more than an on-the-job program of business
administration which is conducted by our universities. It would be a
practical program, under which those who have not and cannot
benefit from our universities would get day-to-day training in how
eventually to manage their own enterprises.
Further, we are authorized to contract for planning and research,
feasibility studies and market research to provide a sound basis for
establishing economically viable enterprises.
The programs I have thus far described aim at largely bringing new
businesses into being.
We have others whose center is perhaps more equally divided
between the objectives of helping existing, as well as new businesses.
One of these is a program we have recently begun by activating
section 8(a) of the Small Business Act.
Under section 8(a) SBA is empowered ~o, take Government prime
contracts and to subcontract same to small, business cQncerns. That is
the essence. of the authority. Section, 407(a) of the Economic Oppor-
tunity Act, as amended, gives further emphasi~ to this,.~program.
By working with procurement and req~ur~ment~ officials, of Federal
agencies-principally the Department of Defense and GSA-the Small
Business Administration is able to identify nonsophisticated items of
manufacture which. are required~
If SBA can then locate or develop a minority-owned ~producing
facility, or .a facility located within a depressed area which will employ
hard-core personnel, a compact can be arranged.' SBA can and: does
take the prime contract, and places it on a subcontract basis with the
selected firm. We supply management counselling and assistance to
give every assurance of success.
We further our national social and economic objectives by doing this.
Government procurement work is placed in firms. which otherwise,
without such assistance, may never have the opportunity to participate
in Government procurement.
All this is done in accordance with procurement policy.
Experience under this program is already available. It is, today,
operating successfully in several areas in the country.
It also has had an additional social benefit. For under this program,
large, national corporations are investing funds and technical person-
nel to assist younger, less experienced minority pools of talent in
getting started.
There are new combinations today of big business, community
residents, and Federal agencies organized to develop small businesses
in depressed areas.
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Lastly, I would like to describe for the committee a program which
is not new in SBA but which time has certified is tested and significant
in helping the deprived and underprivileged community in becoming
entrepreneurs.
It is the economic opportunity loan program, launched in 1964 and
reshaped in 1966.
Under it, two loan programs provide funds for underprivileged
entrepreneurs according to their needs
One program makes available loans of up to $15,000 with a maxi-
mum term of 15 years at 5~/~ percent for those with submarginal
incomes who want to go into business or are struggling to stay in
business
The other increases the maximum available to $25,000 for up to 15
years for those who the record can show have been denied the oppor-
tunity to compete because of social or economic discrimination
The record is filled with statistics of what this program, because of
less stringent criteria, has provided entrepreneurs who otherwise
would have been dewed sources of capital Some highlights
In its first 23 months, almost 2,600 loans for $26 million were
approved
From December 1966 through February of this year-when the
program was accelerated-more than 4,000 loans for $43 5 million
were made
None of these loans would have been made without this program
Nearly half of these loans were made to minority entrepreneurs
All of them went to small operators
About 15,000 job opportunities were created
The involvement of banks as participants in these admittedly high-
risk loan situations has shown a steady increase Five percent when
the program started, 11 percent now-j-and a predicted 13 percent for
the current fiscal year
I have briefly described what we in SBA believe are programs of
imagination and purpose
SBA makes no grants The dollars we place in small enterprises
come back when loans are repaid
The technical assistance, and the management assistance we
provide comes back to our Nation in the form of more successful,
taxpaying small businesses and employment of our underprivileged
citizens.
Thank you
(The legislative authority for the various programs referred to were
ordered to be received into the record at this point)
PUBLIC LAW 88-452'
ECONOMIC OPPORTUNITY ACT OF 1964
TITLE IV-EMPLOYMENT AND INVESTMENT INCENTIVES
STATEMENT OF PURPOSE
SEC. 401. It is the purpose of this title to assist in the establishment, preserva-
tion, and strengthening of small business concerns and improve the managerial
skills employed in such enterprises and to mobilize for these objectives private
as well as public managerial skiils and resources
1 This has been amended by PL 89-794 (see p. 146) and PL 90-222 (8ee p. 146).
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145
LOANS, PARTICIPATIONS, AND GUARANTIES
SEc. 402. The Director is authorized to make, participate (on an immediate
basis) in, or guarantee loans, repayable in not more than fifteen years, to any small
business concern (as defined in section 3 of the Small Business Act (15 U.S.C.
632) and regulations issued thereunder), or to any qualified person seeking to
to establish such a concern, when he determines that such loans will assist in,
carrying out the purposes of this title, with particular emphasis on employment
of the long-term unemployed: Provided, however, That no such loans shall be
made, participated in, or guaranteed if the total of such Federal assistance to a
single borrower outstanding at any one time would exceed $25,000. The Director
may defer payments on the principal of such loans for a grace period and use such
other methods as he deems necessary and appropriate to assure the successful
establishment and operation of such concern. The Director may, in his discretion,
as a condition of such financial assistance, require that the borrower take steps
to improve his management skills by participating in a management training
program approved by the Director. The Director shall encourage, as far as
possible, the participation of the private business community in the program of
assistance to such concerns.
COORDINATION WITH COMMUNITY ACTION PROGRAMS
SEC. 403. No financial assistance shall be provided under section 402 in any
community for which the Director has approved a community action program
pursuant to title TI of this Act unless such financial assistance is determined by
him to be consistent with such program.
FINANCING UNDER SMALL BUSINESS ACT
SEC. 404. Such lending and guaranty functions under this title as may be dele-
gated to the Small Business Administration may be financed with funds appro-
priated to the revolving fund established by section 4(c) of the Small Business Act
(15 U.S.C. 633(c)) for the purposes of sections 7(a), 7(b), and 8(a) of that Act (15
U.S.C. 636(a), 636(b), 637(a)).
LOAN TERMS AND CONDITIONS
SEC. 405. Loans made pursuant to section 402 (including immediate participa-
tion in and guaranties of such loans) shall have such terms and conditions as the
Director shall determine, subject to the following limitations-
(a) there is reasonable assurance of repayment of the loan;
(b) the financial assistance is not otherwise available on reasonable terms
from private sources or other Federal, State, or local programs;
(c) the amount of the loan, together with other funds available, is adequate
to assure completion of the project or achievement of the purposes for which
the loan is made;
(d) the loan bears interest at a rate not less than (1) a rate determined by
the Secretary of the Treasury, taking into consideration the average market
yield on outstanding Treasury obligations of comparable maturity, plus (2)
such additional charge, if any, toward covering other costs of the program as
the Director may determine to be consistent with its purposes: Provided,
however, That the rate of interest charged on loans made in redevelopment
areas designated under the Area Redevelopment Act (42 U.S.C. 2501 et
seq.) shall not exceed the rate currently applicable to new loans made under
section 6 of that Act (42 U.S.C. 2505); and
(e) fees not in excess of amounts necessary to cover administrative expenses
and probable losses may be required on loan guaranties.
LIMITATION ON FINANCIAL ASSISTANCE
SEc. 406. No financial assistance shall be extended pursuant to this title where
the Director determines that the assistance will be used in relocating establish-
ments from one area to another or in financing subcontractors to enable them to
undertake work theretofore performed in another area by other subcontractors
or contractors.
DURATION OF PROGRAM
SEC. 407. The Director shall carry out the programs provided for in this title
during the fiscal year ending June 30, 1965, and the two succeeding fiscal years.
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PUBLIC LAW 89_7941
ECONOMIC OPPORTUNITY ACT AMENDMENTS OF 1966
TITLE IV-AMENDMENTS TO TITLE IV OF THE ACT
SEC. 401. Sections 402, 405, and 406 of the Act are amended by striking out
"Director" where it appears in such sections and inserting in lieu thereof "Admin-
istrator of the Small Business Administration".
SEC. 402. (a) Section 402 of the Act is hereby redesignated section 402(a) and
there is added at the end thereof a new subsection (b) as follows:
"(b) The Director is authorized to make grants to, or contract with public or
private nonprofit agencies, or combinations thereof, to pay all or part of the costs
necessary to enable such agencies to provide screening, counseling, management
guidance, or similar assistance with respect to persons or small business concerns
which receive or may be eligible for assistance under subsection (a). Financial
assistance under this subsection shall be subject to the provisions of section 208 of
this Act."
SEC. 403. Sections 403 and 404 of the Act are hereby repealed.
SEC. 404. Section 407 of the Act is amended to read as follows:
"DURATION OF PROGRAM
"SEC. 407. The Administrator of the Small Business Administration shall carry
out the programs provided for in this title during the fiscal year ending June 30,
1967, and the three suceeding fiscal years."
SEC. 405. Section 402 of the Act is amended by inserting "(a)" after "SEc. 402."
and by adding at the end thereof the following new subsection:
"(b) To the extent necessary or appropriate to carry out the programs provided
for in this title the Administrator of the Small Business Administration shall have
the same powers as are conferred upon the Director by section 602 of this Act".
SEC. 406. Sections 405, 406, and 407 of the Act, as amended by these Economic
Opportunity Amendments of 1966, are respectively renumbered as sections 403,
404, and 405 of the Act.
SEC. 407. Section~606 of the Act is amended by striking out "and IV" where it
appears in subsections (a) and (d) thereof.
PUBLIC. LAW 90-222
ECONOMIC OPPORTUNITY ACT AMENDMENTS OF 1967
AMENDMENTS TO TITLE IV-EMPLOYMENT AND INVESTMENT INCENTIVES
SEC. 106. (a) Section .401 of the Economic Opportunity Act of 1964 is amended
by striking out "enterprises;" and inserting in lieu thereof "enterprises, with
special attention to small business concerns (1) located in urban or rural areas
with high proportions of unemployed or low-income individuals, or (2) owned by
low-income individuals;".
(b) Section 402(a) of such Act is amended by-
(1) striking out "employment of the long-term unemployed" in the first
sentence and inserting in lieu thereof "the preservation or establishment of
small business concerns located in urban or rural areas with high proportions
of unemployed or low-income individuals or owned by low-income indi-
viduals";
(2) striking out the period at the end of the next to last sentence and
inserting, in lieu thereof, a colon; and
(3) inserting immediately preceding the last sentence, "Provided, however,
That any management training program so approved must be of sufficient
scope and duration to provide reasonable opportunity for the individuals
served to develop entrepreneurial and managerial self-sufficiency."
(c) Section 402 of such Act is amended-
(1) by inserting before the period at the end of subsection (a) the follow-
ing: ", and shall seek to stimulate new private lending activities to such
concerns through the use of the loan guaranties, participation in loans, and
pooling arrangements authorized by this section";
(2) by striking out the first subsection (b);
(3) by adding at the end of the second subsection (b) the following: "To
insure an equitable distribution between urban and rural reas for loans
I This has been amended by PL 90-222.
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between $3,500 and $25,000 made under this title, the Administrator is
authorized to use the agencies and agreements and delegations developed
under title III of the Act as he shall determine necessary."; and
(4) adding at the end thereof the tollowing new subsection:
"(c) The Administrator shall provide for the continuing evaluation of programs
under this section, including full information on the location, income character-
istics, and types of businesses and individuals assisted, and on new private lending
activity stimulated, and the results of such evaluation together with recommenda-
tions shall be included in the report required by section 608."
(d) Title IV of such Act is amended by-
(1) renumbering section 405 to read "408" and inserting in such section
"and the Secretary of Commerce" immediately following the word
"Administration";
(2) striking out section 404; and
(3) inserting new sections 404, 405, 406, and 407 to read as follows:
"DISTRIBUTION OF FINANCIAL ASSISTA1~C1I
"SEC. 404. The Administrator of the Small Business Administration shall take
such steps as may be necessary to insure that, in any fiscal year, at least 50 per
centum of the amounts loaned or guaranteed pursuant to this part are allotted
to small business concerns located in urban areas identified by the Director, after
consideration of any recommendations of the Administrator of the Small Business
Administration, as having high concentrations of unemployed or low-income
individuals or to small business concerns owned by low-income individuals. The
Administrator of the Small Business Administration, after consideration of any
recommendations of the Director, shall define the meaning of low income as it
applies to owners of small business concerns eligible to be assisted under this
part, and such definition need not correspond to the definition of low income as
used elsewhere in this Act.
"LIMITATION ON FINANCIAL ASSISTANCE
"SEc. 405. No financial assistance shall be extended pursuant to this title
where the Administrator of the Small Business Administration determines that
the assistance will be used in relocating establishments from one area to another
if such relocation would result in an, inqrease in unemployment in the area of
original location.
"PECHNICAI4 ASSISTANCE AND MANAGEMENT TRAINING
"SEc. 406. (a) The Administrator of the Small Business Administration is
authorized to provide financial assistance to public or private organizations to
pay all or part of the costs of projects designed to provide technical and manage-
ment assistance to individuals or enterprises eligible for assistance under section
402, with special attention to small business concerns located in urban areas of
high concentration of unemployed or low-ir~come individuals or owned by low-
income individuals.
"(b) Financial assistance under this section may be provided for projects,
including without limitation-
"(1) planning and research, including feasibility studies and market
research;
"(2) the identification and development of new business opportunities;
"(3) the furnishing of centralized services with regard to public services
and government programs, including programs authorized under section 402;
"(4) the establishment and strengthening of business service agencies,
including trade associations and cooperatives;
"(5) the encouragement of the placement of subcontracts by major busi-
nesses with small business concerns located in urban areas of high concen-
tration of unemployed or low-income individuals or owned by low-income
individuals, including the provision of incentives and assistance to such major
businesses so that they will aid in the training and upgrading of potential
subcontractors or other small business concerns; and
"(6) the furnishing of business counseling, management training, and
legal and other related services, with special emphasis on the development of
management training programs using the resources of the business com-
munity, including the development of management training opportunities in
existing businesses, and with emphasis in all eases upon providing manage-
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ment training of sufficient scope and duration to develop entrepreneurial and
managerial self sufficiency on the part of the individuals served
"(c) The Administrator of the Small Business Administration shall give prefer-
ence to projects which promote the ownership participation in ownership, or
management of small business concerns by residents of urban areas of high con
centration of unemployed or low income individuals, and to projects which are
planned and carried out with the participation of local businessmen
"(d) To the extent feasible, services under this section shall be provided in a
location which is easily accessible to the individuals and small business concerns
served.
"(e) The Admini~trator of the Small Business Administration shall in cariying
out programs under this section consult with and take into consideration the
views of the Secretary of Commerce, with a view to coordinating activities and
avoiding duplication of effort.
"(f) The President may, if he determines that it is necessary to carry out the
purposes of this part, transfer any of the functions under this section to the
Secretary of Commerce.
(g) The Administrator of the Small Business Administration shall provide
for an independent and continuing evaluation of programs under this section,
including full information on an analysis of the character and impact of managerial
assistance provided, the location, income characteristics and types of businesses
and individuals assisted, and the extent to which private resources and skills have
been involved in these programs. Such evaluation together with any recommen-
dations as he deems advisable shall be included in the report required by section
608.
"GOVERNMENT CONTRACTS
`SEC 407 (a) The Administrator of the Small Business Administration shall
take such steps as may be necessary and appropriate, in coordination and coopera-
tion with the heads of other Federal departments and agencies, so that contracts,
subcontracts, and deposits made by the Federal Government or in connection
with programs aided with Federal funds are placed in such a way as to further
the purposes of this title.
"(b) The Administrator of the Small Business Administration shall provide
for the continuing evaluation of programs under this section and the results of
such evaluation together with recommendations shall be included in the report
required by section 608."
SMALL BUSINESS ACT
SEC. 8. (a) It shall be the duty of the Administration and it is hereby empowered,
whenever it determines such action is necessary-
(1) to enter into contracts with the TJnited States Government and any
department, agency, or officer thereof having procurement powers obligating
the AdministratiOn to furnish articles, equipment, supplies, or materials to
the Government. In any case in which the Administration certifies to any
officer of the Government having procurement powers that the Administra-
tion is competent to perform any specific Government procurement contract
to be let by any such officer, such officer shall be authorized in his discretion
to let such procurement contract to the Administration upon such terms and
conditions as may be agreed upon between the Administration and the
procurement officer; and
(2) to arrange for the performance of such contracts by negotiating or
otherwise letting subcontracts to small-business concerns or others for the
manufacture, supply, or assembly of such articles, equipment, supplies, or
materials, or parts thereof, or servicing or processing in connection therewith,
or such management services as may be necessary to enable the Administra-
tion to perform such contracts.
The CHAIRMAN Thank you, Mr Greenberg, for a very excellent
statement. It is concise and to the point, yet it covers a very broad
field.
You outlined a number of tools that are available to SBA to help
in~the antipoverty program in the hard-core areas. These goals are all
laudable. The goals and objectives are fine.
Just this morning a press release came to my attention from the
Small Business Administration which states that
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Berkeley G. Burrell, President of the National Business League, today pledged
his support of the Small Business' programs to assist the minority group business
community.
In a letter to SBA Administrator Robert C. Moot on the occasion of Small
Business Week, Burrell said, "The National Business League will continue to
cooperate with SBA to provide aid and assistance to minority entrepreneurs to
establish equal participation in the private enterprise system.
Burrell told Moot, "Our work both demonstrates the validity of American
system to the black community and helps instill pride and determination necessary
for success for those who have been excluded from equal participation."
While the National Business League was founded by Booker T. Washington
in 1900, Burrell said that the work of the League is orly now being recognired.
He said that although progress has been made still more needs to be done.
"To that great work, we pledge our full support," he told Administrator Moot.
While all of SBA's programs are available, the Agency's Economic Opportunity
and Displaced Business Loan programs and the relatively new lease guarantee
program are of particular interest to minority entrepreneurs, and the SBA is
working closely with the National Business League as well as other groups to
provide aid and assistance to those who need it most.
As I stated, the objectives are good and the goals are good, if it
can be made to work.
You described these several tools earlier. We might review them.
One is the community economic development program, in which you
try to encourage the minority groups to own their own businesses.
You do this by setting up a team of three men to go into some seven
target areas which you have listed, the hard-core areas of some of the
cities and a couple of rural areas. What success have you had? What
has been accomplished, and what progress are you making? Tell the
committee. What achievements can you point to today?
Of course, we recognize that this is a new law, new legislation.
Under the old economic opportunity program this was centered in the
Department of Commerce, it had many advisory groups. Then it was
under the sponsorship of this committee, and particularly our distin-
guished colleague, Congressman Dingell, who proposed the amend-
ment, that we got the amendment to turn this job over to SBA.
Congressman Dingell said in effect, and we agree with him, that we
think that SBA can do it better, SBA is the recognized loan agency.
If you are going to make loans, SBA should do the job.
And the Congress adopted that concept. So now you have the
authority, you have the responsibility. And this committee beli~ves
that you can do the job. But again I say, it is new. Tell us, what
progress are you making?
Mr. GREENBERG. I would like to answer your question directly as
to progress, and then if I might, with your permission, I would like to
give a little more background on it, Mr. Chairman.
This program was initiated on the 1st of April. Since the 1st of
April we have selected the teams-
The CHAIRMAN. Of this year?
Mr. GREENBERG. That is correct, sir.
The CHAIRMAN. You have been in operation, then, 50 days?
Mr. GREENBERG. We have 24 proposals that we are presently
considering. There is another dozen that are under consideration.
The program contemplates not merely the granting of loans, but the
developing of a package which would make available to the proposed
entrepreneur all of the Federal assistance available, not only by SBA
through its loan program and its management and technical assistance,
but also the application of the 8(a) program for the granting of Govern-
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150
ment contracts to small business entrepreneurs, and the development
of training programs from the Department of Labor to train the un-
skilled and the hard-core unemployed.
I think that the fact that in a period of from 10 to 45 days there
has been generated some two dozen projects across the country of
varying degrees of size is certainly an indication.
The CHAIRMAN. Twenty-four projects?
Mr. GREENBERG. Twenty-four, two dozen, since the 1st of April.
The C~IAIRMAN. Of course, this legislation was signed into law in
December of last year.
Mr. GREENBERG. That is correct, sir.
The CHAIRMAN. And prior to that SBA was knowledgeable of the
problem and was cooperating with the Office of Economic Opportunity
and others.
Mr. GREENBERG. This is a new approach, as you know. The Office
of Economic Opportunity, with centers for business development
located in some 44 cities throughout the country was primarily con-
cerned with the economic opportunity loan program. This program is
a little broader than its concept.
Mr. MOOT. Let me add one comment, Mr. Chairman. During the
development stage from the fall until April 1 when, as Mr. Greenberg
said, we went info business in this program, we did test the program
out. We developed and have in operation some 13 projects around the
country which are substantial businesses above the retail trade and
service level. These projects are in the manufacturing area and account
for, either through retention or increase, some 2,000 employees.
Now, I think that it is too early for us to say that these are all going
to be successful businesses. But we do have them operating, and they
look as though they are going to be successful. We are providing them
with large doses of management and technical assistance. We have
provided them with some Government procurement awards, and we
have provided them with financial assistance. We think they are
going to be successful. So this was a prerequisite of our going into the
target areas.
The CHAIRMAN. Will you give just one example? You indicated
that it is mostly confined to manufacturing.
Mr. MOOT. Yes.
The CHAIRMAN. Give us an example of one or two manufacturers,
business types that have gone into production.
Mr. MooT. All right, sir.
There is in San Antonio a minority owned concern named Superior
Aluminum Manufacturing Co., which manufactures aluminum screen
doors. This is a concern that is receiving a large amount of produc-
tion and technical know-how from a white manufacturer of aluminum
doors. It has been established. It is currently employing 50 employees.
We have provided management plus financial assistance, in the form
of a $150,000 SBA loan.
In Washington, D.C., a well-know example is the agreement whereby
a large concern, Fairchild-Hiller, working together with the Federal
agencies and community organizations in Washington, participated
with SBA's financial assistance and procurement award assistance,
in the establishment of a new small business called Fairmicco. We
have provided financial assistance to Fairmicco, which now has an
employee training force of 60, and is going into production this month.
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A new bakery, Home Sale Bakery, in Chicago, which has an employ-
ment of 114, was established along the lines we are talking about.
There is in Los Angeles a seating company which has an employment
of 50 people.
And I could go through several others.
The CHAIRMAN. Mr. Administrator, do you envision your respon-
sibility under this act as one of being imaginative and creative and
taking the initiative, or do you wait for applications to come in to
be processed to fund them or to assist them in management? In other
words, are you waiting for the tide to come in, or do you go. out and
recognize the problem and meet it?
Mr. MooT. Mr. Chairman, I think that I have had the message
from the Congress loud and clear that we are supposed to be creative
and imaginative and to use our own initiative. It is for that reason
that we are actually locating our teams in these areas, to search out
with the communities, projects and packages that we can get started.
The CHAIRMAN. What success are you having today with, let us
say, large business enterprises that have taken a contract; established
a business, with a view to putting large numbers of people to work,
and ultimately selling or allowing them to acquire ownership and
control and management?
Mr. MooT. We have two specific operations now going. We have
talked with perhaps 12 or 13 of the largest concerns in the country.
All have expressed interest in working with us. There is nothing
specifically in process at the moment, over and above the two that
are actually in operation. But we have many that look very promising.
And I would say that big business is showing a great cooperation
in this area.
The CHAIRMAN. If you can enlist the large business concerns to
establish branch plants, other plants, with a view of providing employ-
ment, and letting the people become partial owners, that would be
helpful, I should think.
Mr. MooT. Yes, sir.
The CHAIRMAN. You state, of course, that every slum area is a
target area. Local organizations are being formed. Tell us again, how
many have expressed interest, and how many besides the two dozen
that you have mentioned, do you have underway.
Mr. MooT, We have, as Mr. Greenberg can outline in detail, in the
legislation a requirement to look to the Office of Economic Opportunity
to designate target areas for us. The OEO has designated areas, and
it is within the scope of these areas that we are gradually and pro~~
gressively establishing our SBA teams. We would plan, if resources
are made available to us, to have about 70 teams or 70 areas with
teams in them by the end of fiscal year 1969, Mr. Chairman.
The CHAIRMAN. In other words, if OEO says that x location is a
target area, this is where you would concentrate? You are not finding
this, they are finding it for you, is that iight?
Mr. MooT. They are charged to make the recommendation to us.
The CHAIRMAN. Tell us about your work with OEO and your co~
operation with Commerce. We notice in here that Commerce has a role.
What do the other agencies do? The primary responsibility is SBA's,
is it not?
Mr. MooT. Yes, the primary responsibility is SBA's. We work
closely with the OEO, with the Labor Departmer~t, and with Corn-
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m.erce. Ai.Id we have had very close cooperation. As a matter of fact,
we have had a task force developing an improved program as we go
along. And we have all contributed. And we try to uiiderstand each
other's roles and missions very well.
The Labor Department, as you know, provides training funds
so that we can train the work force. The OEO has been fuiicling the
local organizations with which we are going to work. The legislative
authority is ours in 1969. If the Congress sees fit to make funds
available for this purpose, then we will continue along these lines.
And so far we have had excellent cooperation from all Federal agencies.
The CHAIRMAN. How long would th.e Department of Labor provide
training funds for training employees? Let us say that a large air-
craft company wanted to build an assembly plant. They would like
to have the part made, and they need the labor. The Labor De-
Partment furnishes training for a time. For what Period of time will
they provide this training?
Mr. MOOT. I think they are doing it currently on an annual basis,
Mr. Chairman, if required on an annual basis. The company seeking
training must look to hard core unemployed, No. 1, and must have
Labor Department certified employees. The Labor Department
actually finds and screens the employees to be trained. rfl~e training
is planned on an annual budgeted basis. And if the upgradmg is
accomplished prior to that, then the training funds cease, of course.
But the funds are provided on an annual basis.
The CHAIRMAN. They would provide it upon the recommendation
of SBA not only to a large company, but to a local development
company, or to a small company if SBA recommended it; isn't that
right?
Mr. Moop. Yes, sir, that is correct. There are two types of labor
training. One is the production force work training, and the other is
the management skills. N ow, the Labor Department currently does
not have funds to train potential junior managers. They have funds
to train production workers, to upgrade skills in that area. We are
currently using OEO fiuids dluring this fiscal year which ends June 30
for a very modest approach to management training.
The CHAIRMAN. Does the Department of Labor set any standard
as to time type of labor for which they will approve training? The reason
I ask this is, just yesterday when I left the committee there came to
niy office a letter from a small manufacturing company in which they
state that the Labor Department will not approve funds for training
workers on machines for garments, sewing' machines, om stitching
machines, or in the textile field. Are they setting standards? Are they
going to eliminate different kinds of labor, or are they going to select
c~rario1ls kinds of labor? Which kind will meet their approval?
Mr. MooT. Mr. Chairman, I am not very well informed on this
particular subject. It is my understanding from arm experience that we
have had that the Labor Department and the cut, make, andi sew
labor unions have reached an agreement whereby the unions will
provide the required training in this area. For this reason this is one
segment of the labor force that is not receiving direct Department of
Labor training funds. I believe this is the correct answer. I would be
glad to verify this with the Labor Department for the record, if you
would like.
The CHAIRMAN. Without objection, that will be received.
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Mr. Mitchell, our counsel.
Mr. MITCHELL. I believe, Mr. Administrator, that in connection
with this specific inquiry that came to the committee, the chairman
was concerned with the concentrated employment program (CEPS)
that is in the Department of Labor.
And, Mr. Chairman, if we could put this letter in the record, we
could refer it to the Small Business Administration to supply a check
on it.
Mr. MooT. We would be most happy to.
(The letter and report from SBA follows:)
LIBERTY MANUFACTURING Co.,
Liberty, Tenn., May 16, 1968.
Hon. JOE L. EVINS,
Member of Congress,
Federal Building, Smithville, Tenn.
DEAR CONGRESSMAN EVINS: The purpose of this letter is to discuss a problem
which my firm has in developing its organization and operation in the DeKalb
County area, and more specifically Liberty. Mr. Congressman, as you know I
recently purchased the Liberty Manufacturing Company. I did this of course with
the hope that I could make a better operation and improve the existing industrial
activity in this area. I want to emphasize that I am extremely anxious to build a
first-class manufacturing firm out of the Liberty Manufacturing Company. This,
Mr. Congressman, brings me to my point.
I have for the last several months been planning to participate in a government
program called the Concentrated Employment Program (CEPS), and I have made
my plans to train people on the job in this program. Now I am informed by the
Employment Security Agency that the type of people I wish to train under this
federal program will not be eligible. They say, and it is difficult for me to under-
stand, that a sewing machine operator would not be eligil~ie for training help.
While I realize, Mr. Congressman, that our industry is highly competitive and
can't always pay the highest wages, we take pride in the fact that we, in the
garment industry, have provided employment in many areas of the country which
wOuld not otherwise have been available. It just seems to me that there is some
element of discrimination involved. We have enough problems coping with imports
from Hong Kong.
I appeal to you, Mr. Congressman, to examine this problem of ineligibility for
training of sewing machine operators in the CEPS program, and I hope that in
some way you may be able to assist us.
Since coming to your County, I have been very much impressed with the people
and with the country. It is my sincere desire that I can promote something that
will be a distinct asset to this area.
With kindest personal regards, I am
Sincerely yours,
JACK J. LORCH,
President.
(Report from SBA:)
FUNDS FOR TRAINING IN TIlE GARMENT AND APPAREL INDUSTRY
Mr. Chairman, I am advised by the Department of Labor that they are the only
branch of the Government that has funds available for on-the-job training.
I am further advised that the legislative history supporting the Manpower
Development and Training Act specifically precludes the Garment and Apparel
Industries from the use of these funds.
In the 1963 Amendments to this Act, Senator McNamara expressed the Con-
gressional intent as follows:
"The bill was designed for situations where there is a demand for labor, but in
which prior training or a specific skill is a substantial prerequisite for employment
in the given job. It is not intended to cover industries, such as the garment and
apparel industry, where minimal training is needed, where traditionally the em-
ployer has provided the necessary on-the-job training, and where there exist a
substantial number of experienced and able workers who are presently unem-
ployed. As I understand it, we do not intend to give a competitive advantage to
PAGENO="0158"
154
one employer over another by having the Manpower Development and Training
Act pay costs which usually and traditionally the employer has assumed, nor do
we intend hereby merely to transfer unemployment from one area to another."
Representatives O'Hara and Holland explained the Act's policy in substantially
identical language to the House. (Cong. Rec. Bound Volume 109, part 18, pp.
24258 and 24261, 1963.)
In summary, it appears very clear that it is the intent of the Congress that the
Garment and Apparel Industries be excluded from the availability of on-the-job
training funds.
The CHAIRMAN. Mr. Greenberg, you also state that you are trying
to interest banks and insurance companies and educational institu-
tions. What are the banks doing, and what are the insurance companies
doing?
Yesterday you told us that you had to sit down and enter into a
treaty to even get them to insure something. What do you expect to
get out of the insurance companies, if anything?
What is the banking industry doing? They all recognize the problem,
but what are they doing?
Mr. GREENBERG. I think the banking fraternity or community has
recognized its responsibilities in this area. And I understand they have
just recently established a group that would interest itself particularly
in the slum area and urban area problems. We are working continu-
ously with the banks in trying to get their participation in any other
projects that we are developing. Obviously, as we pointed out, there
has been an uptrend in the private sector of participation in all of
our programs. Our people find in talking with the various banking
institutions in the various parts of the country that they are working
with, that there is certainly a greater awareness now on the part of
the banking community of their responsibility, not only from the
standpoint of finance, but as a part of the community, in trying to
help this program get started.
The CHAIRMAN. There are programs for training, there are programs
for education, and there are programs to induce businesses of all types
to give youth summer jobs. And I think all in all that we are making
a dent, with all approaches to the problem.
You point out that the key ingredient is the local residents, the
local interest. And I would say that this is certainly to be emphasized.
I heard President Johnson say, and we have al~ heard it said, that
there would be no programs coming from Washington, but that they
come to Washington. If there is initiative, if there is imagination, if
there is a local group that has a plan, there are various programs to
assist. But the Government is not forcing any of these programs on
anybody. It is really very difficuit, I suppose, to make them work.
You indicate that you have tested the techniques, and you expect
to expand. You state that Congress has given you the opportunity.
You also state that you are now authorized to finance private organiza-
tions by contract. This begins July 1. Do you have any monetary
problems with this? I imagine that you would have lots of applications
for grants for contracts.
Mr. GREENBERG. I am glad you brought that question up, Mr.
Chairman. Actually, there are no funds available at the present time.
And a good part of the plans that we are talking about to carry this
program through 1969 will have to be financed from funds presently
being considered by the Cong~ess.
The. CHAIRMAN. The Small Business Development Centers were
under the old OEO program.
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155
Mr. GREENBERG. And they agreed to finance those through June 30
of this year.
The CHAIRMAN. OEO is financing them?
Mr. GREENBERG. That is correct, sir.
The CHAIRMAN. Beyond this you could finance a development
company, a local organization?
Mr. GREENBERG. We couldn't without additional funds, Mr. Chair-
man.
The CHAIRMAN. What do you mean to assist in with this program-
providing jobs, making studies?
Mr. GREENBERG. In addition to the three-man team that we are
establishing, and which we hope to finance if our present level of fund-
ing is approved by the Congress for 1969, we are going to be working
with local organizations of a similar kind, in fact the counterpart team
of the local organizations, which might be a SBDC or some local
organization. The funding of those local organizations is dependent
upon the availability of funds in 1969, Mr. Chairman. In addition to
the funds required for these *counterpart operations of the local
organizations, funds will be required to carry out the technical and
management assistance program authorized under the Economic
Opportunity Act Amendments of 1967.
The CHAIRMAN. Do you want to tell this committee how much you
have requested from the Appropriations Committee for this purpose,
so that we may be apprised?
Mr. MooT. Mr. Chairman, the Poverty Act authorization, in terms
of the fund request up with the Congress, is fully funded. However,
there are no funds in there earmarked for section 406, which is the
section of title IV we are talking about. The Bureau of the Budget,
in sending up a fully funded request, said to SBA and OEO, work out
what your plans or your requirements might be, and then come and
see us, and we will consider your requirements along with others when
Congress appropriates funds.
We have submitted a request to the Bureau of the Budget for $10
million for our funding requirements under title IV, section 406 of
title IV, to provide financing to private and public organizations for
expanded management and technical assistance.
If we have appropriated that which we requested for SBA in 1~469;
we think we can fund the SBA part of the requirement, the SBA teams.
We likewise believe that th~ loan levels that Congress is considering
for 1969' will provide us sufficient funds to provide fiPancial assistance.
But what we do want is $10 million to fund the expanded responsibili~
ties that were given to us in December of 1967.
The CHAIRMAN. Mr. Greenberg, you ihdicated that another tool
that is currently available to you under section 8(a) of the `Small
Business Act is to take prime contracts.
Mr. GREENBERG. Yes, sir.
The CHAIRMAN. You would take the prime contracts into a de-
pressed area and employ hard-core personnel. SBA can and does take
these prime contracts. Tell us to what extent you have done this,
what success you have had, and how many people have been employed.
We commend you itt taking a few of these contracts. Tell us what
you are doing, tell us what success you have had.
Mr. MooT. If you don't mind, I will respond.
The CHAIRMAN. Surely, Mr. Moot. This committee has been
recommending this for some time.
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156
Mr MOOT We have to date taken five contracts from other
Government agencies, for a total amount of $8,200,000 In turn, we
have negotiated eight subcontracts with small firms throughout the
country for the production and delivery of these items for the same
amount of money, $8,200,000
These eight small firms employ some 1,300 employees This is an
increase of some 300 employees as a result of the procurement we are
providing It also results in the retention of certain employees that
would otherwise have been discharged in the coming months
The CHAIRMAN Mr Administrator, I want my colleagues also to
have an opportunity to ask questions One further question You
mentioned the two loan programs in addition to training and setting
up organizations and introducing industry And you are taking the
prime contracts You also have two types of loans One is for $15,000
and another, I believe, is for $25,000?
Mr GREENBERG That is correct, sir
The CHAIRMAN. Delineate for the committee and the record the
difference between these two loans programs
Mr GREENBERG The EOL I program, which has a limitation of
$15,000, is for those who have submarginal incomes, who don't have
enough income to meet their basic needs They are eligible for loans
under this particular program The criteria are less stringent than
they are under our regular programs.
The CHAIRMAN This is a loan to go into business, to begin a
business, or to expand a business?
Mr. GREENBERG. Yes, for any of those purposes.
The CHAIRMAN It all relates to businesses?
Mr GREENBERG That is correct, sir
The second, EOL II, has a maximum lendrng limit of $25,000
Those people who are disadvantaged by reason of social or economic
discrimination are eligible for loans in this particular category The
criterion for the loans is really the applicant's character rather than
the other more stringent criteria under our regular business loan
programs.
The CHAIRMAN. Both of these loans are for what term?
Mr GREENBERG Fifteen years, 5~ percent, Mr Chairman This
is the maximum term, 15 years
The CHAIRMAN. Mr. Dingell, any questions?
Mr DINGELL Yes, Mr Chairman
I am most pleased to see my old freind, Mr Greenberg, here this
morning.
I would also like to welcome the distinguished Administrator And
I would like to commend them for very fine testimony this morning.
I would like, gentlemen, if I could, to lightly treat some of the mat-
ters which have been discussed by the chairman with you, in two
particulars.
One, can you tell us what supervision is given by SBA to assure
that the loans made to these small businesses in economically deprived
areas are for what essentially would be regarded as reasonably good
investments for the person concerned? For example, I came across
the other day a case where the Small Business Administration had
made a loan for a franchised restaurant operation to an individual
who was presently in bankruptcy, and who neither delivered the
supervision, provided the assistance in procuring foods, or afforded
the bookkeeping and other services that he was supposed to provide,
PAGENO="0161"
157
nor did he furnish nor could he furnish the technical assistance that
was required. And this brought to my mind the very urgent need to
have your agent, as fully as it possibly could, to at least assure itself
that the business applying for a loan is solvent, and that the possible
business applying for a loan is one that has at least some possibilities
of success.
Mr. MOOT. I would say, Mr. Dingell, that I could get the specific
answer to that particular case, if you want the details.
Mr. DINGELL. I don't want to clog the record with that, Mr. Moot.
Mr. MooT. I mean specifically from the hearing.
But I would like to say that we are acutely aware of this problem.
We do provide actually, with our somewhat limited personnel in the
field, some limited servicing of loans and processing of loans and
following up of loans. We also have the entire organization involved
in management counseling, seminars, workshops, face-to-face counsel-
ing. In addition to that, we have 3,210 members of our SCORE teams
which are, as you know, service corps of retired executives, whose
job it is to provide expertise in terms of particular operations.
Thus we are very acutely aware of the need for management and
technical assistance as well as the initial need to evaluate the risks
of the proposition.
So, I am somewhat concerned about the aspects of the case as you
mentioned. If it was known to us, and it should have been known to
us, it doesn't look as though it was the type of loan that we should
have made. I would be the first to admit that every loan is not a
perfect loan. We do make mistakes.
Mr. DINGELL. I fully understand that. This question was asked
not by way of criticism, but by way of example, perhaps to alert you
to a problem that you might face, and also to ascertain what you
could do in terms of loan applications to assure that an individual who
is going into reliable business is not going into something which
involves the assumption of perhaps almost impossible liabilities.
Mr. MooT. As a matter of fact, we have been looking fairly sympa-
thetically at good franchise operations, because a franchise operation
does provide the kind of production and technical management assist-
ance that is so acutely needed.
Mr. DINGELL. And on an on-going basis.
Mr. MooT. On an on-going basis. But it is likewise true that it has
to be a good franchise operation. Otherwise, it can be a mulcting or a
draining off of funds, or a hit and run, a selling of the franchise, and
then no followup.
We are aware of these problems.
Mr. DINGELL. The other question I wanted to direct your attention
to is to try and find out what your experience has been in terms of the
expansion of geographic areas. As you remember, the amendments
which placed the Small Business Administration in charge of these
programs were much criticized on the basis that it was a blow struck at
the poor and the impoverished Economic Opportunity Act.
It was my experience that only small areas of the country were able
to derive benefits under the previous loan program when it was ad-
ministered by OEO. I believe that you now cover the whole country.
And it is my experience that you are making loans in much larger
amounts, both in terms of numbers of loans made and in terms of dol-
lar amounts involved. Am I correct in that?
95-193-68--il
PAGENO="0162"
158
Mr. MOOT. You are right, sir, on all counts. We are now making, in
terms of the economic opportunity loan program, the one described by
the chairman and Mr. Greenberg as $15,000 and $25,000 limits. We
are making these loans at a volume of 3,000 a year.
We are making them throughout the country, and we are making
them in all areas of the country. In the program Mr. Greenberg has
just described, we are going to put resident SBA teams right in the
urban inner city area as well as the rural undeveloped area. We are
going to move SBA to the site of the requirement.
Mr. DINGELL. I think that is a highly desirable thing.
Could you submit for the record some information as to the experi-
ence before and after the change in the law, in terms of the numbers of
loans made, the kinds of loans made, the kind of supervision that is
afforded? Because I have had reason to believe that the supervision
afforded by SBA is superior to that which is given by OEO.
And I would also like to have some understanding, perhaps, if you
please, of the area of the country which is covered today as opposed
to that which was covered then. Today it is the entire country. And
in those previous days it was only in a few small areas.
The ChIAIRMAN. Without objection the information may be fur-
nished for the record.
(The material referred to follows:)
ECONOMIC OPPORTUNITY LOANS APPROVED
(Dollar amounts in thousandsj
Number
Amount
Feb. 1 through June 3, 1965
Fiscal year 1966
July 1 through Nov. 30, 1966
159
1,689
737
$1, 766
17,625
6,846
Total through Nov. 30, 1966
2, 585
26, 237
Dec. 1,1966, through June 30, 1967
Fiscal year 1968
2,297
2,891
25,057
31,065
Total, Dec. 1, 1966, through June 30, 1968 -
Total -
5, 188
56, 122
7,773
82, 359
The above data reflect that during the initial period of this program from incep-
tion in 1964 through November of 1966 there were 2,585 Economic Opportunity
Loans approved with a dollar volume of $26,237 million. During this period, the
program was restricted to less than 50 communities throughout the United States.
With the passage of the 1966 Amendments to the Economic Opportunity Act,
one of which was offered by Congressman Dingell that specifically assigned SBA
full responsibility for the Loan Program, the Loan Program was immediately
expanded nationally, and since that time has been available to everyone eligible
under this Act throughout the country. During this period, from December 1966
through fiscal year 1968 SBA has approved 5,188 Econotuic Opportunity Loans
with a dollar volume of $56,122 million. This reflects that the program has better
than doubled in the 19 months of operation since Mr. Dingell's amendment.
As to geographic spread, Economic Opportunity Loans have been made in
every State in the Union during the past 19 months, for just about every con-
ceivable kind of small business from a pottery tableware manufacturing operation
on an Indian Reservation in North Dakota to a small restaurant operation in
Harlem.
Mr. DINGELL. Thank you very much.
I would also like to direct your attention to one more matter that is
peripheral to the matters before you, but which I think is very im-
portant. What is the standing of your revolving fund now?
PAGENO="0163"
159
The CHAIRMAN. He testified to that yesterday.
Mr. MOOT. It is in the record of yesterday. A very quick answer,
we are all right financially through the next fiscal year.
Mr. DINGELL, You have enough money to make the loans that you
are going to have applications for?
Mr. MOOT. Yes, sir.
Mr. DINGELL. My experience with regard to loan in my area, and
th small business company assistance, is that there seems to be a very
distinct difficulty in achieving these loans because of the shortage of
money in your revolving fund.
Mr. MooT. rrhat is a little different aspect, Mr. Dingell. It is true
that there is a greater demand for Small Business Administration loans
than we have the resources to ifil. On the other hand, we would hope
that this would always be the case, because I think part of our job is
to make our program known to the small business community, both
potential and actual, throughout the country.
We have about 400,000 inquiries for financial assistance a year
throughout the country. I think it is obvious that we can never have
the kind of funds that would meet the total demand. On the other hand
our program next year is at a significantly increased level, as it appears
on the Hill today.
Mr. DINGELL. Are you talking about the total loan program?
Mr. MooT. I am talking about each and every loan program. The
record, I think, for yesterday, will show that each of the programs is
on an ascending scale from this year until next year, as. well as down
from last year.
Mr. DINGELL. I am pleased to hear that.
Thank you very much, Mr. Chairman.
The CHAIRMAN. Mr. Corman.
Mr. CORMAN. Thank you, Mr. Chairman.
Mr. Moot, when I served on the President's Commission ~on Civil
Disorders your agency came in for a little bit of criticism from some
on that Commission because they were not losing enough money. But
it is my understanding that first of all you do. not deal with anybody
unless they have been turned down by a bank, indicating that you are
reaching people who would not otherwise be reached. 1s that correct?
Mr. MooT. That is correct, sir.
Mr. CORMAN, And further, that you have placed all your assets in
loans that the Congress has seen fit to give you, you don't have any
great backlog that you have been holding back, isn't that a fair
statement?
Mr. Moor. Yes, sir. We have been using all of the authorization,
all of the funded program levels that hHve been provided us.
Mr. CORMAN. That was my contention. And I wanted to be sure I
was right. It seems to me that if you are lending all of the money that
we give you, lending it to people who can't borrow it any place else,
we shouldn't criticize you because you are not losing the Government's
money.
Now, you indicated that Los Angeles is one of those areas which
you have selected for loans under the poverty program amendments.
Does that mean that anyone in the Los Angeles area would qualify,
or do you limit it geographically within the Los Angeles area?
Mr. Moor. There are two types, Mr. Corman. The Economic
Opportunity loan program is open to all qualified people who meet th~
requirements of that program.
PAGENO="0164"
160
The other program is a specific program within a target area desig-
nated by the Office of Economic Opportunity. And this is the area
where we are trying to build above the retail service and trade level
We are trying to build substantial businesses, minority owned, man-
aged, and operated. In Los Angeles we have two areas, South Side and
East Side
Mr. CORMAN. Then it follows the same target areas as the Depart-
ment of Labor's concentrated program, doesn't it?
Mr. MooT. In the certified areas, yes.
Mr. CORMAN. I would like for you to give consideration to expand-
ing that, because-and~ I expect all the metropolitan areas have
similar problems-you will find that a half of a percentage point dif-
ference in unemployment will cause the Labor Department to cut off
the geography of the availability of those areas And I think that is
wrong. I think you will find that there very well may be significant
areas within the total metropolitan area where the minority unem-
ployment is extreme]y high, because it is relatively smaller And they
find themselves handicapped in a great number of ways.
They lose the concentrated employment program, and they lose
the availability of your program. So I hope you will counsel divorcing
yourself from this criteria unless they broaden it rather quickly.
Mr. MOOT. We would be glad to do that.
Mr CORMAN The other question is concerning the development of
shopping centers or retail businesses In many of the ghetto areas that
seems to be one of the really depressing facts of life, that the balance
of the metropolitan area has beautiful shopping centers, but the people
in the ghettos are still tied to very substandard retail facilities If a
reasonable proposal were made, would you consider assisting in the
financing of that kind of business enterprise, assuming that they met
the other criteria of local ownership and reasonably sound manage-
ment, and so forth?
Mr. MOOT. Yes, sir; we not only would, but we have. And in Los
Angeles specifically we have recently funded through a local develop-
ment company the establishment of a shopping center You are
probably aware of it The name is a Mexican one, El Mercado
Now, I want to qualify one statement, Mr Corman Subject to the
availability of insurance, to the relationship to urban renewal model
city programs, all of which have an impact on our particular programs,
we stand ready with all of our resources, including the lease guarantee
which attracts the flow of outside money as well as our own money,
to help build the economy of the inner city as well as the rural areas.
Mr. CORMAN. Fine. I appreciate that very much, sir.
The CHAIRMAN. Any further questions?
Mr CORMAN No Thank you
The CHAIRMAN. Mr. Conte.
Mr CONTE Mr Greenberg, I share your point of view as to the
importance of bringing our urban and rural disadvantaged citizens
into the economic ownership structure of this country. I can't under-
stand, however, why you have made the proposed means of doing
this, as stated on page 2 of your statement, so rigid and narrow Isn't
it unrealistic to limit your assistance to light manufacturing and
wholesaling? I am wondering why it isn't more flexible. As I under-
stand it, the services area is an area of great potential for achieving
the goals you talk about. It is something where hard work and initia-
PAGENO="0165"
161
tive can bring beneficial results a lot faster than manufacturing and
wholesaling.
Why is this services area excluded from iiossible assistance under
your community econQmic Opportunity program? I notice on page 3
of your statement that you refer to the reversing of the adverse bal-
ance. of payments in depressed areas by exporting goods and services.
Yet, you exclude services from your own development program.
Mr. GREENBEEG. Let me see if J can answer that.
What we are. trying to do essentially is to establish enterprises that
have a greater impact on the area involved. We are treating this as
you would treat an underdeveloped nation.. What we are saying in
fact is that our regular programs are available for services and retail
operations. We don't have to go out and find people to build substantial
businesses. The regular programs of SBA are already available for
the entrepreneurs for the smaller service operations, for the retail
operations, for the mom and pop store. ~.
They will come under 7(a), also under the local communities. The
502 programs can assist in developing various kinds of enterprises.
What we are trying to do, if we can, is to reverse the present con-
ditions where the communities feed upon themselves, where all of the
money that comes into the community goee outside and we believe
that the best vehicle to accomplish this~ is manufacturing and whole-
saling enterprises. Obviously there are situations which do not par~
ticularly qualify as such. We would consider, for instance, if there was
a new car dealership established in a local community, in a ghetto
area, in an underprivileged area, or in a rural area, which had this
kind of problem, we would consider that.
What we are trying to do is limit the availability of this particular
program to establishing enterprises which would be owned, operated,
and managed by Presidents of the community,. and employing and
ttaching skills to the hard-core unemployed in the area.
There is nobody excluded, except that our regular programs are
available for the kinds of things that you are talking about~
Now conceivably if we had a 1~rge drycleaning plant-we have,
for instance, a~.group of some 60 or 6~ drycleaners in the community
here. They.n~ight,, if they wanted to, establish a wholesale drydeaning
operation which would not only service their own particular group,
but would make their services available to other businesses, white
businesses outside. What we are . trying to do is export goods and
services outside and bring some~ revenue in. which can . be used to
build up the eeono.mic viability of the 4~ommunity itself.
Does that answer your question, Mr. Congressman?
Mr. CONTE. Yes. .
I am interested in your seven trial locations. We are pleased that
Boston happens to be one of them, I feei,:however, that John Lindsay
has done a good job working in the ghettos in New York City. Why
was New York City excluded?
Mr. GREENBERG. Let me explain thjs to you. We first decided on
an initial impact in some 15 locations. New York was one of the
locations. But in order to b~ effective in the community we have to
develop a local organization with which we can work. We have been
working very closely with New York City which is developing a
PAGENO="0166"
162
group within the city itself, with which we can work. I hope within
the next week or 10 days to go to New York and talk to them, so that
we can work together with them in developing the kind of communi-
cations with the local organizations which we believe is necessary to
do a good job.
New York is going to be one of the next groups that will be coming
in.
Mr. CONTE. From the little that I know about this subject matter,
I feel that he has done a good job in trying to promote it there.
Mr. GREENBERG. There is no q~1estion about it. Actually there are
many areas-if we do select New York, we will go into more than one
area there. We have the Bedford-Stuyvesant problem, and the
Harlem problem, and the Bronx problem. When we get this worked
out, we propose to go in there fairly quickly, Mr. Congressman.
Mr. CONTE. You continually talk about your community economic
development program in the future tense, in terms of what you are
going to do. Section 406 of the Economic Opportunity Act became
law December 23, 1967.
Mr. GREENBERG. Yes, sir.
Mr. CONTE. What have you done to put into effect the mandate
of section 406? Why can't we get started?
Mr. GREENBERG. Well, we have a little problem of funds, as we
discussed before, Mr. Conte. We have actually started this as a pilot
program. The Administrator has made available from this year's
funds to start these teams immediately. As we pointed out, I think,
in a previous discussion, the continuation and the expansion of this
program would be dependent upon the availability of funds after
July 1.
Mr. CONTE. These funds will come from OEO. Is that right?
Mr. MooT. It is up to the Bureau of the Budget what they allocate
funds for. But the poverty program is fully funded as requested. It
is a logical source of funds. And of course 406 is a part of it. There
are no earmarked funds per se for this.
Mr. CONTE. This bothers me a little. I wonder whether it would be
better to have it right in your shop than to be dependent upon OEO.
Mr. MooT. Well, it bothers us a bit too, I might mention.
Mr. CONTE. OEO isn't your baby. This may take second priority.
Mr. MooT. I don't think, Mr. Conte, that that presents too much
of a problem. I do think that the priorities of the administration and
the Congress will have to be considered in the allocation of the funds.
And of course it depends upon what total funds come back off of the
Hill, in contrast to that which is requested. But our cooperation with
OEO, as the chairman indicated before, and I responded to, has been
excellent.
Mr. CONTE. On page 4 of your statement, Mr. Greenberg, you have
indicated that teams will be working with local organizations. You
refer to small business development centers, and say that it is possible
that there will be such groups. As I understand it, all of the SBDC's
will expire by June 30 unless they receive additional funds to continue.
What do you plan to do about preserving the already existing SBDC's?
Mr. GREENBERG. After June 30 there are no funds available to pay
for these services. We have the same problem again. In those areas
where the SBDC's are located, we propose to work with them.
Mr. CONTE. Are you going to allow them to discontinue?
PAGENO="0167"
163
Mr. GREENBERG. We have no authority to pay for them after
July 1. This, of course, depends on what the Congress does if there
are no appropriations passed by July 1.
Mr. CONTE. Are you requesting funds?
Mr. GREENBERG. We requested $10 million, as the Administrator
said, from the Bureau of the Budget.
Mr. CONTE. That hasn't been before the Congress?
Mr. MooT. This would be an allocation out of the Poverty Act,
when appropriated.
Mr. CONTE. On page 5 you talk about forming local development
companies. Wouldn't it be a waste and a duplication to allow existing
SBDC's to terminate, and then form new local development com~
panies.
Mr. GREENBERG. These are two different kinds of organizations,
sir. When we talk about the local development companies, we are
talking about our 502 programs-about local development companies
formed by members of the community, which then in turn make funds
available to an identifiable small business. The SBDC's we are talking
about are in effect the team counterparts to SBA; they will be the
local organization groups that we will be working with to develop the
wholesaling and manufacturing enterprises we mentioned. They are
separate and distinct.
Mr. CONTE. You mentioned, in answer to a question of my able
chairman, the SCORE program.
Mr. GREENBERG. Yes, sir.
Mr. CONTE. Will you elaborate on that? Are we getting many vol-
unteers from industry?
Mr. MooT. We have an excellent response from industry, from
retired executives. We have a target of some 5,000. We now have
3,210. We want to balance our skills, and we particularly want to be
able to use teams such as three-man teams that provide expertise
in the areas that we are talking about, either for rural development,
or for urban area inner-city problems. And it is in this area that we
look to the SCORE operation as one of our most valuable resources.
So far it has been very successful.
Mr. CONTE. You are not meeting any problems in obtaining
volunteers?
Mr. MooT. No.
Mr. CONTE. How much are you allocating for your community
economic development program in fiscal 1968, and how much have you
requested for 1969?
Mr. GREENBERG. At the present time we have seven teams which
have been authorized by the Administrator, three-man teams in
seven locations. That is 21.
Mr. CONTE. How much will that cost?
Mr. GREENBERG. We have projected a cost for the CED teams
on an annual basis of about $50,000 per team per year. That is about
$12,500 a quarter. If the teams were operating from the beginning
of April it would be some $90,000. I imagine between $50,000 and
$60,000, because of the lapse of time in financing.
With respect to other portions of this, there are no funds available
for any of the other items in 406.
With respect to the SBDC's, the OEO is financing the SBDC's
through June 30, 1968, sir.
PAGENO="0168"
164
Mr. CONTE. How about the 70 teams now?
Mr. GI~EENBERG. They would have to come out of the. $10 million
that we are projecting for the next year.
Mr. CONTE. What would those 70. teams cost?
Mr. GREENBERG. $3,220,000 for next year, 70 teams would cost
$3,220,000.
Are you talking about the 70 local teams, or the 1967 SBA teams?
Mr. CONTE. SBA teams.
Mr. GREENBERG. The SBA teams would cost $2,500,000, plus
$150,000 for the Washington staff, or a total of $2,650,000 to be
allocated from the funds presently pending. And then we have the
$3,220,000, which would be the local organizations for which we
fund. The balance of the $10 million is for the other contractual,
training feasibility studies, and other costs at the same time.
Mr. MooT. In summary, Mr. Conte, we have handled this program
financially except for what is required to fund the operations before
us.
Mr. CONTE. This is interesting to one who is on the Appropriations
Committee.
The CHAIRMAN. I noticed that Mr. Henry Ford stated in a tele-
vision broadcast recently that it wasn't a matter of money, it was a
matter of know-how as far as the franchising of automobile dealers
is concerned. There is a need for skilled know-how, and money is
not the answer to all the problems.
Mr. MooT. We are quite alert to the fact that money is not the
answer to many of the projects we are looking at. it is the lack of
know-how. As a matter of fact, we would multiply the projection if
we could find the know-how.
* Mr. CONTE. This. is where SCORE will help?
Mr. MooT. Yes. But it is not an instant success yet. It will take
time. That is the problem.
Mr. CONTE. As I understand it, SCORE is a voluntary service,
and SBA pays only travel costs.
Mr. MooT. We can pay them if we move them out of their home-
town; we can pay them per diem and travel cost. But there is no
salary involved. It is voluntary.
Mr. CONTE. We talk about 70 teams. Are we talking about 70
cities?
Mr. GREENBERG. Seventy-seven teams altogether in 70 cities.
There are going to be some cities with more than one team.
Mr. CONTE. How much is SBA planning to allocate for imple-
meriting Section 406 in fiscal 1968 and fiscal 1969? I would like to
know your view as to whether or not this amount is sufficient to do
the job called for by the Secretary.
Mr. MooT. I think I can answer this by saying, SBA in 1968 has
no fund for sectio.n 406. However, OEO has continued its level of
funding at our request for section 406 until June 30. The answer for
fiscal year 1969 is the $10 million.
Mr. CONTE. Section 404 provides criteria for the distribution of
financial assistance. What has been done to implement Section 404
for fiscal 1968, and what are your plans for implementing this pro-
vision in 1969?
Mr. MooT. Section 404 required the balanced distribution and
allocation that we have been talking about, Mr. Conte. In other words,
PAGENO="0169"
165
between rural and urban it is the 50-50 determination. As I mentioned
before, we are using the target designated by OEO and allocating our
resources and indancing our program to assure that we do create the
proper balance between rural development and inner city develop-
ment. And we are applying all of our resources as required to meet this
commitment.
Mr. CONTE. Will you set forth how your role is different from EDA
in terms of local economic development. Perhaps you could best do
this by distinguishing between what the role of EDA is in this area
and what your role is.
Mr. MooT. EDA has a very important responsibility of identifying
areas that require economic development that have a high degree of
unemployment or underemployment, or underutilized resources, and
designating these areas. EDA has available to it about $50 million in
program level for loans to these areas, for building the economics of
the area without reference to size. EDA has some modest amount of
management and technical assistance funds that it can grant in a
contract form to provide for the technical upgrading of the skills in
these areas. EDA therefore is limited to specifically depressed areas.
SBA's responsibility, on the other hand, is a much broader responsi-
bility. It has the overall congressional mandate of stimulating the
economy throughout by building small business, with specific reference
to keeping balanced growth wherever it may be. So that we are not
just concerned with a high unemployment area, or even an underem-
ployment area. We are likewise concerned with areas which show their
resources underutilized, so that we can build the economics of the
country on a balanced basis, or help to build them, because obviously
SBA can only do a portion of the job. Our responsibility, therefore,
in this particular respect is much broader in scope. To do this, we
have, as you know, authority for about $1 billion worth of financial
assistance each year, together with the financial and procurement
award assistance that we have previously discussed of approximately
$15 billion of Government awards, plus our 8(a) authority, which
allows us to subcontract from a prime contract base.
The combination of all of these resources give us a much wider
responsibility, and a much greater spectrum of tools to do the job
that Congress has given~ us.
Now, we work very closely with EDA. As you know, we process
the EDA loans. So that there is a cooperative effort where we are
trying to jointly build an economic area that EDA has designated as
a depressed area. The processing of the EDA loans is done in con-
nection with our own evaluation of the needs of that particular
section of the country.
Mr. CONTE. I don't want to put you on the spot. I am concerned
about the question of duplication or overlapping. I think you are
better equipped to handle this particular problem. I can't see why we
should have two agencies working more or less in the same field. It
would be much better, in my estimation, to have the $50 million
under one umbrella and under your direction where jurisdiction
was given by the Congress.
I think in the long run we would save money for the taxpayers, and
we would get a lot more done for our dollar.
Mr. MooT. I think seve~al committees of the Congress are con-
sidering this particular aspect.
PAGENO="0170"
166
The CHAIRMAN. Mr. Burton.
Mr. BURTON. Thank you, Mr. Chairman.
I would like to ask Mr. Greenberg to refer to his statement on page
10.
There, Mr. Greenberg, you point out to the committee that under
some circumstances you can lend $15,000 up to 15 years at 5~ percent.
Then, you go on to explain that you can make a maximum of $25,000
available for up to 15 years for those who the record can show have
suffered from social and economic discrimination.
Obviously you have some criteria which you use to determine who is
eligible for the $25,000 program. I would be interested to know what
criteria you employ to determine who has been socially discriminated
against, No. 1; and No. 2, who has been economically discriminated
against.
Mr. GREENBERG. A handicapped person, for instance, would be
one of the people that we think of as being economically discriminated
against. There are other areas where an individual, because of certain
racial or other social problems, has been unable to participate in the
program, or participate in the economy. We believe there are many
areas. I don't have the specific criteria here-~
Mr. BURTON. "Handicapped" I can understand, but I don't under-
stand the other criteria. If a colored man makes an application, is he
automatically assumed to be economically discriminated against?
Mr. MooT. Not necessarily, Mr. Burton. And in many instances,
quite frankly, it gets down to a judgment determination. The two
levels, $15,000 and $25,000, were established in order that we might
take a plateau at a time. Congress authorized this program with a
ceiling of $15,000. This was a congressional limit, for economic oppor-
tunity purposes, to keep the doors of economic opportunity open to
those disadvantaged citizens that were in some way either physically
or socially handicapped.
We have criteria which in effect says that if you want to establish
a business, or if you are in a business, and your income is submarginal
in terms of supporting your family, we will grant you a loan up to
$15,000 on a character basis with little or no collateral if it looks as
though you have a reasonable assurance of repayment.
Mr. BURTON. What is "submarginal"? Will you define that for me?
Mr. MOOT. Well, it depends upon the part of the country you are
in; it depends upon the living costs, and it depends upon the family
size. So we have not used what has been in the past the standard
measure of $3,000, over and under.
This is the determination of our regional directors, depending upon
the region that we are evaluating.
For example, it would be different in Salt Lake City than it would
be in New York City.
Mr. CORMAN. Will the gentleman yield for a question at that
point?
Mr. BURTON. Yes, I would be happy to yield.
Mr. CORMAN. I wonder if in dea]ing with this problem of minorities
the regional director would look to the banking practices in the com-
munity to ascertain whether people of all colors got the same treat-
ment from lending institutions, or if there was a pattern of practice
in that community of putting different criteria on people solely because
of their color. Would that be one of the considerations?
PAGENO="0171"
167
Mr. Moop. Well, it would be, Mr. Corman, except that, to be quite
honest, the general pattern throughout the country is such that the
minority groups do not have equal access to the banking institutions.
And this is not just plain discrimination; it is just that they do not
have the kind of credit background or collateral or security that a
bank normally is looking for. Which gets us to the second type of
loan, where we normally are looking at established disadvantaged
people operating a business above that marginal level, whatever it
is determined to be, who are seeking a chance to expand their busi-
ness, and who can convince us that they have a need to expand the
business, and who cannot secure private financing.
Now, we are quick to agree that there is very little difference
between this man who can, therefore, get $25,000 on a judgment
determination of need not otherwise satisfied and the man who comes
in with a straight business proposition and needs $15,000. Generally
speaking, the answer is, I think reflected in the fact that these other
programs are generally used in areas where there is a depressed situa-
tion or hardship, low-income families.
Mr. BURTON. I understand that. I am all in favor of that. If someone
is being socially or economically discriminated against, I think that
is a legitimate reason to give them help. Constantly on this com-
mittee, Mr. Chairman, I run into SBA rules, regulations and wording,
which seems to be completely subjective, however.
Mr. Bruhn, our regional SBA director in Utah, how does he deter-
mine who is being socially discriminated against? Is it completely
up to him? Do you send him any guidelines?
Do you send the regional SBA Director in Mr. Corman's district
these guidelines and policy statements, and say, "This is when these
will apply in this particular program, and this is when they won't"?
That is what I am trying to find out this morning.
Mr. MOOT. Regional Director Bruhn and Regional Director Myers
of Los Angeles have criteria guidelines, rules, and regulations. But
there is no substitute, in my opinion, for actual judgment on the spot.
And so therefore we do not attempt to make a close matrix, where
you put one of the facts down here, and the answer will come out. It
has to be judged in each particular case upon need, character, and
ability to make a success.
Now, generally speaking, a resident of a deprived or depressed area
who is either in business or who has a means of going into business
with a reasonable assurance of success can be considered as eligible
for an economic opportunity loan, unless his personal resources are
so great that he therefore rules himself out of eligibility. Just being a
resident of a depressed community, without resources, but with char-
acter, ability, and opportunity to go into business, is enough, generally
speaking, to qualify for this particular program.
Mr. BURTON. This is the thing that bothers me. Words like
"character," "ability," and "opportunity," are subjective.
The CHAIRMAN. Will the gentleman yield?
Mr. BURTON. Yes, sir.
The CHAIRMAN. These are not grant programs, Mr. Burton, these
are loan programs. SBA has a number of loan programs to assist a
man in business, to go forward in business. And here is a new program
that we are reviewing, economic opportunity. And they have several
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tools. One is to take a prime contract and break it down, and to let
them become owners of the company to give them jobs.
And another is to make a loan. Some people don't want loans. They
want welfare, they want handouts. Some don't want to work, regretta-
bly and unfortunately. And this is a new tool to try to help people to
become entrepreneurs, to become owners, to become owners of the
company, to become managers. And I am sure the SBA has a difficult
problem. As I say, one gentleman stated that it wasn't a matter of
money, it was a matter of management and know-how. And so we are
reviewing the programs to try to assist people to get ahead in business.
Mr. BURTON. I am all for that, Mr. Chairman. The only thing I am
trying to develop this morning is that when I play a ball game, I
want to know what the rules are, and I want them to apply to all the
players equally.
Mr. MOOT. You appreciate that this is a very difficult program. The
economic opportunity program, Mr. Burton, is somewhat different
from a regular business loan program. It is easy to process a bank loan
of the kind that we normally make in our regular business loan pro-
gram, where it is a question of evaluating security, past sales, projec-
tion of new sales, the market, and so forth, and a balance sheet. It is
much more difficult and necessarily subjective when you are evaluating
the granting of a loan of Treasury dollars to a man who does not have
security but can offer you his experience, which you have to test, his
character, which means his reputation of paying his bills, and so forth,
and a proposal which you have to test in terms of the market viability.
These matters necessarily are subjective. And there is no substitute for
the mature judgment of our regional directors and their loan assistants
and their management assistants in the area of knowing the community
and being able to check on the credit ability of the applicant. I don't
really see any other choice. I can put in the record the specific criteria
that we pass out. But I am the first to admit that it is subjective.
Mr. BURTON. It has to be pretty flexible.
Mr. MOOT. That is true, sir.
Mr. BURTON. Thank you.
The CHAIRMAN. Mr. Horton.
Mr. HORTON. No questions, thank you.
The CHAIRMAN. Will you yield to Mr. Conte?
Mr. HORTON. I yield.
Mr. CONTE. On page 10 you say, "The involvement of banks as
participants in these admittedly high risk loan situations has shown a
steady increase, 5 percent when the program started, 11 percent now,
~nd a predicted 13 percent for the current fiscal year."
Could you give us a dollar figure of the bank involvement, sir?
Mr. MooT. So far this fiscal year, since April, we have had $3 million
of private sector financial institution participation in the economic
opportunity loan program, which in total through that same period of
time was $23~/~ million.
Mr. CONTE. Thank you.
The CHAIRMAN. Any further questions, gentlemen?
Mr. Corman?
Mr. CORMAN. No, sir.
The CHAIRMAN. Mr. Mitchell, our counsel.
Mr. MITCHELL. Mr. Chairman, for coherence of the record may we
have placed in the record immediately following Mr. Greenberg's
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169
formal statement, title IV of the Economic Opportunity Act of 19M,
as amended by the Economic Opportunity Act Amendments of 1966
and 1967?
The CHAIRMAN. Without objection, it will be included.
Mr. MITCHELL. And also section 8(a) of the Small Business Act?
The CHAIRMAN. Without objection.
(The material referred to may be found beginning at p. 144 of this
record.)
Mr. MITCHELL. Concerning section 8(a), of the Small Business Act,
Mr. Greenberg, where you are using that authority to help channel
contracts to businesses, is this being utilized solely to channel con-
tracts into small businesses, or to any size business in a depressed
area?
Mr. MooT. May I respond to that, Mr. Chairman?
Mr. MITCHELL. Yes, sir.
Mr. MooT. We are using 8(a) for the benefit of small business. And
unless that appears to be an equivocal answer, I will go on. In one of the
eight subcontracts we have made to date we have contracted with what
is currently a large business, with a firm legal document in hand show-
ing planned divestiture by sale of the small entity which is now a
currently wholly owned subsidiary of the large eoncern. We have
interpreted our authority under 8(a) to allow us to use 8(a) to the bene-
fit of small business.
As the ëhairman mentioned earlier, we look with great promise to
the area of having big business work with us in what are termed
spinoff operations where they will help us form a small firm, start out
with the ownership of that firm, but with a firm plan for divestiture,
so that the community becomes the owners `over ~ period of time.
Mr. MITCHELL. We understand that section 8(a) is being utilized
now for the purposes of channeling contracts to business in poverty
areas, or areas of economic deprivation. Are you using or have you
used or are you planning to use section 8(a) solely for the purpose of
channeling contracts just to small business, regerdLess of the area, in
any areas where you might ~find that the Government procurement
agencies are not properly giving small business their fair share?
Mr. MooT. We haven't reached that point, Mr. Mitchell. We have
taken the congressional intent for this program as expressed in section
407, title IV of the Economic Opportunity Act Amendments of 1967,
as a direction of the Congress for us to use section 8(a) for the poverty
pocket areas at this stage. And I am frank to admit that it will take
us some time to get this piece of the job done.
So we haven't looked beyond that.
Mr. MITCHELL. I have one other question: Much talk has been
had and much legislation has been introduced concerning providing
insurance through some Government-sponsored plan to businesses
and small businesses that have been injured as a result of crime and
riots, and so forth.
I believe that Mr. Horton introduced a bill along this line. Has the
Small Business Administration taken any position concerning this
type of approach to helping the small business?
Mr. MooT. Yes, sir. We have taken a very strong position, and
have testified in favor of S. 3028 and its House counterpart, which
provides for insurance on the fair plan with a reinsurance provision
by the Federal Government.
Mr. MITCHELL. That is all I have, Mr. Chairman.
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170
The `CHAIRMAN. We want to hear from our other witness in just a
moment. But first, let me say this. In the vast Economic Opportunity
Act we notice the section that says, on page 41 of the act, under sec-
tion 406(f), that "The President may, if he determines that it is
necessary to carry out the purposes of this part transfer any of the
functions under this section to the Secretary of Commerce."
Now, that was a rather gratuitous section that was thrown in and
agreed upon by an unnamed Senator. We think that the SBA is capa-
ble of doing this job. We think that it is located in the right area and
in the right jurisdiction, that you are experts in this field. It is a new
program, and you are making some progress, although it is a very
difficult program. We want to commend you on it. We battled to
have SBA administer this program. We have confidence that you
will do a good job.
Mr. MooT. Thank you, sir.
The CHAIRMAN. If there are no further questions, we will hear our
next witness, Mr. Bothmer, who is the Deputy Associate Admin-
istrator for Procurement and Management Assistance.
The procurement program is one of the vast programs of the SBA,
and one that has always been of immense value and service.
Mr. Bothmer, we will be pleased to hear your statement as to how
your program is coming along.
Mr. BOTHMER. Thank you, Mr. Chairman.
I appreciate the opportunity to discuss this morning our procure-
ment and management assistance programs.
The general objectives of our procurement assistance program are
to increase the share of awards to small business at both the prime
and subcontract level and to decrease the number and severity of the
problems which small firms experience either in being considered for
awards or in the field of contract administration.
Since 1960, there has been a dramatic rise .in total Federal procure-
ment and the amounts going to small business.
In 1967, Federal procurement totaled $49.8 billion, an "increase of
92.2 percent over the $25.9 billion in 1960. The amount going to small
business more than doubled and reached $10.2 billion in 1967, an
increase of 117 percent over the $4.7 billion in 1960. Percentagewise
the small business share increased from 18.3 percent of the total in
1960 to 20.5 percent in 1967.
The CHAIRMAN. If I may interrupt at this point, when you indicated
that Federal procurement in 1967, last year, totaled $49.8 billion, an
increase of 92.2 percent over the $25.9 billion in 1960, is this all
procurement, both military and civilian?
Mr. BOTHMER. That is correct, Mr. Chairman.
The CHAIRMAN. And small business' share has gone up 117 percent
since 1960. To what do you attribute this mammoth rise? Of course,
there is great procurement in the military for the Vietnam war
effort. But there has been this vast increase. Tell us what accounts
for this large increase.
Mr. BOTHMER. The percentage of increase for small business, Mr.
Chairman?
The CHAIRMAN. Right.
Mr. BOTHMER. We feel that the attention that has been given
to the small business and the need for a viable small business com-
munity in assuring a healthy economic growth in the country by the
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171
Congress, that the continuing attention legislatively that has been
paid to this area has contributed greatly to the rise in contract awards
to small business, Mr. Chairman.
The CHAIRMAN. Very good.
Mr. MooT. I think also, Mr Chairman, that you touched On
another fact, that the absolute volume of Federal procurement
matches the defense programs in terms of the readiness of the country,
as is evidenced by the difference between the $25.9 billion and the
$49.8 billion which is the current level.
The CHAIRMAN. That is a dramatic rise. And the SBA and the
others who have contributed to that percentagewise, as far as small
business is concerned, are to be commended.
Mr. Moop. And likewise this committee has done an amazing
amount of work in hearings and in reports, which has helped our
effort considerably, sir.
The CHAIRMAN. Proceed, Mr. Bothmer.
Mr. BOTHMER. We believe this trend speaks well for the efforts
expended by SBA and for the cooperation we are receiving from the
procurement activities of the Government. However, we are not
resting on this past record. We intend to continue to press for larger
shares of procurement for small business and would like to raise the
level to 26 percent by 1975.
In addition to prime contract awards, we are, in cooperation with
DOD and GSA, engaged in an effort to induce big business prime
contractors to increase their subcontracting with small business.
We are working with 39 large Government contractors in what we~
call our voluntary subcontracting program to seek out more small
firms for subcontract work. In fiscal year 1968-69, the number of
prime contractors will be increased from 39 to 74 and the number of
plants from 244 to 324.
The CHAIRMAN. If I might interrupt again, I would `like to commend
you for the recent voluntary subcontracting program conference which
was held `in this room recently, which is another evidence of your
inducing large Government contractors to subcontract with small
business.
Proceed.
Mr. BOTHMER. Thank you, Mr. Chairman. We appreciate the co-
operation we received from this committee in making facilities avail-
able and making this conference a success. We have had a number of
compliments on it.
We also have established Project Upgrade which is designed to assist
submarginal small firms to improve their capabilities for subcontract
work.
The subcontract program already is producing good results. In
fiscal year 1967, DOD, NASA, and AEC, prime contractors reported
that they had placed $7.3 billion in subcontracts with small firms. If
we add this amount to the $10.2 billion in total prime contracts
awarded to small business, the total would represent 35.2 percent of the
1967 Federal procurement dollar, as compared with 20.5 percent.
I am glad to report that after little more than a 2-year lapse, the
procurement set-aside. program was resumed on November 1, 1967.
We have 18 representatives working at major procurement activities
of the Department of Defense and are budgeting for full implementa-
tion in 1969.
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172
These representatives open up new opportunities for firms to com-
pete by recommending, when appropriate, that sole-source procure-
ments be made competitive, recommending that separate portions of
large planned procurements, or suitable components of end items, be
purchased separately so small firms may compete, locating additional
small business suppliers for these opportunities and recommending
modification of unduly restrictive specifications
The CHAIRMAN Mr Bothmer, you indicated just now that you
have had 18 of these procurement specialists since you have resumed
the program How many did you have prior to the time it was dis-
continued?
Mr BOTHMER I believe it was 46, Mr Chairman
To help reduce contract administration problems of small firms, we
plan to have representatives stationed at Defense Contract Ad~
ministration offices
There they can serve as a "friend in court" in such matters as
inspection problems, problems of delay in performance caused by the
Government, or causes beyond the control of the small firm, progress
and other payment problems, and proprietary rights problems
The CHAIRMAN If I might interject again, there was a continuing
argument that SBA should have the specialists Others such as the
Defense Department have them. We had a period when we didn't
have the specialists, and during this period I must say that your
testimony indicates that the highest percent of subcontracting was
going on Which shows that it is not all the work of the specialists
I would like to say that it is not the number of specialists that you
have in the field, but the quality and capability One man might be
able to do more than a dozen others
That is just a gratuitous comment
Proceed
Mr BOTHMER We have recently started some special studies to
determine, on a geographic and industrial basis, where the Federal
procurement dollar is being spent The first such study dealing with a
contract density index has recently been completed
The contract density index is a useful measure of the relative impact
of Federal procurement among SBA regions and areas. The index
represents the ratio of each region's or area's share of total procure-
ment to its share of total manufacturing shipments, converted to a
base of 100
An index of 100 for an area or region means that its share of total
Federal procurement equals its share of manufacturing shipments
Indexes above or below this base measure the degree to which the
area or region has exceeded or fallen short of its proportionate share of
Federal procurement awards.
The wide dispersion of the index (from a low of 20 for the Boise and
Sioux Falls regions to a high of 900 for the Washington metropolitan
region) reflects major variations in regional industry mixes
The 27 regions with the highest indexes (125 and above) generally
contain medium or large metropolitan areas which have emerged as
growth centers for new industries serving the needs of the electronic,
missile, and space age Illustrative of these are most of the regions of
the northeastern area, Jacksonville and Miami in the southeastern
area, and Los Angeles, San Francisco, and San Diego in the Pacific
coastal area
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173
Indexes of 80 or lower were recorded for 29 regions. These include
two principal types of region:
(1) Regions containing metropolitan complexes with high concen-
trations of manufacturing concerns producing basic materials, heavy
equipment, production equipment, and automotive vehicles-such as
Pittsburgh, Birmingham, Chicago, Detroit, Cleveland, and Portland.
(2) Regions which are predominantly rural with limited man
manufacturing facilities largely devoted to supplying local markets
on processing local primary materials-such as Clarksburg, Jackson,
Augusta, Little Rock, Des Moines, Boise, and Spokane.
In some instances, a high concentration of service-type contracts
may distort an index based upon manufacturing capabilities.
This explains, in part, the abnormally high index (900) for the
Washington metropolitan region.
The certificates of competency program is designed to give small
firms a better chance to participate in Government procurement.
If a small business bids low on a Government contract, and the
contracting agency feels that the firm does not have adequate produc-
tive capacity or credit to fulfill the contract, SBA is authorized to
investigate the competency of the firm. SBA may issue a COC based
on a thorough study of the company's operations. The contracting
agency must award the contract to the small business when the
certificate is issued.
SEA follows the progress of the contract until it is completed. If
the contractor has difficulty meeting production schedules because
of technical or other problems, SBA offers assistance.
The program also makes available to the Government the services
and products of those qualified small firms that have submitted low
bids on particular purchases. This enables the Government to realize
a saving and the Government, as well as small business, benefits.
Since it began, through fiscal year 1967, the COC program has saved
the Government $29.8 million through the acceptance of low bids
on the 2,111 COC's issued. In fiscal year 1967, the total savings were
$1,498,000 based on 141 COC awards made for $22.8 million.
Another 94 awards valued at $14.3 million were made without the
necessity of issuing COC's after SBA supplied specific information to
contracting agencies. The savings, by accepting these low bids, ex-
ceeded $1.5 million.
Section 8(a) of the Small Business Act declares it to "be the duty~
of" SBA, and SBA is empowered whenever it "determines such action
is necessary" to enter into procurement contracts with other Govern-
ment agencies on such terms and conditions as the parties agree.
SBA is authorized by section 8(a)(2) to subcontract to others the
performance of contracts it has obtained. This authority had not been
exercised by previous SBA Administrators. Our decision to utilize this
authority was prompted by the President's test cities program an-
nouncement proposing to "mobilize the resources of private industry
and the Federal Government to help find jobs and provide training
for thousands of America's hard-core unemployed."
In addition, the Economic Opportunity Act Amendments of 1967
added congressional emphasis and direction for our use of this
authority.
95-193-68-12
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In utilizing 8(a) in the cOntext, we are trying to encourage small
business development in areas which require economic stimulus and
small business participation in resolving a critical national problem
of developing job opportunities for the hardcore unemployed in our
country.
We are moving carefully in employing our 8(a) authority. Our
initial effort was focused on the five cities in which the test program
operated-Washington, Boston, Los Angeles, San Antonio, and
Chicago.
With the full cooperation of the Department of Defense and the
General Services Administration, we are jointly determining the items
that are relatively simple to manufacture; that have a large con-
tinuing requirement; and that generally lend themselves to the train-
ing and skill development needs of the hardcore unemployed.
We are seeking out qualified small business firms that are interested
in participating in this program.
Other Government agencies are assisting us in developing a pro-
curement package that will be acceptable to the small business subcon-
tractor who is being asked to assist not only in training of completely
unskilled individuals, but also in providing permanent jobs. The
Labor Department has agreed to expedite its consideration of training
program requirements that can be included in our negotiations with
potential subcontractors.
Arrangements have been made with Lackland Air Force Base for a
contract to supply troop issue bakery items. We have subcontracted
with an existing supplier, and we are assisting in expanding a small
minority-owned bakery in San Antonio to which we will subcontract
a portion of the requirement. Both firms plan to work with the Labor
Department in a training program. A loan application from the second
firm to assist in its expansion plans is nOw being processed by our
agency.
In Washington, D.C., we are working initially with a large business
concern. In this particular case, the large concern in conjunction with
a local civic organization is setting up a local development corporation.
The corporation will provide operating capital for a newly formed
small business firm to which SBA will subcontract for military
requirements.
For the initial production item, we are taking contracts from the
Defense Supply Agency for wooden pallets and boxes. These will be
subcontracted to the small manufacturer and will provide a production
base from which this business can be launched successfully.
Eventually, the firm plans to expand into electronic assembly work.
At least 60 hard-core unemployed will be brought into the training
program during the initial phase of this operation.
The Labor Department has agreed to a 12-week training program,
and the Economic Development Administration will provide assistance
for necessary management and technical advice.
SBA seeks to assure full opportunity for small logging and milling
concerns to bid on Federal timber sales. To do this, SBA and the
appropriate Federal sales agency set aside certain timber sales for
bidding by small concerns only. Since the inception of this program
in 1959, SBA-sponsored set-asides have averaged almost $6 million
annually. It is expected that set-asides will be $14 million annually
by fiscal year 1969.
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SBA also has progr~ms to assist small firms in purchasing surplus
Government property, to promote the interests of small business in
the purchase of stockpile items and to encourage the Department of
Commerce to keep in mind the interests of small business when pre-
paring regulations governing the allocation of critical materials.
In summary, the major SBA procurement assistance events during
the past year involved:
Reestablishment of the agency's "procurement set-aside" program.
Expansion of the subcontracting program to gain more Government
business for the small producers.
Increased activity in the certificate of competency program.
Activation of the 8(a) procurement program in furtherance of the
President's test cities effort to provide more jobs for the hard-core
unemployed.
Restaffing of the procurement centers with SBA representatives to
assure continued attention to the small business potential by the
procurement officer.
BUSINESS MANAGEMENT ASSISTANCE
Our Office of Management Assistance conducts a number of pro-
grams designed to assist businessmen in their day-to~day operations..
This Office-
Publishes factual pamphlets and booklets covering the whole
spectrum of small business operation.
Provides counseling services through its own network of
management assistance officers in 73 cities.
Offers counseling at local levels program which brings the
services of SBA counselors to about 500 cities per quarter.
Makes arrangements with educational institutions to provide
both . day and evening training se~sions in business subjects for
established businessmen as well as potential entrepreneurs.
Manages a. cadre of 3,210 retired executive (Service Corps of
Retired Executives) who volunteer to provide their expertise to
small business free of charge.
During fiscal 1967, 3,400,000 copies encompassing 500 different
business subjects were distributed.
Our publications are written by distinguished authorities in~ the
business field, either as a public service or for a modest fee.
Interest in our publications is continually growing.
The overwhelming majority of all publications distributed was a
direct result of specific requests from individuals, corporations,
governmental institutions, State governments, foreign governments
and banks.
Many police departments have very recently requested volume
amounts of publications dealing with crime prevention measures which
small businesses located in ghetto areas may be able to take.
The CHAIRMAN. Mr. Bothmer, are you telling the committee that
you have a publication in SBA on how to prevent crime, and that the
police departments, who are supposed to be experts, call upon you
for these publications so that they may be better informed?
Mr. BOTHMER. Not a single publication, Mr. Chairman. We have
some publications dealing with subjects such as shoplifting and the
kind of preventive measures that small companies might take from a
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170
merchandising standpoiut to alleviate or minimize shoplifting, similar
publications which have been of interest to police departments, who
in turn redistributed the pamphlets
The CHAIRMAN And these are for distribution to the small mer~
chants?
Mr. BOTHMER. That is correct.
The CHAIRMAN. Mr. Bothmer, this is just another example of the
many services of SBA.
Proceed, Mr. Bothmer.
Mr. BOTHMER. During 1967, the agency set up more than 2,000
business education courses, workshops, seminars or conferences This
training varies from a course meeting 1 night a week for 8 to 10 weeks,
a 1-day workshop for prospective business owners, or a 1-day con-
ference for~established small business owners.
Approximately 73,000 small businessmen and potential small
businessmen attended such training units in fiscal year 1967 This
past year there has been a sharp increase in attendance by relatively
young people and members of the minority groups who desire to own
their own businesses.
The 3,210 volunteers in SCORE helped more than 11,500 businesses
and individuals last year. These ranged from one-time visits to small
stores to assist in such problems as bookkeeping, inventory manage-'
ment, customer stimulation, and other subjects to intensive day-to-day
counseling. ` `
An outstanding example of the service, rendered free of charge, by
individuals in this category is seen in the case of help given to a
cooperative in a small Louisiana town
A retired vice president of General Mills went from Minnesota to
Louisiana (travel paid by the SBA, but no salary), and as a result of
his visit, the cooperative's ventures into the baking industry, and the
retail grocery, and gasoline business, was completely remade.
PROMOTION OF SMALL BUSINESS IN EXPORT TRADE
On November 13, 1967, SBA and the Department of Commerce
formally signed an agreement to help the Nation's small businessmen
enter export markets and share in the benefits of our expanding
export trade
The CHAIRMAN Mr Bothmer, I read this statement earlier with
interest as to why it would be necessary to presume that you would
have to enter into an agreement with the Department of Commerce
to agree to stimulate export trade, in view of the balance-of-payments
situation. We have had extensive hearings heretofore on how to use
all the tools available to try to encourage small business in the export
field. And Commerce does this, and SBA does it. Why is it necessary
to enter into an agreement to promote this objective? This is one of
the regular missions, this is one of the goals. That is a nice statement,
but it doesn't get the job done.
Mr. BOTHMER. I think one statistic, Mr. Chairman, might be
useful There are approximately 290,000 manufacturers in the United
States, of these, about 90 percent are small businesses. Less than 5
percent are actively engaged in export trade. A majority are small
businesses under the size standards of the SBA.
The CHAIRMAN. What growth has there been in small business
participation in export trade, let us say, in the last 5 years?
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177
Mr. BOTHMER. I am sorry, Mr. Chairman, I don't have that infor-
mation available.
(The following was subsequently submitted and ordered to be
inserted at this point:)
GROWTH IN SMALL BusINEss PARTICIPATIoN ix EXPoRT TRADE
A review of foreign trade statistics compiled by the Bureau of the Census
reveals that there are no available export statistics tabulated by size of busi-
ness which permit an analysis of the growth in small business participation.
The CHAIRMAN. I think you ought to have some figures as to how
much export trade small business is doing, whether it is growing.
Mr. BOTHMER. I think I can say generally, Mr. Chairman, that
the export trade business being done by small concerns has been
growing at a much less dramatic rate than the growth rate in the
medium-sized and larger firms. And part of the problem, as we see
it, is to encourage small business by making known to them the fact
that their capability to participate in this field is not necessarily as
difficult as it appears to many people who have not previously
engaged in it.
The CHAIRMAN. Didn't SBA at one time have an export division,
foreign trade section or division? Do you have such a division now,
or are you turning it all over to Commerce?
Mr. BOTUMER. We did have a very small group interested in the
export trade field sometime ago. This was discontinued. And we have
just reopened our interest in this by working out this agreement with
the Department of Commerce. And we do currently have a gentle-
man in my office whose function it is to continue to work with Com-
merce and with large-scale carriers, and so forth, interested in the
export field to sponsor conferences and workshops to try to educate
small companies to the possibilities of entering this field.
The CHAIRMAN. We commend your effort.
Mr. BOTHMER. Thank you, Mr. Chairman.
The agreement provides for close cooperation between SEA a d
the Commerce Department's Office of International Trade Promotion
to expand U.S. exports to help improve the Nation's balance of
payments.
Under this agreement, SEA will give additional emphasis to loans
to small business for participation in U.S. export trade.
SEA will also encourage small businesses to participate in U.S
commercial exhibits, in U.S. Trade Center exhibitions in trade missions
and trade conferences.
SEA shares the frequently expressed confidence of the House Select
Small Business Committee that American small businessmen possess
the competence and ingenuity to compete successfully in export
trade, provided they have a knowledge of foreign market potential
for a given product or service and follow sound marketing management
practices.
The two agencies, together with American flag carriers, have set
up a series of at least 12 foreign trade conferences in the United States
during 1968.
A highly successful conference was held in Boston in which Pan
American World Airways Cargo* Service joined the Government
agencies.
PAGENO="0182"
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Another has been held in Seattle, Wash., with Northwest Airlines
joining Commerce and SBA as sponsors, with 64 new potential ex-
porters signing up.
Preparations are under way now for conferences in Phoenix,
Atlanta, Los Angeles, Jackson, Chicago, Cleveland, Louisville,
Miami and other cities of small business manufacturing concentration.
TECHNOLOGY UTILiZATION
In the middle of 1967, SBA undertook to assist to the small business
manufacturing community (300,000 companies) to obtain some of the
benefits from technology information generated as a result of Govern-
ment-sponsored research and development. Two programs have been
activated:
First, the scheduling of technology utilization conferences through-
out the country and technology transfer workshops to encourage the
potential commercial application of technical advances from space,
nuclear energy and other programs, and
Second, the screening of technical information resulting from Gov-
ernment-sponsored research and development and publication of
selected items in special industry-aimed pamphlets.
During the past 6 months, three highly successful general con-
ferences have been held and an additional 23 are scheduled in the
major manufacturing centers of the country.
Conferences and workshops are cosponsored with SBA by such
agencies as NASA, AEC, State Technical Services and are par-
ticipated in by technical staffs from those agencies.
Smaller, industry-oriented workshops have been held with the co-
sponsorship of universities and trade associations, such as the Tool
and Die Institute.
It is estimated that more than 500 companies have already reacted
to conference and workshop attendance by requesting additional and
more detailed information on specific technical subjects.
Many publications will be issued in the coming months. The
first publication, dealing with Electrical and Electronics Advances,
has been issued and will reach a selected audience of 17,000 manu-
facturing firms.
Other carefully screened publications will appear later in the year
and will cover such subjects as: Advances in Tools, Dies, Jigs, and
Fixtures Technology; Advances in Welding, Brazing and Soldering
Technology; and Selected Advances in Instrumentation Technology.
That concludes my statement, Mr. Chairman.
The CHAIRMAN. Thank you, Mr. Bothmer, for a comprehensive
statement of your two principal functions: procurement and manage-
ment assistance.
There is nothing as powerful as an idea. And these technical pub-
lications and conferences may well stimulate new ideas for new in-
dustries and growth.
Certainly the Government is spending a great deal of money on
research. And we hope that there will be results growing from it.
I want to ask you a question or two. I think you are doing a good
job on your procurement program. I am glad to see the percentage
of your small business participation increasing. We have a special
committee concerned with procurement. And we think it is also doing
a good job in supporting it and assisting it.
PAGENO="0183"
179
You state on page 5 that once a COC is issued that the agency
must award the contract. I understand that the way it used to be
was that you checked into their capacity and credit and, if you found
that it was satisfactory or acceptable, you issued the COC, and they
were supposed to let them have the contract. Now they are finding
other ways and means of getting around this certificate of compe-
tence and stating that they don't have the tenacity necessary, or the
perseverance. They are finding other avenues to evade the COO.
Would you want to elaborate for the record on this?
Mr. BOTHMER. Yes, Mr. Chairman. Several years ago the first test
case of this kind arose in which the small bidder on a Government
contract was disqualified on the basis of tenacity and perseverance.
This generally refers to the record of the small business company on
past transactions, its record of performance, as opposed to its financial
capability and its capacity in tooling and plant. This concept was
tested and upheld by the General Accounting Office.
We think in SBA that certainly the procuring agency has every
obligation to ascertain the tenacity and perseverance of a firm. We
don't know exactly how much impact the use of tenacity and per-
severance is having, but we feel that it could be very substantial.
And we feel that one of the things that should be looked at very
closely is the question of the current status of the firm. In other words,
if its past record is the sole basis for determining its tenacity and
perseverance, and it is ruled out on the basis of that record without
any current look at perhaps changes in the management, changes in
the policy or other things that would have a bearing on that record,
it would be very difficult indeed for a small concern to ever get back
into Government procurement.
And, therefore, we think there must be a current look at the question
of the firm's willingness to perform before it is ruled out on the basis
of tenacity and perseverance.
Mr. MITCHELL. As a practical matter, Mr. Bothmer, hasn't SBA
in the past when it surveyed a company as to capacity and credit
taken all, these factors into consideration?
Mr. BOTHMER. Yes, Mr. Mitchell. We in SBA-and I certainly as
an individual-feel very strongly indeed that we are doing no one any
favors by certifying as to the competence of a firm if it is not truly
competent. And by that I mean from all standpoints that we are able
to make any check on. We don't think we are helping the small busi-
ness if they can't perform the contract. And we are certainly not
interested in certifying people who can't fulfill their obligations to the
procuring agency. So we do in fact check on every aspect of the
business.
Mr. MITCHELL. Then if Congress, in order to straighten out this
matter, desired to add the words "tenacity and perseverance" in
section 8(b)(7) of the Small Business Act, it would actually put no
greater burden on your agency; it would actually clear the matter up
more than anything, wouldn't it?
Mr. BOTHMER. Yes, sir; that is correct.
Mr. MITCHELL. That is all.
The CHAIRMAN. At what levels are your small business specialists
in procurement stationed in the Department of Defense?
Mr. BOTHMER. Generally, when we have fully implemented this
program, Mr. Chairman, we will have some 45 procurement center
PAGENO="0184"
180
representatives throughout the country-42 will be in procurement
installations, and three wili be in defense contract administration
service regions, on a test basis The 42 in procurement centers will be
at the large procuring activities: the Defense Department, NASA, the
AEC, and so forth Some portion of those 42 people will cover more
than one installation on a liaison basis As far as their actual level
in the organization is concerned, we try to assure-and I think with
some success-that our procurement center representatives have access
to the top-level procurement people and the commanding officers of
most of the installation in which they are stationed.
The CHAIRMAN I want to yield to our distinguished chairman of the
Subcommittee on Procurement Mr Corman, of California
Mr. CORMAN. Thank you, Mr. Chairman.
Mr Bothmer, I know that you are going to be back before our sub-
committee in a couple of weeks. But I want to say that I shared your
optimism when we looked at the figures on the growth of the percentage
of small business up to the first half of this fiscal year. And then we
noted that, insofar as the Department of Defense is concerned, it had
dropped back to below 18 percent, or about that figure. And I wondered
if you had any views now or might have when you appear before us as
to the reasons for that, and what we might do to change that trend.
Mr. BOTHMER. Yes, Mr. Corman. We would be very happy to discuss
that in detail later And briefly now, I might say that the Procurement
Division, as you know, has a great deal to do with the success or failure
of the small business program in any given year.
I have a few figures on this as of the time frame you are talking
about. During the first three quarters of fiscal year 1968, the percent-
age declined from 20.6 to 18.4. While I think that SBA's programs can
help alleviate this sort of situation, and the reinstitution of our PCR's
and activity in the procuring centers will have a salutory effect, I
think there is something to be said for the problems that are faced by
the procuring agencies In this case, the commercial-type items which
have greater small business potential andnormally provide about 50
percent have been reduced in dollar volume over that period in terms
of about a billion dollars During that same period, clothing and tex-
tiles, which are predominantly produced by small business, have been
reduced by about $375 million. Sustenance, anOther item in which
small business shares very highly, is down by about $175 million And
in addition to that, the purchase of missiles was up $500 million. In
aircraft engines there was a $300 million increase. So I think that the
decline percentagewise in dollar expenditures in the areas in which
small business normally shares best during the same time frame that
the hard goods, particularly the larger weapon systems hard goods,
have been going up, has in part at least accounted for this decline
Mr CORMAN We will explore that in much more detail in a couple
of weeks.
With reference to tenacity and perseverance, which the chairman
brought up, we were very disturbed just because we had trouble getting
a handle on it ourselves. What about the poor businessman out there?
As I understand it, that issue never comes before SBA. Let us assume
for the moment that he is the low bidder, and the procuring agency
says, "We are not worried about his credit and his competency, so we
won't submit that issue to SBA. We are going to eliminate him on
tenacity and perseverance." And you never take a look at that, do
you?
PAGENO="0185"
181
Mr. BOTHMER. That is correct.
Mr. CORMAN. Now, as I recall the testimony, they have not used
this as. a second step. In other words, ~f they submit the credit and
c,ompeteiicy to you, you give them a certificate, and then they can't
come back and pull the rug out from under him after they get the
certificates by saying that he didn't have the tenacity and per-
severance; do they?
Mr. BQTmVrER. There have been one or two cases where that has
happened., That certainly is nQt a general practice. .1 will say that we
normally work quite cooperatively in this field with the procuring
agency. But that has happened.
Mr. CORMAN. I think our subcommittee would like to have the
instances for the record, because in the first place, if they decide when
they first look at him that he isn't going to get the contract anyway,
they shouldn't put you through the exercise of reviewing for a
certificate.
Mr. BOTHMER. I agree with that.
Mr. CORMAN. What has been your record for performance when you
do get a certificate of competency?
Mr. BOTHMER. Our record has been quite good. It is a little difficult
to be exactly responsive to that question. But, for instance, the
default rate on contractors to whom we have issued certificates of
competency, I think, compares very favorably with the default rate
experienced generally in the Defense Department. In fact, it may be
better than the default rate generally. We work very hard to make
sure that it comes out that way.
Mr. CORMAN. I am pleased to hear that. And I think it might be
protection for you and for our committee if you keep. some statistics.
Because if anybody ever gets the idea that they might want to change
it, we might want some statistics to back us in retaining the present
policy..
The CHAIRMAN. Will the gentleman yield?
Mr. CORMAN. Yes, sir.
The CHALRMAN. I think, in additionto the default, we are concerned
as to how many times they have failed to honor your COC's. The
law says they must.
Mr. BOTHMER, To the best of my knowledge we have no record
of that sort of thing Mr. Chairman..
The CHAI~RM~N. kou have just delineated that they have found
other criteria? . .
Mr. ~OTHMER. On the one or two occasions ~here they have, sub-
sequent to the issuance of the COC, said tJ~at~. the company lacked
tenacity and perseverance, that is true, Mr. Chairman. But I under-
stand your. q~iestion to be broader than that. And in other circum-
stances we have no trouble..
The CHAIRMAN. You say there are only one or two exceptions in
which they have failed, to honor your COO's?
Mr. MOOT, Occasionally, Mr. Chairman, there is a cancellation of
the requirement after we issue a COO, which is a subjective determi-
nation that :the requirement no longer exists. This is a pretty difficult
thing to prove.
Mr. BOTHI~EER. We don't feel, in other words, that the Defense
Department has specifically said, "Werefuse to honor a COC; there
are other reasons."
PAGENO="0186"
1S2
The CHAIRMAN. Very good.
Mr. Corman.
Mr. CORMAN. Just one other thing. We will want to look very care-
fully at your criteria in deciding whether to take a prime contract for
the purpose of contracting the small business. And also I am curious
as to whether or not you have to compete when you want to bid on a
prime.
Mr. BOTHMER. No; we do not have to compete. We can certify
ourselves as being competent. And in very brief form, the criteria we
are mostly interested in is whether we can find simple items for which
there are continuing requirements, and from which there is a need for
additional competition. In other words, we don't want to take an item
and subcontract it ou t and find 6 months later that we have no con-
tinuing way to keep the subcontractor in business, nor do we want to
take contracts from Peter to pay Paul.
So we are looking for added capacity.
Mr. CORMAN. We will look into that in more detail. We are out of
time.
The CHAIRMAN. Mr. Addabbo.
Mr. ADDABBO. I am happy to be a member of this Select Committee
on Small Business and a member of the subcommittee with Mr.
Corman. I take this opportunity, first1 to congratulate the Adminis-
trator and his staff on the' work that they have been doing. We have
had some favorable reports back in New York, although there are
still innumerable problems.
Mr. Administrator, we are also extremely pleased and proud of
your Associate Administrator for Procurement and Management
Assistance, Irving Maness. I know that the small business community
in New York and in the Nation is extremely proud of his efforts on
behalf of the small businessman. The exceptional job done in the
procurement and management area, we know, is due to the great
efforts of Irving Manness.
I congratulate the Administrator and his staff on the wonderful
statements they have presented. I hope that we will be able to supply
the funds when you have the manpower to fulfill this dream.
I look forward to working together with the committee and SBA
individually. On the question of publications, how technical, Mr.
Bothmer, would the publications be? Will we need explanations of the
publications, or will they be clear enough for the small businessman
to be able to interpret without hiring counsel?
Mr. BOTHMER. We try to keep our publications very simple, very
down to earth, very practical. In the main, when we are talking about
things like, for instance, controlling an inventory system, or retail
displays, that sort of thing, we try to get an expert in the field to
write an article. We review it in a number of ways, and try to put it
out in a form that is very readily understandable.
You may have reference also to the publications that we intend to
put out in our technology utilization endeavor. In that case they are
very obviously and necessarily more technical and more complicated.
However, our whole purpose is to take briefs of the National Aero-
nautics and Space Administration, patterns and information developed
by the Commerce Department or the Defense Department, and do in a
selected field relate all the information that we can to sort of bring up a
pattern of the current state of the art and new advances in that field.
PAGENO="0187"
18~3
And again we try to keep it as simple as we can, and have it reviewed
by a number of activities, including the experts in other departments,
and try to put out something that is as understandable to a layman as
we possibly can.
Mr. ADDABBO. On page 16 of your statement you say, speaking of
certain publications, that they will reach a selected audience of 17,000
manufacturing firms. When you say a selected audience, how will they
be selected?
Mr. BOTHMBR. We have worked with industry associations, our
own facilities, our inventory ifies, and so forth, and with NASA and
the other agencies concerned with advances in this area, in trying to
select that group of small businesses which we think will be interested
in receiving this information.
Mr. ADDABBO. Thank you.
No further questions, Mr. Chairman.
The CHAIRMAN. Mr. Williams, any questions?
Mr. WILLIAMS. No, sir.
The CHAIRMAN. Mr. Moot, Mr. Greenberg, and Mr. Bothmer, we
thank you. We think you have many tools. And we commend you for
the work that you are doing.
Without objection, counsel may insert sections of the act in the
record.
Mr. MooT. Thank you for your consideration and support.
The CHAIRMAN. We will stand adjourned until 10 o'clock tomorrow,
at which time we hope to look over the program of the Small Business
Investment Divisions.
(Whereupon, at 12:15 p.m., May 21, 1968, the committee recessed,
to reconvene at 10 a.m., Wednesday, May 22.)
PAGENO="0188"
PAGENO="0189"
ORGANIZATION AND OPERATION OF THE
SMALL BUSINESS ADMINISTRATION
(1968)
WEDNESDAY, MAY 22, 1968
HOUSE OF REPRESENTATIVES,
SELECT COMMITTEE To CONDUCT STUDIES AND
INVESTIGATIONS OF THE PROBLEMS OF SMALL BUSINESS,
Washington, D.C.
The committee met, pursuant to call, at 10 a.m., in room 2359,
Rayburn House Office Building, Hon. Joe L. Evins (chairman)
presiding.
Present: Representatives Evins, Patman, Dingell, Addabbo, Conte,
Horton, and Morton.
Also present: Richard L. Mitchell, special counsel; Myrtle Ruth
Foutch, clerk; Beth Russell Schultheis, staff assistant; and John
J. Williams, minority counsel.
The CHAIRMAN. The committee will come to order.
This morning we will resume our hearings on the Small Business
Administration.
We hope that these hearings are instructive and helpful.
We have Mr. Moot, the Administrator, back with us this morning,
and Mr. Greenberg, the Deputy Administrator, and Mr. Glenn R.
Brown, the Associate Administrator for Investment.
PESTIMONY OP ROBERT C. MOOT, ADMINISTRATOR, SMALL BUSI-
NESS ADMINISTRATION; ACCOMPANIED BY HOWARD' GREEN-
BERG, DRPUTY ADMINISTRATOR, AND GLENN IL BROWN, ASSO-
CIATE ADMINISTRATOR POR INVESTMENT
The CHAIRMAN. Mr. Administrator, how do you wish to proceed?
Mr. Moop. I would like to make some opening remarks, Mr.
Chairman, and then ask Mr. Glenn Brown to present a statement to
the committee.
The CHAIRMAN. Very well.
Mr. MooT. I would like to say for the record that, since the Small
Business Administration testified in 1966 before this committee on the
small business investment company program, in my opinion much
has happened to the benefit of the small business community. And the
two men who are with me this morning at the table in my opinion
have been largely responsible for the operational improvement of this
program.
As you know, Deputy Administrator Greenberg was the Associate
Administrator for Investment prior to August of 1967. Since then Mr.
(185)
PAGENO="0190"
186
Glenn Brown has been the Associate Administrator an4 has very
capably handled the small business investment company program.
With your permission, he does have a statement which he would
like to present to the committee at this time.
The CHAIRMAN. Mr. Brown, you may proceed.
Your entire statement may be included in the record, with the tables.
And you may highlight it, or proceed as you wish.
Before you begin, Mr. Brown, we will place in the record at this
point something of your background, your experience, and a little
biography. Don't be modest. You are a new man heading this Small
Business Investment Division.
Mr. BROWN. Thank you.
(The material referred to follows:)
BIOGRAPHICAL SKETCH OF GLENN R. BROWN, AssOCIATE ADMINISTRATOR FOR
INVESTMENT, SMALL BUSINESS ADMI NISTRATION
Glenn R. Brown has headed the Investment Division of the Small Business
Administration since August 1, 1967. As Associate Administrator for Investment
of SBA, Mr. Brown administers the Agency's small business investment company
program. This program involves more than 500 privately owned and operated
small business investment companies with assets of three-quarters of $1 billion.
Mr. Brown, who is 39, joined SBA in August 1966 as Director of Western Area
SBIC Operations and became Deputy Associate Administrator for Investment in
November 1966.
Before coming with SBA, he was supervisor for the nine-state southwestern
area of the Economic Development Administration.
Mr. Brown has also served as a trial attorney for the Department of Justice, as
attorney-managing director of the Texas Association of Life Underwriters, and as
Assistant Attorney General for the State of Texas.
A native of Jacksonville, Texas, he is a graduate of the University of Texas in
Austin and served in U.S. Army Counterintelligence during the Korean War.
He and his wife Peggy have six children and live in Arlington, Virginia.
Mr. BROWN. As you know, when SBA appeared before this com-
mittee in June of 1966, the SBIC industry was the focal point of a
searching inquiry by the Congress due to a multitude of problems-
involving all aspects of the industry and of SBA's operation of the
program. Since that time, we at SBA and the industry have been the
beneficiaries of two pieces of legislation which represent giant strides
in our continuing quest to provide small business with a sound and
viable equity and long-term financing vehicle.
Today, I will direct my remarks to the status of our efforts to suc-
cessfully cure the problems which were present in 1966, and to our
current situation and future plans.
The primary problem which we faced in June of 1966 was that there
were many SBIC `s who were either unable or unwilling to adhere to
the SBI Act, the regulations, and to sound financial practices and
requirements incident to the borrowing of funds from SBA.
In July 1966 we instituted vigorous action in order to rid the indus-
try of these operators. As of June 10, 1966, there were 686 licensed
SBIC's. From July 1, 1966, until April 30, 1968, 164 licensees left the
program, voluntarily or involuntarily, and 15 new companies were
licensed. We had 537 licensees as of April 30, 1968. As of that date,
42 of these companies were in the process of surrendering their
licenses.
This substantial reduction in the number of licensees does not
illustrate the entire picture. On April 30, 1968, there were 120 com~
panies in various problem categories, other than in process of sur-
PAGENO="0191"
187
render. Most of these licensees will be leaving the program in the near
future. The remaining 375 licensees form the nucleus for our future
plans.
We were able to identify and proceed successfully against the
problem companies due to a continuing program of examination,
investigation, and appropriate legal action.
As you recall, one of the most glaring deficiencies involved our
examination prqgram. The SBIC's were not being examined on a
continuing basis nor were the examinations being conducted in depth.
From August 1 through November 30, 1966, 434 licensees were
examined. This represents every licensed company who had not been
examined between January 1 and June 30, 1966. In all of the preceding
12 months only 339 companies had been examined.
As a result of the findinc~s of the examinations, 74 investigations
were requested and 64 completed in fiscal year 1967, and 22 have been
requested through February 29, 1968, in fiscal year 1968 and 27 com-
pleted. In the previous history of the program only 56 investigations
were completed.
When violations of the act or regulations are uncovered, legal action
is promptly instituted. Since August 1, 1966, 130 complaints have
been submitted to the Department of Justice requesting the subject
licensee be removed from the program and 63 of these have resulted
in judgments in favor of SBA by U.S. district courts. There were 58
cases pending at the Department of Justice or before U.S. district
courts as of April 30, 1968, nine of these being criminal references.
With your permission, we are attaching an aging of these pending
cases and a copy of the agreement which we have entered into with
the Department of Justice, which should be treated as confidential.
We believe that the agreement has generally worked well to help
process these cases.
Each SBIC is now being examined at least once a year. Whereas,
in fiscal year 1967, 51 percent of all violations uncovered were of a
serious nature, statistics covering the first 9 months of fiscal year
1968 reveal that only 41 percent of the indicated violations could
be considered of a more serious nature,
In September 1966, the Congress passed legislation strengthening
SBA's enforcement powers and authorizing fines for failure to file
reports as required. The legislation also provided that SBA could be
named receiver in appropriate cases. The 1966 amendments, resulting
in large part from this committee's 1966 SBIC hearings, greatly
improved SBA's regulatory tools to allow us to properly administer
the program.
Subsequent to the passage of the bill, SBA instituted eight actions
against companies who filed required reports late or did not file at all.
Of the 75 companies in a state of receivership as of April 30, 1968,
56 SBA receivers had been named.
There were certain other program problems which were apparent at
the time of the 1966 congressional hearings. I would like to briefly
review these problems and the action we have taken to correct each.
First, licensing procedures needed improvement. In this area we are
strictly adhering to a policy of a close scrutiny of each proposal re-
ceived and of the individuals involved, and an examination of the
company within 6 months of licensing. Fifteen licenses have been
PAGENO="0192"
188
issued in the past 22 months During that period 28 proposals were
received.
The 1967 amendments to the SBI Act provided that the Administra-
tion, prior to licensing, would give due regard to the need for a licensee
in the particular area, the business reputation and character of the pro-
ponents, and the probability for financial soundness and profitable
operations We feel that these amendments provide useful guidelines
with regard to the issuance of licenses
We have previously indicated the extent of our overall regulatory
activities.
Our new regulations, which became effective on January 9, 1968,
better enable us to take action against licensees who are not carrying
on active operations. The new regulations provide a presumption of
inactivity where SBIC's with large amounts of idle funds do not invest
a significant portion of them within a year.
Whereas conflicts of interest and overline violations represented 13
percent of all indicated violations in fiscal year 1967, this figure was
reduced to 8 percent during the first 9 months of fiscal year 1968
The conference report incident to the SBI Act Amendments of 1967
indicated that the House and Senate Banking and Currency Com-
mittees would review the overall industry involvement in real estate
investments prior to June 30, 1968. SBI was directed to prepare a
study involving the entire spectrum of the real estate problem. That
report has been recently submitted to the Congress.
Pending the study completion and congressional review, SBIC's
who are approved real estate specialists and who are not otherwise
in violation* of the act or regulations have been accorded the same
benefits and privileges as other nonproblem licensees.
Following the hearings in June of 1966, a study was undertaken to
establish a uniform and consistent method to estimate what would be
a conservative reserve for losses. As of September 30, 1966, 682
licensees were indebted to SBA for $284,389,052. We established a
reserve against this amount of $50,571,607 as of December 31, 1966,
or 17.8 percent. The latest figure indicates that $285.9 million is
owed by SBIC's and the loss reserve established as of September 30,
1967, was $44.5 million, or 15.6 percent.
SBA has established an early warning system in order to ascertain
SBIC's encountering serious financial difl1~culties. In addition, the
licensees themselves have been provided guidelines which help them
to evaluate initially and on a continuing basis the viability of their
small business borrowers
The latest available consolidated financial report for the industry,
dated September 30, 1967, indicates, for the 478 reporting companies,
that industry assets are $659.6 million.
This includes $481.8 million in outstanding loans and investments
in small business. The private investment in these reporting licensees
is $358.8 million as compared with outstanding Government funds of
$232.1 million. Loans from private sources are $47 million.
Thus, for every outstanding dollar of Government financing, small
business has received approximately $2.07.
Profits represented 4.7 percent of invested capital.
The average interest rate to SBIC's was just over 8 percent.
From the inception of the program, through September 30, 1967,
SBIC's made 28,367 separate financing transactions to small businesses
PAGENO="0193"
189
in all 50 States, the District Of Columbia, Guam, Puerto Rico, and
the Virgin Islands. These transactions represent $1.2 billion.
There were SBIO's in 42 States and two territories as of April 30,
1968. We are presently attempting to encourage the formation of
financially sound SBIC's in all States to make available to small
concerns the facilities of these institutions.
Reports from 1,381 SBIC-assisted firms indicate they have increased
their employment by 11,800 jobs-29 percent-since the original
financings were made. Thus, for every $9,000 in SBIC disbursements,
one new employee was hired. To put it another way, for every $3,000
in SBA seed money, $6,000 was added by SBIC's to create a new job
opportunity.
The accumulated information which we have available regarding
the impact of the SBIC program on small businesses and job creations
is still sparse. The information available covers only 2 years since
the installation of the requirement by SBA for SEIC's reporting data
on their portfolio concerns. As the data builds up on the small business
concerns financed by SBIC's, a more complete and profound analysis
can be made of this impact. The information which is available, how-
ever, demonstrates the high potential of the program to provide
assistance to small business concerns. For instance, a comparison of
prefinancing and March 1967 data indicates that:
Gross revenues increased 42 percent on the average for the small
business concerns.
Profits showed an increase of 100 percent, from $11.1 million to
$22.2 million.
Net worth increased 18.8 percent, from $179 million to $213 million.
Total assets increased 36.8 percent, from $711 million to $973 million.
Short-term borrowings increased 22.2 percent, from $113.4 million
to $138.6 million, demonstrating the increased ability of SBIC-
financed concerns to secure funds from oth~r sources.
We feel that the SBIC program is particularly valuable in providing
assistance to small businesses in the manufacturing and technical
innovation fields. Not only by supplying loan or equity financing to
these concerns but in providing management assistance and financial
expertise to the principals of the small concerns, which is often as
valuable as the funds provided. Because of reporting difficulties, and as
a result of corresponding lack of information, these figures do not
represent a majority of the small business concerns financed. We expect
the reports to be received as of March 31, 1968, to provide a better
basis of information on the small businesses financed by SBIC's.
The SBIC industry, the Small Business Investment Act, and SBA
regulations thereunder, have, of course, undergone many changes since
first established in 1958. Congress, SBA, and the industry have been
gaining experience in ways to further the purposes of the act so as to
maintain and foster a healthy, expanding, and useful industry to serve
the small business community.
There are three major aspects of SBA's activities aiding the industry:
as a promoter, as a lender, and as a regulator.
SBA's role under the act is to insure compliance with the statutory
purposes of the program and protection of the Government's creditor
position, and to help implement adequate guidelines and incentives
to promote sound and profitable financial institutions serving small
business concerns throughout the Nation.
95-193-68-13
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All of these aspects have been greatly affected by the recent Small
Business Investment Act Amendments of 1967, Public Law 90-104,
signed by the President on October 11, 1967, and which became
effective on January 9 of this year.
This legislation resulted from the experience by SBA, the Congress,
and the industry over a period of years, and a general agreement
that certain basic problems faced the program. These problems gen-
erally fall into three categories: SBIC size, SBIC profitability, and
the need to encourage more equity-type investments by the companies.
Studies indicated that minimum-size SBIC's lacked sufficient cap-
italization to interest prospective investors and competent manage-
ment, to make thorough investigations of investment prospects, to
maintain continuous services for portfolio concerns, to insure a com-
petitive return on investments, and to create a reasonable prospect
for success. In short, these studies indicated that the minimum-size
company was generally much too small, too limited in finance resources
and management skills, to do the job contemplated by the Congress.
It was also recognized that the leverage offered to investors in
SBIC's by prior law through SBA loans to the companies was not
enough to attract and maintain the flow of private capital to the
program. Moreover, larger companies were discriminated against in
the amount of assistance they could receive from SBA.
The other major problem was that financing provided their port-
folio companies by SBIC's was too frequently of a conventional-debt
nature rather than the more desirable and needed equity-type invest-
ment. While long-term loans are beneficial to small firms, equity
financing is often more appropriate and necessary. In contrast to
straight loans, equity-type financing does not place the recipient
under early-repayment pressure. It does not take priority over other
obligations of the borrower. And it does not cut off other sources of
credit. Such equity-type investments may include common or pre-
ferred stock, or debt obligations which have appropriate subordina-
tion and nonamortization features.
The recent legislation, which had the backing of the President,
substantially improves the situation with respect to these matters.
The maximum amount of SBA loans to an SBIC has been increased
from $4 to $10 million. The companies are eligible up to $7.5, million
for loans on the basis of $2 for every dollar of private capital. Thus,
an SBIC having $3.5 million, of private capital would be eligible for
$7 million of Government loans, compared to its eligibility for only
$2.8 million of SBA loans under previous law. SBIC's having~ at least
$1 million in private capital may receive an additional so-called third
dollar of Government loans for every dollar of their private capital
exceeding $1 million if they have 65 or more percent of their funds
invested in "venture capital" financings of small business concerns.
The $3.5 million privately capitalized SBIC would thus be eligible
for a total of $9.5 million of SBA loans if it meets this "venture
capital" test, compared to its previous eligibility for $2.8 million. As
a result, potential SBIC finanCial assistance from SBA is substantially
increased from prior law, and a special incentive is provided for
equity-type assistance.
I will discuss in a moment our definition of "venture capital" for
this incentive purpose. Another beneficial feature of the legislation is
that SBA loans to the companies will generally be on a 15-year sub.'
PAGENO="0195"
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ordinated basis, unless credit considerations preclude this in particular
cases. This long-term, subordinated, additional leverage will better
allow the companies to develop private financing sources to supplement
their private capital and SBA loans. The SBIC statutory total pro-
gram authorization from SBA's revolving fund has been increased
from the $400 million limit at the time of the previous hearings to
$450 million; $271.2 million has been charged against this $450 million
limit through February 29, 1968, leaving $178.8 million.
Features of the legislation which will encourage SBIC's to increase
to a viable size include eligibility of larger companies for the "third
dollar" leverage, as well as the fact that companies which do not
increase their private capital will gradually over a 5-year transition
period have their investment limit in a single small concern reduced.
At present, the limit is based on a combination of private capital and
debentures purchased by SBA from the companies. In 1972, after the
transition period, an SBIC's maximum permitted investment in a
single small concern will be 20 percent of its private capital. This
should encourage minimum size companies to increase their private
capital to a more adequate amount.
The new legislation specifically indicates that companies should be
of sufficient size to operate soundly and profitably, and be managed
actively and prudently, in accordance with the act and SBA regulations.
While the legislative history indicates that private capitalization
should not be the sole determinative of an adequate SBJC, Congress
definitely indicated its intent that SBIC's have sufficient resources to
be active, sound, and profitable financial institutions.
SBA has recently issued regulations implementing the provisions
of the new law. For example, related to the question of size of SBIC's,
the regulations require that each SBIC shall have and maintain
qualified management in charge of its operations and available at its
office to the public during regular business hours.
We believe that over a period of time these provisions, as well as a
growing recognition by the companies of the desirability and necessity
for an adequate capital base, will result in an SBIC industry com-
prised of companies with adequate amounts of private capital to
support effective operations under the act. It should be remembered
that many minimum-size companies have left the program either as
a result of SBA action against them for violations, through default on
their loans, or voluntarily because of lack of profit. We are also en-
couraging growth of remaining smaller companies through mergers
and the addition of more private capital.
The SBA regulations also define "venture capital," which must
comprise 65 percent of an SBIC's funds and investments in order for
eligibility for the "third dollar" from SBA. "Venture capital" is
defined to include common and preferred stock, and debentures or
loans-whether or not convertible or having stock-purchase rights-
which carry an effective interest rate not to exceed 10 percent, are
subordinated to borrowings of the small concern from other institu-
tional lenders, and have no part amortized during the first 3 years.
This definition will encourage SBIC's to provide long-term funds to
small concerns on a basis which will not require early amortization or
prevent short-term borrowings of the small concern. This equity-type
assistance is the type that is generally needed by small business and
for which the program was primarily designed~
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The legislation also contains a number of other provisions to
promote the SBIC program. Increased investment by banks in the
companies is permitted, subj~ct to appropriate safeguards; and an
industry advisory board to SBA is provided for. The new legislation
increases permitted bank-SBIC investments from 2 to 5 percent of a
bank's capital and surplus, but limits acquisitions of ownership of an
SBI[C by a bank to 49 percent or less.
The first meeting of this group, the National SBIC Advisory
Council, was held in early March of this year in Washington, D.C.,
and the second meeting was held on May 3 in Dallas, Tex. This
Council promises to be a most helpful means of improving communica-
tion betwe&n SBA and the industry, and to aid in developing measures
to better enable the SBIC's to provide increased assistance to the
small business community.
We are also, pursuant to the legislation, working with other Govern-
ment agencies-such as the Internal Revenue Service and the Se-
curities and Exchange Commission-to simplify and clarify their rules
applicable to SBIC's, as well as continuing our efforts to aid the
industry in improving SBIC profitability, obtaining better access to
institutional loan funds for the companies, and in methods to make
the industry more attractive to investors so as to increase the flow
of private capital to the SBIC program.
I might mention at this point that there is important complementary
legislation-H.R. 10410 and S. 1863-still pending before the
Congress to improve the tax treatment of SBIC's and to encourage
their making more equity-type investments. While the Congress in
1958 enacted a number of tax provisions recognizing the unique
venture capital nature of SBIC's, experience under the program
shows a definite need for modifications. Accordingly, after consultation
with the industry and Treasury Department, SBA proposed legisla-
tion to accomplish corrective improvements in the tax provisions
applicable to the companies and their stockholders. The SBIC's
are presently permitted to establish a loss reserve against their loan
investments; to treat as ordinary losses certain losses on their port-
folio; and to pass through gains to their shareholders without payment
of the corporate tax in certain circumstances. In these and other
areas this tax legislation contains provisions designed to accord
with the special nature and functions of the companies in their small
business financings. In effect, these tax amendments would allow
SBIC's to increase their profit potential by making venture-capital
investments in conformity with the purposes of the Small Business
Investment Act, without incurring tax disadvantages. We are hopeful
th~t~ these tax amendments will be enacted in the current congressional
session,
Ooncurrently with the January 9 effective date of the new legisla-
tion~ SBA issued a general revision of its regulations applicable to
tlçie SBIC industry. A major purpose of this revision was to consoli-
date, simplify, and improve SBA rules applicable to the companies.
There are a number of new provisions in this regulations package
which are especially significant. These include specific authority for
SBIC's to guarantee to institutional lenders debts of portfolio small
concerns. This authority could substantially help portfolio small
concerns in obtaining short-term financing supplementary to their
long-term financing fmm the SBIC's. The regulations governing
control of a small business concern by an SBIC have been tightened.
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The regulation requires the SBIC in all cases where such control is
acquired to divest control within a reasonable time, subject to a
written plan approved by SBA. While it is recognized that SBIC's
must take control in some cases in order to protect their investments,
the regulation insures that such control is temporary only. It is clear
that Congress did not intend SBIC's to be holding companies, operat-
ing or indefinitely controlling small business concerns. Other significant
changes in the regulations include a tightening of the conflicts-of-
interest regulations to prevent possible self-dealings by SBIC's;
and a specific regulation prohibiting unreasonable inactivity, since
the act contemplates that an SBIC shall conduct active operations
to meet the needs for financing of small business concerns in its
area. A provision has also been added for an early warning to SBA
in the case of significant capital impairment by a debtor SBIC.
The intent throughout the regulations is to encourage stable and use-
ful financial institutions serving small business. We believe these
regulations are fair and sound, and provide reasonable desirable guid-
ance to the companies in keeping with the congressional intent to
provide aid to small concerns, to protect the Government's funds, and
to encourage participation of private financing sources in the program.
The industry is now on a much sounder footing, largely as a result of
these legislative and administrative improvements.
SBIC profits have been rising, and realized and unrealized apprecia-
tion of SBIC investments has been much greater. After a shakeup
period of a number of years, the industry is gaining increased recogni-
tion as a needed and viable form of financial institution. SBIC man-
agers are more experienced, and many companies have developed high-
quality staffs. The SBIC's have learned how to invest in equity financ-
ing growth situations with the best chance of maximizing profits and
minimizing losses. And there is every indication that the demand for
capital from growing and high-potential small businesses will continue
to present many desirable and profitable investment opportunities to
SBIC management.
But there is still much work to be done. Many areas of the Nation
are still not adequately served by SBIC's. We are continuing our
efforts to foster interest in the program in such areas. SBIC's still have
a difficult time raising additional private capital, since their shares
frequently sell at a significant discount from book value. And the port-
folio turnover rate of the industry needs substantial improvement,
through better methods to realize on seasoned and appreciated invest~
ments, in order to enable the companies to perform maximum financial
assistance services for the small business community.
But there have been advances in these areas and we look for more
progress as the industry continues to prosper. The price index of
publicly held SBIC's has risen substantially in the past year. Many
portfolio small concerns have gone public, thus providing a market
for sale of SBIC investments. And the possibility of some sort of
capital bank, with secondary market features for purchase or loan
against an SBIC's portfolio, is being actively considered within the
industry. It should be noted that the new legislation, which generally
provides for the subordination of SBA loans to the companies, would
materially aid the development of such market financing sources for
the SBIC industry~
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As we have indicated previously, SBA is attempting to improve the
information base related to the program, and to explore the long-range
questions which must be studied if the program is to achieve continued
growth
Among these questions are
The nature and size of the small business equity gap? This is the
problem that the program was designed to meet We must know more
about the actual equity-capital needs of various types of small business
What are the means for meeting this equity gap? The SBIC program
has proven itself as a workable concept, but what other aids to the
small business equity problem are available for utilization in conjunc-
tion with SBIC financing?
What is the appropriate annual rate of investment for the SBIC
industry? Is the need for such financing growing?
Another important question is what structure for the industry can
be most effective? What are the respective roles of public SBIC's,
bank SBIC, closely held SBIC's and specialized types of SBIC's?
There may be different types of roles for all these kinds of companies,
but what are they? And how can they best be promoted?
What different small business opportunities are presented by various
types of geographic areas and what approaches are needed in these
areas for maximum utilization of the SBIC program to aid the con-
tribution which small concerns can make to economic growth?
Our studies of the small business community indicates that the
SBIC program can be of very great benefit to aid small concerns
operating in high-growth areas of the economy For example, in the
manufacturing and new-technology fields there is a particular need
for equity capital for rapidly expanding small businesses serving new
and specialized markets And SBIC financing can assist in providing
capital to~ local industry to help in generating balanced economic
development
We are also attempting to better coordinate the SBIC program
with our other small business assistance efforts As you know, SBA's
recently broadened lease-guarantee program permits small firms of
all types to rent prime commercial or industrial premises which might
otherwise be unavailable to small business And SBA's local develop-
ment company loan program provides long-term industrial mortgage
loans to allow plant construction and reconstruction for small con-
cerns In many cases, the small firm might utilize these SBA financial
assistance programs in conjunction with an SBIC investment which
provides the additional equity-type capital needed for its expanded
operations
SBA may also provide management assistance, such as facilities or
procurement advice, to small concerns receiving SBIC financing,
and the small firm might be eligible for a regular SBA business loan
We have instructed our SBA field offices throughout the country to
work closely with SBIC's in their area to help provide coordinated
assistance services for small firms
We are also working closely with the industry to help improve
program effectiveness The first two meetings of the National SBIC
Advisory Council strengthened channels of communication with the
SBIC industry and established a mechanism for joint efforts toward
program objectives Among the matter being emphasized are methods
to broaden the geographic coverage of the program, to attract more
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private capital to the industry, and to aid in the improvement of
various governmental rules and procedures affecting the companies.
SBA considers the SBIC program to be one of its most important
activities. It has high potential effectiveness in that it is carried out
primarily with private resources and aids the most innovative and
productive types of small firms. As the program develops and matures,
SBIC's are gaining better recognition in the small business and
financial communities as ne cessary and useful financial institutions.
We are confident that the SBIC industry will continue to provide
increasingly valuable assistance to small business, and to balanced
economic growth in all areas of the Nation. SBA will make every
effort to insure the success of the program.
At the completion of the hearings on the SBIC program in 1966,
the committee made several recommendations on the program. With
your consent we are submitting them attached as exhibits 1 and 1-A.
In addition we are also submitting exhibits 2, 3, 4, and 5 which
provide additional information regarding the SBIC program.
That concludes my statement, Mr. Chairman.
The CHAIRMAN. Without objection, the other material may be
included with Mr. Brown's statement.
(The information referred to follows:)
ExmBIT 1
The Select Committee on Small Business conducted hearings on the small
business investment program in June 1966 and published its report on December
29, 1966.
The Report included a number of recommendations, which are reproduced
below, together with SBA's report on actions taken in response to the recom-
mendations.
RECOMMENDATION NO. 1
The SBA should proceed as repidly as possible to remove from the SBIC program
all companies which do not conform to the Act or regulations pursuant thereto and
all officers and directors who may be guilty of malfeasance or nonfeasance, pur-
suant to the law.
In July 1966 SBA instituted vigorous action to rid the SBIC program of these
companies. As of June 10, 1966, there were 686 licensed SBICs. From July 1, 1966,
until April 30, 1968, 164 companies left the program, voluntarily or involuntarily
and 42 additional companies were in process of surrendering their licenses. SBA is
continuing the action to rid the program of undesirable companies. At April 30,
1968, there were 120 companies in various problem categories and most of these
will be leaving the program in the near future.
RECOMMENDATION NO. 2
The Small Business Administration and the Department of Justice should
promptly adopt procedures to allow the SBA to proceed more expeditiously on
civil matters in court and, more especirlly, to allow the SBA to proceed exclusively
and independently of the Department of Justice on any matter pursuant to
Section 311 of the Act. The SBA and the Department of Justice are requested to
report to the Committee on the Action taken.
On January 18, 1967, the SBA and the Department of Justice entered into a
letter agreement wherein subject to the supervisory control of the Department of
Justice and except in unusual circumstances, civil litigation arising out of the
SBI Act of 1958, shall be actually handled by attorneys of the SBA. The pro-
cedures to expedite the handling of such civil litigation was vlso agreed upon in
the letter agreement. A copy of the letter agreement is attached.
RECOMMENDATION NO. 3
The Department of Justice should take prompt r ction on criminal matters
referred to it by the Small Business Administration. If prosecution is declined, the
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SBA should be notified as rapidly as possible. If the case is to be litigated, it
should be prosecuted promptly and with vigor.
The SBA has cooperated with the Department of Justice in criminal matters
to facilitate prompt prosecution of these matters.
RECOMMENDATION NO. 4
The SBA should consult with representatives of the SBIC industry in an
endeavor to formulate a workable plan whereby the assistance of organizations
representative of the industry can be utilized to assist in policing the industry to
insure compliance with provisions of the Act and regulations adopted pursuant
thereto.
The SBA has consulted with representatives of the industry regarding the
enforcement of the Act and Regulations. In addition, the National Association
of Small Business Investment Companies has adopted a "Code of Ethics," "Trade
Practice Rules," and "Procedures for Enforcement of the Code of Ethics and
Trade Practice Rules" which are attached hereto.
RECOMMENDATION NO. 5
Amendatory provisions of the Small Business Investment Act as discussed in
this report should be considered by the appropriate legislative committee of
the Congress.
The SBIA was amended and became effective January 9, 1968. The dual types
of lending programs (Sections 302 and 303) have been replaced by one type of
lending program. This legislation provides 2-1 leverage to companies up to
$7,500,000. In addition, the amendments provide a 3-1 leverage on capital in
excess of $1,000,000 but not to exceed $10,000,000 if the company has sixty-five
percent of its investments in venture capital.
The amendments eliminate the option to a small business concern obtaining
capital from an SBIC to become a stockholder-proprietor of the SBIC.
RECOMMENDATION NO. 6
Immediate consideration should be given by the appropriate legislative com-
mittee to legislation which would amend the Internal Revenue Code to-
(a) allow bad-debt and reserve treatment on all types of financing instru-
ments acquired by SBIC's other than shares of stock or rights to acquire
stock.
(b) clarify the personal holding company surtax exemption now referred
to in code section 542(c) (8).
(c) liberalize the diversification requirements for SBIC's registered under
the Investment Company Act of 1940 that ekct to be taxed as regulated
investment companies, in order that small business investment companies
can operate as SBIC's while being permitted to pass through their income
to their shareholders without the payment of corporate income tax.
These provisions are included in the tax bill pending before Congress.
RECOMMENDATION NO. 7
Following completion of its examination of all SBIC's, the Small Business
Administration is directed to make a full report on the operation and management
of this program, together with recommendations, to the Congress.
Answered by letter dated 2-7-67.
ExHiBIT 1-A
SMALL BusiNEss ADMINISTRATION,
OFFICE OF TEE ADMINiSTRATOR,
Washington, D.C., February 7, 1~67.
Hon. JOE I. EVIN5,
Chairman, Select Committee on Small Business,
House of Representatives, Washington, D.C.
DEAR MR. CHAiRMAN: In its report to the House of Representatives, 89th
Congress, Second Session, the Select Committee on Small Business directed SBA,
following completion of its intensive examination program, to make a full report
to the Congress on the operation and management of the investment program.
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There is enclosed a list of actiors taken with respect to the investment program
during the period from May 1966, when I assumed the post of Administrator, to
December 1966.
Consolidated financial statements for the industry as of March 31, 1966, were
not yet available at the time of the hearings. I am pleased to enclose copies of these
statements.
We expect in the near future to have available the consolidated activities
report for the SBIC industry as of the close of its last fiscal year and consolidated
midyear financial reports as of Septembcr 30, 1966. They will be forwarded to you
upon publicatior.
We are developing and refining legislative recommendations for the program
and will furnish them to the Committee together with background and justifica-
tions as soon as necessary Administration clearances are obtained.
Sincerely yours,
BERNARD L. BOUTIN, Administrator.
ExHIBIT 2
TABLE 1.-TOTAL NUMBER AND AMOUNT OUTSTANDING, SEPT. 30, 1967
Number Amount
Equity securities (sec. 304):
Debt instruments with equity features 1, 769 $144, 961, 142
Capital stock 1, 862 86, 102, 647
Warrants for which separate costs have been established 214 610,492
Total equity securities 3, 845 231, 674, 281
Long-term loans (sec. 305) 6, 407 250, 109, 220
Total 10,252481,783,501
TABLE 11.-SIZE OF DISBURSEMENTS MADE, 6 MONTHS ENDED SEPT. 30, 1967
Disbursements
Size of principal amount of -
individual disbursements Loans Debt securities Capital stock 2 Total 2
Number Amount' Number Amount' Number Amount' Number Amount'
$5,000 and under 194 $499, 510 32 $84~ 666 149 $196,870 375 $781, 046
$5,001 to$I0,000 150 1,221,846 30 257 261 46 385,516 226 1,864,623
$10,001 to $25,000 305 5,426, 194 56 1,000,099 49 856, 676 410 7,282,969
$25,001 to $50,000 189 7, 292 496 43 1,707 546 52 1,920, 093 284 10, 920, 135
$50,001 to $100,000 117 8, 580, 793 30 2, 166, 628 27 1,778, 542 174 32, 525,963
$100,001 to$150,000 29 3,639,063 16 1,986,220 12 1,545,413 57 7,170,696
$150,001 to $250,000 20 3,987158 16 3,244 390 15 3, 104, 720 51 00, 336,268
$250,001 to $350,000 7 2, 055, 750 6 1,822 500 6 1,784 210 19 5,662, 460
$350,001 to $500,000 3 1,263,003 4 1,620,000 4 1, 798 669 11 4,681,672
$500,001 and over 5 3,210,811 4 3,014,091 9 6,224,902
Total 1, 019 37, 176, 624 233 13,889, 310 364 16 384, 800 1,616 67,450,734
Arithmetic average size~__~_-_ 36, 483 59, 611 45, 013 41,739
Loan and debt security amounts reflect the principal amount of related financing instruments, including any discount,
fees, or other charges; capital stock amounts reflect cost.
2 includes warrants, options, and other stock rights for which separate costs have been determined.
EXHIBIT 3
TABLE 111.-TYPES OF BUSINESS ASSISTED-OUTSTANDING BALANCES, SEPT. 30, 1967
Number Amount'
22 $785,424
3 110,686
7 199,355
10 1,470,963
Nonmanufacturing industries:
Agricultural services
Forestry - - -
Fisheries
Metal mining
See footnotes at end of table, p. 198.
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TABLE 111.-TYPES OF BUSINESS ASSISTED-OUTSTANDING BALANCES, SEPT. 30, 1967-ContInued
Number Amounti
Nonmanufacturing industries-Continued
Anthracite mining 8 $41,918
Bituminous coal and lignite mining 3 160, 400
Petroleum and natural gas (extracting, etc.) 124 4, 853, 582
Mining and quarrying, nonmetallic minerals 22 3, 700, 343
Building construction, general contractors 554 19, 333, 431
Other construction1 general contractors 96 4, 034, 456
Construction, special trade contractors 173 4, 146, 423
Railroad transportation 15 2, 834, 561
Local and suburban passenger transportation 26 1, 069, 130
Motor freight transportation and warehousing 63 2, 557, 837
Water transportation 38 1, 020, 214
Air transportation 39 2, 386, 584
Pipeline transportation 11 611, 173
Transportation services 20 779, 098
Communications 235 21, 118, 361
Electric, gas, and sanitary services 56 1, 390,212
Retail trade:
Building materials, hardware, and farm equipment 254 6,415,975
General merchandise 179 6,541,896
Food 598 11,113,784
Automotive dealers and filling stations 168 5,296, 292
Apparel and accessories 119 2, 868, 660
Furniture, home furnishings, and equipment 87 2,224, 479
Eating and drinking places 248 9, 280, 511
Miscellaneous retail stores - 165 4,014,195
Total, retail trade 1, 818 47, 755, 792
Wholesale trade 383 20,208,268
Security and commodity brokers, dealers, etc 5 96, 590
Insurance carriers 33 2,972,910
Insurance agents, brokers, and services 58 1,134,753
Real estate 2, 118 86, 867, 964
Combinations-real estate, insurance, law offices 21 1, 645, 290
Hotels, motels, camps, and other lodging places 374 16.652, 511
Personal services 121 2, 235, 143
Miscellaneous business services 364 16, 294, 779
Automobile repair, rental, and storage 101 3, 910, 347
Miscellaneous repair services 25 894, 843
Motion pictures 50 2, 302, 849
Amusement and recreation services 260 12, 969, 418
Medical and other health services 404 17, 238, 873
Legal services 8 47, 831
Educational services 35 885, 456
Museums, art galleries, botanical and zoological gardens 3 55, 000
Miscellaneous services 127 4, 636, 780
Unclassified 212 9, 850, 082
Total, nonmanufacturing 8, 045 321, 259, 630
Manufacturing industries:
Ordnance and accessories 6 475, 019
Food and kindred products 174 11,014,140
Textile mill products 34 1, 529,258
Apparel and other finished products made from fabrics and similar materials 43 1, 853, 187
Lumber and wood products, except furniture 52 2,833,214
Furniture and fixtures 54 1, 723, 816
Paper and allied products 34 2, 544,216
Printing, publishing, and allied industries 180 5,914,900
Chemicals and allied products 117 5, 780, 900
Petroleum refining and related industries 11 584, 026
Rubber and miscellaneous plastic products 85 4, 469, 631
Leather and leather products 30 3, 977, 663
Stone, clay, and glass products 64 2,607,382
Primary metal industries 54 6,324,225
Fabricated metal products, except machinery 180 18, 753, 380
Machinery, except electrical 245 16, 330, 470
Electrical machinery, equipment, and supplies 453 42, 527, 712
Transportation equipment 62 6, 303, 277
Professional, scientific, etc., equipment 176 13, 928, 518
Miscellaneous manufacturing industries 153 11, 048, 937
Total, manufacturing 2, 207 160, 523, 871
Total, all industries 10, 252 481,783, 501
1 Loan and debt security amounts reflect the principal amount of related financing instruments including any discount,
fees, or other charges; capital stock amounts reflect cost and include warrants, options, and other stock rights for which
separate costs have been determined.
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ExHIBIT 4
NASBIC CODE OF ETHICS
1. The business of each ~BIC shall be conducted at all times in full compliance
with the Small Business Investment Act of 1958, any amendments thereto, and
the Regulations issued thereunder by the Small Business Administration, and in
accordance with high standards of commercial honor and just and equitable
principles of conduct.
2. The constant goal of each SBIC shall be to improve the welfare of the small
business concerns which it serves.
3. Each SBIC shall promote and maintain ethical standards of conduct and
deal fairly and honestly with all small business concerns seeking its assistance,
with all companies to or with whom it makes loans or investments, with all other
SBICs, with the Small Business Administration and other Government agencies
having jurisdiction.
4. Each SBIC shall require its officers, employees, designees, and representatives
to abide by the Code, the Trade Practice Rules, the Procedures for their Enforce-
ment, and all rulings and orders issued pursuant to them; and all such officers,
employees, designees and representatives are as individuals hereby so bound.
5. In the administration of the Code and the Trade Practice Rules, it shall be
the purpose and object of this Association not to discriminate against any member
or licensee, nor to engage in any practices which may be considered as being in
restraint of trade~
6. Each SBIC shall comply with the Code, the Trade Practice Rules and the
Procedures for their Enforcement as they may from time to time be adopted or
amended and all rulings and orders made pursuant to them.
7. Unethical conduct shall be deemed to include any evasive device intended
to cloak noncompliance with the Act, Regulations, Code, Trade Practice Rules
or Procedures for their Enforcement.
NASBIC TRADE PRACTICE RULES
1. It shall be the duty and obligation ot each SBIC to strive at all times to
uphold the integrity, honor and reputation of the industry.
2. No SBIC shall malign, defame or unfairly criticize sny other SBIC in any
dealings with proposed client companies or otherwise.
3. If one SBIC asks anOther SBIC whether it has negotiated or is negotiating
with a proposed client company, the second SBIC shall disclose whether it has
or is and whether the matter is still open. Any further disclosures on the part of
the second SBIC shall be within its own discretion, and the decision of the first
SBIC to proceed with its own negotiation shall likewise be at its own discretion,
it being intended to foster free competition.
4. No SBIC may be used or permit itself to be used to promote the welfare of
or assist its officers, directors, stockholders, employees, designees or representa-
tives except insofar as. they may benefit from the success of the SBIC. This rule
shall not be deemed however to proscribe any investment or relationship which
has been approved in writing by the Small Business Administration, nor the
establishment of normal banking, business or professional relationships; nor
shall this rule be deemed to proscribe or prohibit the payment of professional fees,
directors' fees or other compensation for services, provided that a full disclosure
thereof is made in advance in writing to the officers and directors of the SBIC and
to the officers and directors of all participating SBIC's and other associates in the
investment.
5. Where two or more SBIC's participate in a loan or investment, the sponsoring
SBIC and all other participating SBIC's shall make full disclosure of all facts
known to them about the proposed client company and all relationships between
the proposed client company, its officers, directors, stockholders, employees,
designees or representatives with the sponsoring SBIC and other participating
SBIC's or any of their officers, directors, stockholders, employees, designees or
representatives.
C. SBIC's collaborating in a proposed loan or investment are bound not to
* i~,ompete with each other for that loan or investment and may not deal directly
with the proposed client company except on behalf of the group.
PAGENO="0204"
200
NASBIC PROCEDURES FOR ENFORCEMENT OF THE CODE OF ETHICS AND TRADE
PRACTICE RULES
1. Complaints of violations shall be forwarded to the Chairman of the Com-
mittee on Ethics and Trade Practices, who will have the responsibility, in con-
sultation with counsel to NASBIC, of deciding if there is an initial basis for further
investigation and action.
2. [f the decision is affirmative, a 3-man ad hoc investigating committee shall
be constituted to consist of the Chairman of the Committee on Ethics and Trade
Practices (or his designee), the President of the Regional Association having
jurisdiction over the SBIC or person complained against (or his designee), and if
either such Chairman or such President or their companies are involved in the
complaint then the President of NASBIC shall appoint such members; and the
two members so designated shall select a third.
3. The ad hoc committee shall promptly investigate and consider the facts.
The accused SBTC or person shall be under the affirmative duty to cooperate fully
and supply all facts and evidence requested, and may be required to do so under
oath; the accused SBIC or person complained against shall have the right to
counsel at all stages of the proceedings.
4. The committee shall reach its determination with all due diligence and shall
render a confidential report to the Chairman of the Committee on Ethics and
Trade Practices, who shall forward the report to the Executive Committee of
NASBIC for such action as may be appropriate, together with his recommenda-
tion. To the extent feasible, but bearing in mind the need to avoid publicity, the
Chairman shall consult with other members of the Committee on Ethics and Trade
Practices before making his recommendations.
5. The Executive Committee of NASBIC shall make the final determination
which shall be either dismissal of the complaint, censure, suspension or expulsion,
and shall also determine.whether its rulings shall be kept private or made public
and whether to report tl~em to the Small Business Administration.
EXHIBIT 5
SUMMARY OF SBIC LITIGATION REFERRED TO AND CLEARED BY CIVIL
DIVISION, DEPARTMENT OF JUSTICE
CIVIL CASES TRANSMITTED TO DEPARTMENT OF JUSTICE, AUG, 1, 1966, TO APR. 30, 1968
0 to 6 6 to 12 12 to 18 18 to 24 Total
Completed cases:
Subpena enforcement_ -
Other 47 25 5 77
Incomplete cases 18 14 12 5 49
Total 65 39 17 5 126
The above figures include 4 cases in which a civil complaint was transmitted to
the Department of Justice in addition to a criminal reference. The above figures
do not include 13 cases in which a criminal reference was made, but no civil com-
plaint transmitted.
Statistical analysis of SBIC's referred to Criminal Division, Department of Justice,
since inception of SBIC program
Prosecution completed 1
Prosecution declined 9
Pending 9
Total 19
The CHAIRMAN. Thank you, Mr. Brown, for a rather comprehensive
statement of a very important program of one of the constituent
agencies of SBA.
The original Small Business Investment Act, I believe, was passed
in 1958. This is 1968, 10 years later. SBA has had a 10-year period to
make that program become really effective as intended by Congress.
PAGENO="0205"
201
As I recall, over the years there were a number of smaller SBIC's,
there were some medium-sized SBIC's, and it is considered that there
will be some large ones. After 10 years, what is the condition of the
industry in this regard now?
Mr. BROWN. Mr. Chairman, of course, as I indicated, we have seen
a good ma~y of the smaller SBIC's leave the program because they
either had credit problems or had regulatory problems with the
agency which they couldn't solve. We still, of course, have a number of
small companies left in the program. And many of the smaller ones,
however, have grown through adding new capital. And our number of
larger c~pmpanies has increased. Out of the new licensees that have
come i~o the program in the past year the average is over $2 million
private êapital for each of them, which indicates that the average size
of the SBIC is growing considerably.
The CHAIRMAN. You do not have as many of the small SBIC's
today as was envisioned earlier?
Mr, BROWN. That is correct, Mr. Chairman.
The CHAIRMAN. How about the medium-sized SBIC's?
Mr. BROWN. Well, there are many medium-sized SBIC's, and I
think there always will be, Mr. Chairman.
The CHAIRMAN. Should we be anticipating that with you as Associ-
ate Administrator for Investment of the SBA the SBIC's will continue
to be few in number and large in composition?
Mr. BROWN. Well, that is essentially true. But in many of the
States involved, smaller States and States with rather small popula-
tion, it is always going to be the case that you are not going to have-
The CHAIRMAN. Mr. Brown, how long have you been Associate
Administrator of the SBIC program?
Mr. BROWN. Not quite a year, sir.
The CHAIRMAN. Is it your view that after the hearings of 2 years
ago, and a lot of irregularities have been corrected and improvements
made, that the program today is functioning much better, as intended
by Congress?
Mr. BROWN. Yes, Mr. Chairman. I think there is no doubt in my
mind about that. And we are consistently making improvement, and
I think there has been a tremendous improvement in these 2 years,
due largely to some of the hearings and the legislation coming, out
of them.
The CHAIRMAN. Do you think Mr. Moot's predecessor, Mr,. Boutin,
recognized that he was confronted with the problem, and Mr. Grem-
berg was brought in to make corrections, and you have the prob~ems
solved now; is that the rosy picture you are presenting to the' committee?
Mr. BROWN. We wouldn't want to say that, Mr. Chairman. But we
think we are well on the way to continue solving them. I think Mr.
Greenberg, as the Administrator indicated, did a tremendous job in
his time, and I was fortunate to be his deputy, and sort of learned
under him. I think we are continuing to make this kind of improve-
ment. But we are still going to have to make some more.
The CHAIRMAN. Mr. Brown, how many times has the SBIC Act
been amended since it was orginally passed by Congress?
Mr. BROWN. I believe five times, Mr. Chairman.
The CHAIRMAN. Five or six times. Will you prepare for us a tabu-
lation in this regard and supply it for the record?
Mr. BROWN. We will supply that for the record.
PAGENO="0206"
202
The CHAIRMAN. Give the number and the date of the amendments
to the SBIC program as it was originally passed.
Mr. BROWN. We will be glad to do that.
(The information referred to follows:)
AMENDMENTS TO THE SMALL BUSINESS INVESTMENT ACT AS OF MAY 29, 1968
The Small Business Investment Act of 1958, Public Law 85-699, has been
amended six times since it was approved on August 21, 1958. The following is a
list of these amendments:
1. Small Business Investment Act Amendments of 1960, Public Law 86-502,
which were approved on June 11, 1960.
2. Small Business Investment Act Amendments ot 1961, Public Law 87-341,
which were approved on October 3, 1961.
3. Small Business Investment Act Amendments of 1963, Public Law 88-273,
which were approved on February 28, 1964.
4. Housing and Urban Development Act of 1965, Public Law 89-117, Section
316 amending the Small Business Investment Act of 1958 by adding Title IV,
Lease Guarantees, approved August 10, 1965.
5. Small Business Investment Act Amendments of 1966, Public Law 89-779,
which were approved on November 6, 1966.
6. Small Business Investment Act Amendments of 1967, Public Law 90-104,
which were approved on October 11, 1967.
The CHAIRMAN. You indicate that about 164 SBIC's have left the
program. Did they leave voluntarily or did they leave as a result of
investigation, examination, and action by you and your predecessors
as Administrators of the program?
Mr. BROWN. I would think the large majority left because of the
latter, Mr. Chairman, because of our regulatory actions, and because
of credit problems. A few left voluntarily, but they were in the minor~
ity.
The CHAIRMAN. You indicate that there are 537 licensees today,
and you are going to have in the future about 375. So you are going to
hone these down to an even lesser number?
Mr. BROWN. We still have about 120 of our present licensees that
are in some problem category. And we feel that eventually most of
these will be going out of the program, which will bring us down to a
350 to 400 base.
The CHAIRMAN. What is the nature of the problem-that Congress
doesn't pass enough amendments and the SBIC's are not provided
enough funds?
Mr. BROWN. Part of the problem, of course, Mr. Chairman, is that
many of these companies that we are talking about have been having
credit problems because of inadequate size; they are not just big
enough, many of them, to be profitable and to make it. Many others
are just not going along with the act and regulations. And there are
very significant violations that we can't permit.
The CHAIRMAN. Who are they serving, these SBIC's?
Mr. BROWN. Their shareholders, of course, the people that own
them. But they are serving the needs of small business, we hope,
along with it.
The CHAIRMAN. Mr. Moot.
Mr. MooT. I wanted to be sure that the record indicated that these
companies are vehicles to provide assistance to the small business
community, which is our primary mission.
The CHAIRMAN. That is the intent of Congress, and that is the
intent of the Administrator. But are they doing it?
PAGENO="0207"
2O~
Mr. BROWN. We think that generally, Mr. Chairman, they are
doing so.And we think the figures, which we admit are not as complete
as we would like to see them, indicate-
The CHAIRMAN. My question is: Ultimately is it serving small
business, or are they serving big business, are they serving growth
industries?
Mr. BROWN. We feel like they are serving small business, Mr.
Chairman.
Mr. MooT. I might add, Mr. Chairman, that admittedly so far
the incomplete information system we have-which is getting better
with the help of the association, from which you will hear a little
later on-indicates that the $1.2 billion of financing which has gone
down through 27,000 separate financings from the Small Business
Investment Company, industry is doing a good job for small business
in the areas of growth industry, primarily in the manufacturing
industries, and in the new innovation industries.
I might point out that, if we extrapolate the employment growth
that has resulted from 1,381 reporting small business companies that
we have looked at recently, which showed that an 11,800 employment
growth is evidenced, that if we extrapolate this to the 27,000 financing,
we would credit this industry with having improved the employment
control over 200,000 jobs and positions during this period prior to
current financing.
I think that the small business concerns that they have reported to
us progress on indicate increased profit growth, increased sales growth,
net worth growth, total asset growth, so that we do consider that the
small business community, to the extent the industry is providing
equity capital and long-term debt financing, is doing a good job. What
we would like to do is to see more private financing being combined
with the Treasury dollar.
The CHAIRMAN. Mr. Administrator, this is a nearly three-quarter-
of-a-billion-dollar industry now: $650 million. And the Government
as a taxpayer has put a quarter of a billion dollars into these companies.
And they in turn have placed about another-
Mr. MooT. A billion in total, sir, over the period of the industry.
You see, there was a turnover of the investment.
The CHAIRMAN. Do you consider this a billion-dollar industry or
three-quarters-of-a-billion-dollar industry today?
Mr. MooT. I like to consider that the impact that this industry has
made on the small business community totals $1,200 million because
that is the rollover of the financing.
The CHAIRMAN. Mr. Brown, what is the number of examinations
that are made of these institutions that are licensed by your?
Mr. BROWN. Well, each company is now examined once a year.
And in the past year we bad a total of 342 examination reports for-
warded. And each one of these companies are examined every 12
months.
The CHAIRMAN. Besides the liberalizing legislation, Congress has
passed legislation to strengthen the hand of the SBA in administering
the program with additional powers of examination and other policing
and for proceeding to remove problem companies. This program held
forth great hope and great promise. It was heralded as a great savior
at the time it was passed. And we have watched it over the years.
Many of us do not really see the. impact, because it pyramided into
larger and larger, bigger and bigger companies; they consolidated,
PAGENO="0208"
204
they merged, they bought the stock of competing companies. And we
are concerned to know whether or not they are really serving the
original intended declared purpose of Congress.
And I think it is one of your missions, Mr. Brown, to see that it
serves that purpose, that it not just be made a profiteering and pyra-
miding enterprise.
Mr. BROWN. We intend to see that that happens, Mr. Chairman.
The CHAIRMAN. You state here that the Small Business Adminis-
tration proceeds in the courts against these undesirable companies.
Does the SBA or the Department of Justice proceed?
Mr. BROWN. Well, the SBA, due to an understanding between the
Small Business Administration and the Department of Justice, pro-
ceeds with their assistance, but SBA proceeds in civil litigation in these
cases.
The CHAIRMAN. We need to let SBA proceed, because the Depart-
ment of Justice is not proceeding generally in criminal matters, let
alone some of the civil matters. I think SBA is doing a better job.
Mr. BROWN. Thank you, sir.
The CHAIRMAN. That is one man's opinion.
On page 6 you speak of SB1C investments. This includes $481.8
million in outstanding loans and investments in small business. Is this
SBIC's investment in small business?
Mr. BROWN. Yes, sir, the ones that are still standing, the SBIC's
investment is over $481 million.
The CHAIRMAN. In other words, when an industry needs capital
the SBIC has invested into it to this extent?
Mr. BROWN. That is right.
The CHAIRMAN. On the bottom of page 7 and the top of page 8 you
project a very healthy industry-gross revenues increased 42 percent,
profits showed an increase of 100.7 percent, from $11.1 million to
$22.2 million.
Mr. MooT. Mr. Chairman, those are small business concerns. They
are portfolio concerns.
The CHAIRMAN. This is the result of SBIC's work?
Mr. MooT. Yes. This is what we were discussing just a moment
ago, you and I, in terms of what good the companies were doing?
The CHAIRMAN. Short-term borrowings increased 22.2 percent, from
$113.4 million to $138.6 million. These are borrowings--
Mr. MooT. Of the small business concerns.
Mr. BROWN. From banks and other sources which they could not
have made if they hadn't had this long term financing from the SBIC.
The CHAIRMAN. The SBIC funds are seed money which generates
other funds.
Well, I think we touched briefly on the size. What about geography
and area? How are they dispersed? Could you supply for the record
an outline map of the United States with pinpointing dots where
these are located?
Mr. MooT. We can, sir.
We do have a problem in this area. We do need to get a better
distribution in the industry. And the industry is working with us to
do this. We need to make sure that the rural and certain of the States
that are not now covered are covered with the advantage of investment
equity and investment capital.
(The information referred to follows:)
PAGENO="0209"
LOCATION OF 439 SBIC's
April 1, 1968
ann Lflt~ 38 2 Noro~ and
6 2
1 !~ If' ~
bsAngens~.~ ~ 2 / `~ Qk~ahorna ~ \ * ~ `,..
and v~cim1y-23 * 12
* Dai~as - Forth Worth-i5 * 3 * Atlanta and vicinity-9
S
1~ P ~ -i
PAGENO="0210"
206
The CHAIRMAN. You mentioned on page 3 the problems of the day.
What are they, other than the desire for more liberalizing legislation by
Congress and tax writeoffs?
Mr. BROWN. We still feel that we need to encourage the SBIC's to
make more equity-type investments as opposed to straight loans. We
still feel, as the Administrator indicated, that we have still got to
increase geographic coverage. And we have eight States that have no
SBIC's active right now. We want to get the other States served,
although they are served~usually from the outside. We have invest-
ments in all 50 States but we feel like this is an area-and, of course,
increasing private capital coming into the program.
The CHAIRMAN. Mr. Brown, at the bottom of page 10 and the top of
page 11 you review the maximum SBA loans to SBIC's. The maximum
amount of SBA loans to an SBIC has increased from $4 to $10 million.
Now, you can make loans or investments up to $10 million?
Mr. BROWN. Under the old legislation, Mr. Chairman, a company
could borrow up to $700,000 in debentures. SBA would buy $700,000 in
debentures of that company, no matter what the size; if a company was
$700,000, SBA could buy $700,000, and if it was $5 million private
capital they could still buy $700,000 of debentures. And they were
eligible for up to $4 million in loans, operating loans, in addition to
this, on the basis of one-half of the combined total of the private
capital and the subordinated debentures that were bought.
Thus, as the example illustrates, an SBIC having $3~ million of
private capital under the old rules would be eligible for only $2.8
million, $700,000 of debentures, and $2.1 million of operating loans.
And now that same SBIC can borrow 2 to 1 on that $3~ million, up
to $7 million. And if invested 65 percent or more in what we cali
venture capital, those with a million dollars or more can get a third
dollar. So that that same company that could only borrow $2.8 million
under the old legislation, under the new legislation provided by Con-
gress can borrow $934 million.
The CHAIRMAN. So that today, in the formation of a new SBIC,
SBA would invest initially how much, a maximum of how much?
Mr. BROWN. A maximum of $10 million if the company is big
enough.
The CHAIRMAN. And how much is the-
Mr. BROWN. Two to one on their ordinary investments and their
portfolio. And if they have 65 percent in what we call venture capital,
and if they are a million dollars or over, they get a third dollar of
leverage. A company of $500,000 or more-
The CHAIRMAN. Do you consider that the great number of SBIC's
today are active, sound, and profitable institutions?
Mr. BROWN. Yes, sir; we think so. The ones that we don't feel like
are active or sound, we are going to proceed to get out.
The. CHAIRMAN. I see that your regulations deal with inactive
companies. We want them to be active and helpful. Suppose they
haven't made any loans in 6 months, or a year. They have their
capital structure there, but they are not busy. They are sort of an
adjunct to a bank, or some construction company. What do you do
with an inactive company?
Mr. BROWN. We have just received instructions from Congress on
this. And we have proceeded to issue regulations on inactivity, where
a company must not have above a certain amount of money in. cash.
PAGENO="0211"
207
And over a year's period they have to invest so much of their money
if they have idle funds. So~we are not any more letting SBIC's sit out
there, even if they don't owe the Government any money~ with idle
funds. As SBIC's we are going to make them make loans or get out of
the business.
Mr. MORTON. Will the chairman yield?
The CHAIRMAN. I yield, Mr. Morton.
Mr. MORTON. Mr. Brown, do you have a double standard on
activity, one for the SEIC that has a high percentage of investment
in equity and another for the SBIC that has a low percentage of
investment in equity?
Mr. BROWN. No, Congressman; we don't.
Mr. MORTON. If you have 65 percent invested in venture-capita
and equity-type investment, how can you be active without trading
the equity?
Mr. BROWN. We make allowances for that, Congressman. If an
SBIC is fully invested, they are not penalized. It is only when they are
sitting there with cash and idle funds that they are penalized.
Mr. MORTON. That is what I wanted you to say.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Brown, you referred in your testimony to the
advisory board. Will you supply for the record the names of the
members of the advisory board, how many, and a little information
on them?
Mr. BROWN. I would be happy to do so, Mr. Chairman.
The CHAIRMAN. How many members of the advisory board?
Mr. BROWS. There are 10 members.
The CHAIRMAN. Are there any small businessmen on this advisory
board?
Mr. BROWN. Well, we have none that are in small businesses at the
present time. But many of them have been small businessmen before
they got into the industry, into the business of an SBIC. We have also
people in the academic world on the board, and people outside of the
SBIC industry. And many of them have been in small business.
The CHAIRMAN. Will you supply the list and their connections for
the record?
Mr. BROWN. I will be glad to do so.
(The information referred to follows:)
NATION4L SMALL BUSINESS INVESTMENT COMPANY ADVISORY CoUNcIL
Chairman of the Council, Grogan Lord, President, Texas Capital Corporation,
P.O. 139, Georgetown, Texas 78626.
Professor Frank L. Tucker, Harvard Graduate School of Business Administration,
Harvard University, Soldiers Field, Boston, Massachusetts 02163.
Mr. Frank G. Chambers, President, Continental Capital Corporation, 255
California Street, San Francisco, California 94111.
Mr. Milton D. Stewart, President, Small Business Investment Company of New
York, 64 Wall Street, New York, New York 10022.
Mr. Stanley M. Rubel, S. M. Rubel & Company, 53 W. Jackson Boulevard,
Chicago, Illinois 60604.
Mr. Elliott Davis, President, Alliance Business Investment Company, McFarlin
Building, 11 East 5th Street, Tulsa, Oklahoma 74103.
Mr. John A. Arndt, President, First American Investment Corporation, 1700
Commerce Drive, N.W., Atlanta, Georgia 30318.
Robert L. Banner, Vice President, Capital Investment, Inc., 238 West Wisconsin
Avenue, Milwaukee, Wisconsin 52303.
Mr. John M. Bryan, President, Bryan Capital, Inc., 2205 Russ Building, San
Francisco, California 94104.
PAGENO="0212"
208
Mr. Louis L. Allen, President, Chase Manhattan Capital Corp., 1 Chase
Manhattan Plaza, New York, New York 10015.
The CHAIRMAN. You mentioned the improvements in regula-
tions, and I marked them here as you testified. First, specific au-
thority for SBIC's to guarantee to institutional lenders debts of
small portfolio concerns. Would you elaborate on that?
Mr. BROWN. Well, it isn't one that has been used to any extent
at all. But the SBIC's are allowed to guarantee debts of the small
business concerns that they loan to, from banks or other lending
institutions.
The CHAIRMAN. In other words, if a small business concern has
accumulated debts, and the SBIC has J)reviously made some loans
or investment in it, SBA can take a second action to guarantee these
debts?
Mr. BROWN. It is a guarantee, Mr. Chairman; that is right.
The CHAIRMAN. And give them additional support?
Mr. MOOT. Its primary purpose, Mr. Chairman, is to extend the
private sector financing base whereby a small business investment
company can say to a bank, "If you will provide funds to this small
company in addition to us, we will guarantee that loan from the
bank to the small business investment company." In a small way it
is the same way that SBA works directly with a small business con-
cern, we will guarantee a bank loan.
The CHAIRMAN. No. 2, the regulations governing control of small
business concerns by an SBIC have been tightened. Do you want
to elaborate? In what particular? What is control?
Mr. BROWN. Well, any time-and that is a pretty difficult question,
Mr. Chairman. Generally we consider 50 percent as control of a small
business concern. But in many cases this is not the case, where you
have large holdings of a company. But we have been concerned with
small business concerns being controlled by SBIC's, because this was
not the intent of the program. And we have tightened our regula-
tions where SBIC's, although they still occasionally have to get into
control, because of problems of the small business concern, they have
to put in more money to keep them alive, they have to now divest
within a reasonable period of time, and have to submit to SBA a
written statement showing us how they are going to get out of control,
and within a reasonable period of time.
The CHAIRMAN. How many control cases have you had including
banks or building contractors, and how many have divested them-
selves of control once they gained control?
Mr. BROWN. You mean bank SBIC's, Mr. Chairman?
The CHAIRMAN. Yes.
Mr. BROWN. I will have to supply that for the record. I don't have
it broken down.1
The CHAIRMAN. You must know how many cases of control and
divestiture you have had.
Mr. MooT. What we required, Mr. Chairman, as of March 31,
most recently, is that all companies with control situations submit
plans for the divestiture of such companies, so that we do have
statistics. Whether we have them readily available by type of SBIC,
I don't know.
The CHAIRMAN. Do you know overall how many such cases in
numbers?
`Seep. 210.
7
PAGENO="0213"
209
Mr. MooT. Yes, sir; we do have that information.
Mr. BROWN. We will try to get it for you, Mr. Chairman.
The CHAIRMAN. Mr. Conte?
Mr. CONTE. Will you yield while he is looking for that?
The CHAIRMAN. Yes.
Mr. CONTE. What has been the reaction of the SBIC's in regard to
this position of not being able to control the small business concerns?
1\lr. BROWN. I think it has been very good, Mr. Congressman. Most
of them realize that this program wasn't intended for a SBIC to
control those small business concerns, they were supposed to be inde-
pendent small businesses, and be helped by financing.
And the SBIC industry, I think, has been very appreciative of this.
And they feel like as long as we allow, when it is necessary for them
to get into control, as long as we allow sufficient time for divestiture,
we haven't had too many problems about that.
Mr. CONTE. That is interesting, because you would think the feeling
might be the other way around. When you are putting quite a bit of
money into a small business which is being mismanaged, you would
want to get in there and control that particular business.
Mr. BROWN. But there have been a few SBIC's that have gone
out of the program, because the number of controlled companies
were so large that they felt it was better to go out of the program
and into operating companies, holding companies, than stay in our
programs
The CHAIRMAN. You may supply this data for the record.
Can you tell us how many SBI's are controlled by banks?
Mr. BROWN. Yes, we can tell you that: 72 are either wholly or
partially controlled by banks out of a total number of SBIC's of 537.
The C~[AIRMAN. Do you or the Administrator envision that that was
~one. ~oLthe original intents of Congress?
Mr. MooT. We have felt right along, Mr. Chairman, that Congress
expressed the intent for bank participation in this program by placing
the limitation. And, of course, this has been the limitation that we have
required in our regulations. But within that limitation we have felt
right along that if we could get private sector funding we could also
do the job without as much Treasury impact, because banks have a
greater availability of funding.
The CHAIRMAN. Mr. Administrator, that wasn't exactly my ques-
tion. We want to get venture capital for small business, and we want
to get private capital. And certainly Congress intended that the banks
should advance some of the money. But my question was, was it in-
tended that the banks should control it?
Mr. MooT. I am sorry, I apologize for misunderstanding your
question.
The answer is obviously no. And this situation has been corrected.
The CHAIRMAN. Counsel Mitchell has a question.
Mr. MITCHELL. Mr. Administrator, I believe in Public Law 90-104
that it was written into the act that a bank could not own 50 percent
or more of the stock.
Mr. MooT. Forty-nine percent or less, it has to be.
Mr. MITCHELL. And that act was to take effect on January 9, I
believe. Could you tell us how many banks applied for licenses in the
period of time from when that legislation was passed and the time it
went into effect?
PAGENO="0214"
210
Mr. MOOT. Yes, sir. From between October, when the legislation
was passed, and January 9, we had bank applications numbering--
Mr. BROWN. Out of the last year we have six bank SBIC's that
came into the program.
Mr. MooT. And there were six licenses granted in that interim
period between October and January.
Mr. BROWN. That is right.
Mr. MITCHELL. These six licenses to banks, were they instances
where banks controlled or owned the SBIC's?
Mr. MooT. They were control situations.
Mr. MITcHELL. After the legislation was passed which went into
effect January 9, you licensed six banks to have control of small
business investment companies?
Mr. MooT. Yes, Mr. Mitchell. But, lest the record be incomplete
here, we did this after discussion with the legislative committees of
Congress, because we felt that our legislative position was such that
we had no choice but to accept and process applications during this
period of time. The legislation was not retroactive, it was a forward
date. So we didn't feel as though we had any option in this particular
case.
The CHAIRMAN. After the January 9 date, are you then going to
proceed with divestiture of control?
Mr. MOOT. No, sir; there is no requirement for divestiture of control
of those companies that it did control as of January 9.
The CHAIRMAN. The third reform in regulation is relating to self- ~
dealing. You tighten the conflict-of-interest regulation to prevent
possible self-dealings. That situation, I judge, has been substantially
improved.
Mr. BROWN. Yes, it has, Mr. Chairman. The number of violations is
going down considerably because of our tight regulations.
Incidentally, Mr. Chairman, if I may, I would like to supply it for
the record.
The CHAIRMAN. Without objection, it will be received and inserted
at this point.
(The information submitted at this point pertains to control
situations and is as follows:)
SBIC PROGRAM-CONTROL OF SMALL BUSINESS CONCERNS BY SBIC'S
1. Alleged violations of the control regulation from Aug. 1, 1966, through Apr. 30, 1967:
Number of
companies
examined
Total
violations
alleged
Alleged
violations
of control
regulations
Percent of
total
violations
a. Aug. ito Dec. 31, 1966
b. Jan. ito Dec. 31, 1967
c. Jan. ito Mar. 31, 1968
434
223
113
1,348
707
394
72
25
15
5.3
3.6
3.8
d. Total
770
2,449
112
4.6
2. Number of actual and violative control situations as of Apr. 30, 1968:
a. Total existing violations 42
b. Number of SBIC's involved 25
3. Number of SBIC's controlled by banks: 1
a. Wholly owned by banks 2 20
b. Partially owned by banks 2 52
c. New licensees, bank owned (licensed subsequent to September 30, 1967, reporting date) 6
d. Total 78
1 The information concerning the number of SBIC's controlled by building contractors is not available. Also, the number
of bank controlled SBIC's who have control situations violative of the regulations is not available.
2 Reporting as of Sept. 30, 1967.
PAGENO="0215"
211
Mr. BROWN. There have been 97 violations of control out of 2,055
reported violations from August 1966 through December 31, 1967.
And we are proceeding on these, too-many of them have been
corrected, and the others are being divested at the present time.
The CHAIRMAN. And what percentage is that?
Mr. BROWN. You mean of the total number of violations?
The CHAIRMAN. The violations of the companies as compared with
those charged.
Mr. BROWN. There were 97 violations. But I don't have the number
of companies involved. There are certainly many less, because many
of the SBIC's had more than one violation.
The CHAIRMAN. Hasn't this industry had an unusual amount of
violations and regulatory problems, and it has had a rather bad side,
so that even the stock on the market has dropped? What is the situa-
tion with respect to the market value of securities of the SBIC's
today?
Mr. BROWN. Well, of course, you are right about the fact that back
a couple of years ago the publicly held SBIC's went down tremen-
dously. And during the cleanup period, of course, it continued to stay
down. But I think most of the industry now feels that the market has
come up greatly in the `last 2 years, and they feel that even though
that was a tough period to go through, in the long run, it has been
healthy for the industry. And we feel like the image-
The CHAIRMAN. How many of the SBIC stocks are sold on the big
board today?
Mr. BROWN. None of the big board. There is one on the American
Exchange.
The CHAIRMAN. Only one going public?
Mr. MOOT. No.. There are 36 public companies, `but only one is on
either of the boards. And that is on the American Exchange.
The CHAIRMAN. What about the regulations with respect to early
warnings to SBA in case of significant capital impairment.
Mr. BROWN. Well, we wanted to make `sure that none of these
`companies got into capital impairment situations before we knew
about it. And so we have requirements for the SBIC's when they
have information showing that they are reaching a point of capital
impairment to give us information to `that effect.
First, we go in every year and ask them and bring it up at that
time. But we have required them to give us that information when
they have reached the 35-percent capitally impaired point. That is
just the private capital.
The CHAIR1~[AN. Mr. Brown, on page 18-and we are rapidly going
through a review of ~our'statement-you throw out these questions:
What are the respective roles of public SBIC's, bank SBIC's, and
closely held or family-type SBIC's, and specialized types?
Do you have other categories in mind?
Mr. BROWN. Well, certainly that comprises most of the total, most
of the SBIC's in the program are either closely held---
The CHAIRMAN. They serve the general declared purpose of
Congress but in different areas?
Mr. BROWN. That is right, Mr. Chairman.
The CHAIRMAN. Any questions, Mr. Conte?
Mr. CONTE. Do you feel, Mr. Brown, that there are sufficient rules,
regulations and controls with regard to self-dealing?
PAGENO="0216"
212
Mr. BROWN. I believe there are at the present time, Mr. Congress-
man. I think they have been helped in this regard by the new amend-
ments, the new definition of associate that has been put out. And we
feel like that at present we have sufficient legislation.
iVir. CONTE. I must agree with the chairman that a lot of good
has come out of our hearings in 1966 in this field, for example, the
increased cooperation with SBA and the amendments that have been
adopted. There was a rather sticky situation during those hearings.
What has been the net loss to SBA of SBIC funds?
Mr. BROWN. Just a few thousand dollars have been actually
charged off. Of course, we have reserve losses, as I indicated to you,
of about $443/~ million. But this doesn't indicate estimated losses,
this is just our SBA reserve for possible losses.
Mr. CONTE. You must have a "ball park" figure, though. When
the company is in receivership, it is gone, isn't it?
Mr. BROWN. That is right. We have some indication by the com-
panies that are in liquidation, and what has already been recovered
from those companies.
Mr. MooT. This is an area, Mr. Conte, where our experience
has been a good recovery. For example, during the fiscal year 1968
there have been 16 cases of completed liquidated and recovery. And
we have had 100 percent recovery of the Government dollars in those
cases. The overall situation in terms of-we have in liquidation at
the present time 75 SBIC's, whose indebtedness to SBA is $29,200,000~
Mr. CONTE. That was about the same figure we had in 1966. It
was $20 million, if I remember correctly.
Mr. MOOT. Yes, sir.
With the processing through of these companies-and as Mr. Brown
indicated, there are still behind this another 120-some odd companies
that have problems. And with the purification, this figure will probably
stay that way for a period of time. This doesn't mean that it will stay
static, but there will be companies liquidated and new problem
companies entering it until we get down to the hard core.
The CHAIRMAN. I think it would be appropriate to place in the
record the names of the active SBIC companies and their locations.
Mr. MOOT. We will be happy to.
The CHAIRMAN. I don't think we need to list in the record those that
are out of business.
(The information referred to follows:)
Note: This is a list of all small business investment companies whose licenses,
issued by SBA, remain outstanding except those companies that are in process of
surrendering their licenses or are subject to legal proceedings, which may have
the effect of terminating their activity as small business investment companies.
This list does not purport to characterize the relative merits as investment com-
panies or otherwise, of these licensees, inclusion on this list may, in no way,
be construed as approval of a company's operations or as a recommendation by
the Small Business Administration.
PAGENO="0217"
213
SMALL BUSiNESS INVESTMENT COMPANIRS, APRIL 1, 1968
ALABAMA
Alabama Capital, Inc., 409 Leeman
Ferry Road, SW., Huntsville, Ala.
35801.
Business Investors, Inc., 2233 Fourth
Avenue North, Birmingham, Ala.
35203.
Investment Capital Corp., 57 Adams
Avenue, Montgomery, Ala. 36103.
ALASKA
Alaska-Pacific Capital Corp., Suite 710,
425 G Street, Anchorage, Alaska
99501.
ARIZONA
First Southwest SBIC, 1611 East
Camelback Road, Phoenix, AriZ.
85016.
SB Capital Arizona, LtcL, 19 Guaranty
Bank Bldg., Phoenix, Ariz. 85012.
CALIFORNIA
ABCO Equity Funds, Inc., 9220 Sunset
Boulevard, Suite 222, Los Angeles,
Calif. 90069.
All State Capital Co., 405 Montgomery
Street, San Francisco, Calif. 94104.
AMCO Capital Corp., 703 Market
Street, San Francisco, Calif. 94103.
ANA SBIC, Inc., 2122 Market Street,
San Francisco, Calif., 94114.
Bankers SBIC, 301 20th Street, Oak-
land, Calif. 94612.
Bay Area Growth Corp., 311 Mac-
Arthur Boulevard, San Leandro,
Calif. 94577.
Berkeley Science Capital Corp., 260
California Street, Rm. 1230, San
Francisco, Calif. 94111.
Bryan Capital, Inc., 2205 Russ Build-
ing, San Francisco, Calif. 94104.
C. S. & W. Investment Co., 5758
Broadway, San Francisco, Calif.
94611.
California Equity Corp., 650 California
Street, San Francisco, Calif. 94108.
California Growth Capital, Inc., 1717
North Highland Avenue, Los Angeles,
Calif. 90028.
California-Northwest Cap Co., 2210
S Street, Eureka, Calif. 95501.
Cal-West Capital Corp., 260 California
Street, San Francisco, Calif. 94111.
Capital City Equity Co., 2509 South
Broadway, Santa Ana, Calif. 92701.
City Capital Corporation, 9255 Sunset
Blvd., Los Angeles, Calif. 90069.
Columbia Capital Corp., 3700 Whitney
Ave., Sacramento, Calif. 95821.
Comstock SBIC, 235 Montgomery
Street, San Francisco, Calif. 94104.
CALIFORNIA--ContIliued
Continental Capital Corp., 255 Cali-
fornia Street, San Francisco, Calif.
94111.
Contra Costa Commerce Corp., 3663-A
Mt. Diablo Blvd., Lafayette, Calif.
94549.
Developers Equity Cap Corp., 9348
Santa Monica Blvd., Beverly Hills,
Calif. 90210.
Diablo Capital Corp., 114-A Buchanan
Circle, Pacheco, Calif. 94553.
Diversified Equities Corp., 625 Market
St., Suite 1300, San Francisco, Calif.
94105.
East Bay SBIC, 2905 Telegraph Avenue,
Berkeley, Calif. 94705.
East-West Capital Corp., 1942 Shattuck
Avenue, Berkeley, Calif. 94704.
Edvestco, Inc., 150 Isabella Avenue,
Atherton, Calif. 94025.
Equity Capital Corp., 44 Montgomery
Street, San Francisco, Calif. 94108.
First SBIC of California, 215 West
Sixth Street, Los Angeles, Calif.
90014.
First SBIC of Los Angeles, 611 North
Alvarado Street, Los Angeles, Calif.
90026.
Fresno SBIC, 5300 No. Fresno St.,
Box 5130, Fresno, Calif. 93726.
Gibraltar Capital Corp., 703 Market
Street, Room 1000, San Francisco,
Calif. 94103.
Goodwin SBIC, 1200 1st Natl. Bldg.,
5th & B St., San Diego, Calif. 92101.
Greater California Cap Corp., 5340
W. 102nd St., Box 45055, Los Angeles,
Calif. 90045.
Growth Assistance Co., 2821 Telegraph
Avenue, Berkeley, Calif. 94705.
H. & R. Investment Capital Co.,
801 American Street, San Carlos,
Calif. 94070.
Interstate Capital Corp., 2958 W.
Seventh Street, Los Angeles, Calif.
90005.
Judson-Murphy Capital Corp., P. 0.
Box 4335, Bayshore Sta., Oakland,
Calif. 94623.
Krasne Fund for Small Business, 9350
Wilshire Blvd., Suite 416, Beverly
Hills Calif. 90212.
Lyon áapital Corp., 800 Welch Road,
Suite 117, Palo Alto, Calif. 94304.
Mapleton Capital Corp., 9107 Wilshire
Boulevard, Beverly Hills, Calif. 90211.
Merchants Equity Co., 1024 Jay Street,
Sacramento, Calif. 95814.
North Coast Capital Corp., 410 Peta-
luma Blvd., South Petalurna, Calif.
94952.
Olympic Capital Corp., 9300 Wilshire
Blvd., 6th Floor, Beverly Hills,
Calif. 90212.
PAGENO="0218"
214
CALIFORNIA-Continued
P. M. Investment Co., 601 California
Street, Rm. 603, San Francisco,
Calif. 94025.
Professional SBIC, 5979 West Third
Street, Los Angeles, Calif. 90036.
Redwood Empire Capital Corp., 1801
Harrison Street, Oakland, Calif.
94612.
Roe Financial Corp., 9885 Charleville
Blvd., Los Angeles, Calif. 90212.
Small Business Enterprises, 300 Mont-
gomery Street, San Francisco, Calif.
94104.
Maryland Capital Corp., 116 Mont-
gomery St., Suite 617, San Francisco,
Calif. 94805.
North American Capital Corp., 55
River Street, Suite 305, Santa Cruz,
Calif. 95060.
Northern California SBIC, 2235 Grant
Road, Los Altos, Calif. 94022.
Orange Coast Capital, Inc., 4533 Mac-
Arthur Boulevard, Newport Sch,
Calif. 92664.
Palm Springs SBIC, 1037 North Palm
Canyon Dr., Palm Springs, Calif.
92402.
R. & D. Capital Co., 2700 Merced
Street, San Leandro, Calif. 94577.
Regent Investment Corp., P. 0. Box
931, Walnut Creek, Calif. 94697.
San Joaquin SBI Corp., P. 0. Box 1344,
Bakersfield, Calif. 93302.
Small Business Financing, Inc., 3815
Marconi Avenue, Sacramento, Calif.
95321.
Southwestern Capital Corp., 1010 Sec-
ond Avenue, Suite 2005, San Diego,
Calif. 92101.
Space Age SBIC, 1330 Lincoln Ave.,
Room 309, San Rafael, Calif. 94901.
Sutter Capital Company, 343 El Camino
Real, So. San Francisco, Calif. 94080.
Sutter Hill Capital Company, 2600 El
Camino Real, Room 500, Palo Alto,
Calif. 94306.
Unionamerica Capital Corp., 445 South
Figueroa St., Los Angeles, Calif.
90017.
Valley Capital Company, 2975 Hunt-
ington Drive, San Marino, Calif.
91108.
Warde Capital Corporation, 3440 Wil-
shire Blvd., Rm. 1012, Los Angeles,
Calif. 90005.
West Coast Capital Company, P.O.
Box 388, Auburn, Calif. 95603.
Westamco Investment Company, 7805
Sunset Blvd, Suite 201, Los Angeles,
Calif. 90046.
Western Business Assist Corp., 601
California Street, San Francisco,
Calif. 94108.
Western Business Funds, Inc., 235
Montgomery St., Rm. 2400, San
Francisco, Calif. 94104.
CALIFORNIA-Continued
Western Equity Capital Corp., 9601
Wilshire Blvd., Suite 340, Beverly
Hills, Calif. 90210.
Western Urban Redevelo Inv. Corp.,
235 Montgomery Street, Rm 1472,
San Francisco, Calif. 94104.
Westland Capital Corp., 9465 Wilshire
Boulevard, Beverly Hills, Calif.
90212.
Wyle Capital Corporation, 128 Mary-
land Street, El Segundo, Calif. 90245.
COLORADO
Arrowhead SBIC, 799 Dahlia-Pent-
house B, Denver, Cob. 80220.
Central Investment Corp., Central
Bank Bldg., Denver, Cob. 80202.
Colorado Capital Corp., 1630 Welton
Street, Denver, Cob. 80202.
Colorado Equity Cap. Inv. Corp., 1636
Welton Street, Room 105, Denver,
Cob. 80202.
Colorado SBIC, Inc., P.O. Box 5168 T.A.,
Denver, Cob. 80217.
Petroleum Investment Cap. Corp., 715
Midland Savings Bldg., Denver, Cob.
80202.
CONNECTICUT
All State Venture Capital Corp., 855
Main Street, Bridgeport, Conn.
06603.
Business Ventures, Inc., 111 Pearl
Street, Hartford, Conn. 06103.
Chartered Capital Corp., 174 Bridge
Street, Groton, Conn. 06343.
Connecticut Capital Corp., 488 Whalley
Avenue, New Haven, Conn. 06511.
Conresco Corp., 10 River Street,
Stamford, Conn. 06901.
Dewey Investment Corp., 18 Asylum
Street, Hartford, Conn. 06103.
Faircon Investors Corp., 1435 Bedford
Street, Stamford, Conn. 06905.
First Connecticut SBIC, 177 State
Street, Bridgeport, Conn. 06603.
General mv. Co., of Connecticut,
348 Orange Street, New Haven, Conn.
06511.
Investors Capital Corp., 29 Federal
Street, Bridgeport, Conn. 06606.
Manufacturers SBIC of Conn., 1488
Chapel Street, New Haven, Conn.
06511.
Marwit Capital Corp., 1530 Summer
Street, Stamford, Conn. 06905.
Nationwide Funding Corp., 685 Parker
Street, Manchester, Conn. 06043.
Northern Business Capital Corp., 709
Isaac Street, Norwalk, Conn. 06850.
Nutmeg Capital Corp., 125 Market St.,
New Haven, Conn. 06510.
SBIC of Connecticut, 1115 Main Street,
Bridgeport, Conn. 06603.
PAGENO="0219"
215
DELAWARE
Delaware Investment Co., 200 West 9th
Street, Wilmington, Del. 19801.
DISTRICT OF COLUMBIA
Allied Capital Corp., 1625 Eye Street
N.W., Washington, D.C. 20006.
American Growth Investment Co., 1346
Conn. Ave. NW., Suite 1028, Wash-
ington, D.C. 20036.
Capital mv. Co. of Washington, 1001
Connecticut Avenue NW., Washing-
ton, D.C. 20036.
First Washington Capital Corp., 1707 L
Street NW., Washington, D.C. 20036.
General Business Invest. Corp., 821 15th
Street NW., Rm. 830, Washington,
D.C. 20005.
General Capital Investment Corp., 1100
Conn. Ave. NW., Suite 1010, Wash-
ington, D.C. 20036.
Greater Washington Indus. Investment,
1725 K Street NW., Washington,
D.C. 20006.
FLORIDA
Arlington-Florida Fund, Inc., 6201 22nd
St. North, St. Petersburg, Fla. 33702.
Atlantic Investment Fund, Inc., 150
SE. Third Avenue, Miami, Fla.
33131.
Central Florida Investments, Inc., 125
South Court Avenue, Orlando, Fla.
32001.
First Florida Funding Corp., 110 South
Orange Avenue, Sarasota, Fla. 33977.
First Miami SBIC, 420 Lincoln Road,
Room 235, Miami Beach, Fla. 33139.
First North Florida SBIC, 107 North
Madison Street, Quincy, Fla. 32351.
Gold Coast Capital Corp., 35 NE 17th
St. Suite 206, Miami, Fla., 33132.
Gulf States Capital Corp., 3605 North
Davis, Pensacola, Fla., 32503.
Lincoln SBIC, 123 NE 79th St.,
Miami, Fla., 33138.
Market Capital Corp., 1102 N. 28th
Street, Tampa, Fla., 33605.
Master Capital Corp., 316 Aragon Ave-
nue, Coral Gables, Fla., 33134.
SB Assist Corp. of Panama City, 711
West Beach Drive, Panama City,
Fla., 32401.
Small Business Funds, Inc., 1630 South
Myrtle Avenue, Clearwater, Flu.,
33516.
Southeast SBIC, Inc., 100 So. Biscayne
Blvd., Miami, Fla., 33131.
GEORGIA
Capital Resources Corp., 710 Peachtree
St., NE., Atlanta, Ga., 30308.
Citizens & Southern Cap Corp., P.O.
Box 4899, Atlanta, Ga., 30303.
Continental Equity Corp., 240 Peach-
tree Street NW., Atlanta, Ga., 30303.
CSRA Capital Corp., 901 South Finance
Bldg. Augusta, Ga., 30902.
Dixie áapital Corp., 2400 First Natl.
Bank Bldg., Atlanta, Ga. 30303.
First American Investment Corp., 148
Cain St., Ste. 700, Atlanta, Ga. 30303.
Investors Equity, Inc., 26 Pryor Street
NE., Atlanta, Ga. 30303.
Mome Capital Corp., 912 Main Street,
Thomson Ga. 30824.
Peachtree áapital Corp., 230 Houston
Street NE., Atlanta, Ga. 30303.
SBI Corp. of Georgia, 22 Marietta
Street NW., Atlanta, Ga. 30303.
Southeastern Capital Corp., 215 Pied-
mont Avenue NE., Atlanta, Ga.
30312.
Transamerica Capital Corp., 1 South
Oakwood Drive, Savannah, Ga.
31404.
hAWAII
SBIC of Hawaii, Inc., 1575 South
Beretania St., Honolulu, Hawaii
96814.
IDAHO
Industrial Investment Corp., Farmers
National Bank Bldg., Buhi, Idaho
83316.
ILLINOIS
Adams Street Capital, Inc., 120 South
LaSalle Street, Chicago., Ill. 60603.
Advance Growth Capital Corp., 401
Madison Street, Maywood, Ill. 60153.
Albany Capital Corp., 208 South Lasalle
St., Rm, 1703, Chicago, Ill. 60604.
Business Capital Corp., 208 South La-
salle St., Chicago, Ill. 60604.
Capital Opportunities, Inc., 111 No.
State St., Box 31, Monticello, Ill.
61656.
Capital Ser1vice Corp., 121 East Liv-
ingston, Monticello, Ill. 61656.
Central Capital Corp., 4 Madison Street,
Oak Park, Ill. 60302.
Chicago Equity Corp., 188 West Ran-
dolph Street, Chicago, Ill. 60601.
Enterprise Funds, Inc., 79 West Monroe
Street, Chicago, Ill. 60603.
First Capital Corp., of Chicago, 38
South Dearborn Street, Chicago, Ill.
60690.
PAGENO="0220"
216
ILLINOIS-Continued
Geriatrics Capital Corp., 120 Alex-
ander Avenue, Peoria, Ill. 61603.
Illinois Cap Invest. Corp., 135 South
Lasalle Street, Chicago, Iii. 60603.
Lasalle Street Capital Corp., 10 South
Lasalle Street, Chicago, Ill. 60603.
Mid-North Capital Corp., 38 So. Dear-
born St., Suite 1239, Chicago, Ill.
60603.
Republic Capital Corp., 33 North La-
salle Street, Chicago, Ill. 60602.
SB Management Investors, Inc., 1
North Lasalle Street, Chicago, Ill.
60602.
Transportation Capital Corp., 23th
Ave. at Roosevelt Blvd., Chicago, Ill.
60153;
INDIANA
American Fidelity Corp., P.O. Box 217,
Bristol, md. 46507.
Central States Small Bus Corp., 915
South Clinton Street, Fort Wayne,
md. 46802.
Evansville SBI Corp.,r416 Main Street,
Evansville, md. 47708. ~
Great Lakes SBI Corp., Box 285, Tip-
ton, Ind. 46072.
Incentive Capital Corp., 569 Broadway,
Gary, md. 46402.
Industrial Growth Capital Corp., Mer-
chants Bank Bldg., Indianapolis, Ind.
46204.
Merchants Capital Corp., 1515 North
Senate Avenue, Indianapolis, Ind.
46202.
SBI Corp. of Indiana, 5 East Market
Street, Indianapolis, Ind. 46204.
IOWA
Hawkeye Venture Capital Corp., 505
5th Street, Suite 515, Sioux City,
Iowa 51101.
Iowa Growth Investment Co., 128 First
Avenue Northeast, Cedar Rapids,
Iowa 52401.
Iowa-Nebraska SBI Corp., 116 Col-
baugh Street, Red Oak, Iowa 51566
KANSAS
Kansas Investment Corp., 300 West
Douglas, Wichita, Kans. 67202.
Midland Business Inv. Corp., 122 West
Myrtle St., Independence, Kans.
67301.
LOUISIANA
Business Loan & Investment Corp.,
225 Barrone Street, Suite 1720, New
Orleans, La. 70112.
Delta Capital Corp., 550 Pontchartrain
Dr., Slidell, La. 70458.
First SBIC of Lafourche, Inc., 1614
South Bayou Drive, Golden Meadow,
La. 70357.
LOUISIANA-Continued
First SBIC of Louisiana, Inc., 637 Com-
mon Street, New Orleans, La. 70130.
L. P. Sas Capital Inc., P.O. Box 939,
Covington, La. 70433.
Mid-South Capital Corp., 312 Polk
Street, Mansfield, La. 71652.
Royal Street Investment Corp., 520
Royal Street, New Orleans, La. 70130.
Southern SBIC, Inc., 8137 Oleander
Street, New Orleans, La. 70116.
MARYLAND
Aviation Growth Investments, 7979 Old
Georgetown Road, Bethesda, Md.
20014.
Charles SBI Corp., 101 Light Street,
Baltimore, Md. 21202.
Electronics Systems Inv. Corp., 4321
Hartwick Road, College Park, Md.
20740.
Inter-State Business Inv. Co., 233
Equitable Building, Baltimore, Md.
21202.
MASSACHUSETTS
Anderson New England Cap Corp., 150
Causeway, Boston, Mass. 02114.
Arrow Investment Corp., 1051 Beacon
Street, Brookline, Mass. 02146.
Atlas Capital Corp., 315 James Avenue,
Room 338, Boston, Mass. 02116.
Beacon Capital Corp., 587 Beacon
Street, Boston, Mass. 02215.
Boston Capital Corp., 535 Boylston
Street, Boston, Mass. 02116.
Business Assistance Corp., 199 Alewife
Brook Parkway, Cambridge, Mass.
02138.
Business Achievement Corp., 1 Court
Street, Boston, Mass. 02108.
Cambridge Science Advance Corp., 85
Devonshire St., Boston, Mass. 02109.
Chestnut Hill Capital Corp., I Brewster
Terrace, Brookline, Mass. 02146.
Congress Capital Corp., 294 Washing-
ton St., Suite 711, Boston, Mass.
02108.
Eastern Seaboard Invest. Corp., 73
State Street, Suite 208, Springfield,
Mass. 01103.
Finan Tech Asst. Corp., 60 Hickory
Drive, Waltham, Mass. 02154.
Financial Investors of Boston, 185
Devonshire Street, Boston, Mass.
02108.
First SBI Corp. of New England,
One Federal Street, Boston, Mass.
02110.
Hancock Capital Corp., 1455 Common-
wealth Avenue, Brighton, Mass.
02135.
Massachusetts Capital Corp., 225
Franklin Street, Boston, Mass. 02110.
Massachusetts SBIC, 75 Federal Street,
Boston, Mass. 02110.
PAGENO="0221"
MICHIGAN
Creative Capital of Michigan, 770 South
Adams Road, Birmingham, Mich.
48011.
Michigan Capital & Service, Inc., 410
Wolverine Bldg., Ann Arbor, Mich.
48108.
Midwest SBIC, 1921 First National
Building, Detroit, Mich. 48226.
MINNESOTA
Bonzer Investment Co., 8212 Highway
No. 7, Minneapolis, Minn. 55426.
First Heartland Investment Co., 209
Third Avenue NW., Austin, Minn.
55912.
First Midwest Capital Corp., 110 South
Seventh Street, Minneapolis, Minn.
55402.
Minnesota SBIC, 2338 Central Avenue
NE., Minneapolis, Minn. 55418.
Northland Capital Corp., 402 West
First Street, Duluth, Minn. 55802.
Northwest Growth Fund, Inc., 1384
Northwestern Bank Bldg., Minne-
apolis, Minn. 55402.
Retailers Growth Fund, Inc., 15 North
Eighth Street, Minneapolis, Minn.
55403.
MISSISSIPPI
Southern Investment Corp., 815 23rd
Ave. Southern Bldg., Meridian, Miss.
39301.
Sunflower Investment Corp., Int. of
U.S. Highway 49W, Indianola, Miss.
38751.
Vicksburg SBIC, 302 FirstWNational
Bank Bldg., Vicksburg, Miss. 39180.
MISSOURI
Atlas SBI Corp., 1808 Main Street,
Kansas City, Mo. 64100.
Capital for Business, Inc., 922 Walnut
Street, Room 318, Kansas City,
Mo. 64141.
MONTANA
Capital Investors of Montana, Capitol
Bldg., Suite C, Missoula, Mont.
59801.
Intermountain Capital, Inc., 4 North
Broadway, P.O. Box 1572, Billings,
Mont. 59101.
Small Business Improvement Co., 711
Central Ave., P.O. Box 1175, Billings,
Mont. 59103.
217
MAssACHUSETTS-Continued
Massapoag Investment Corp., 1330
Beacon Street, Brookline, Mass.
02146.
Mutual SBI Corp., 31 St. James
Avenue, Room 357, Boston, Mass.
02116.
New England Enterprise Cap Corp.,
28 State Street, Boston, Mass. 02109.
New England Capital Corp., One Court
Street, Boston, Mass. 02118.
Pilgrim Capital Corp., 10 Pleasant
Street, Brookline, Mass. 02146.
Seventeen Investment Corp., 207 Bel-
mont St., Belmont, Mass. 02178.
Weston Electronics Inv. Corp., Pru-
dential Center, Suite 2240, Boston,
Mass. 02199.
Worcester Capital Corp., 446 Main
Street, Worcester, Mass. 01608.
Yankee Capital Corp., 77 Franklin
Street, Boston, Mass. 02110.
NEBRASKA
Nebraska Capital Corp., 1309 L Street,
Lincoln, Nebr. 68508.
Omaha Industrial Capital, Inc., 806
Farnarn St., Omaha, Nebr. 68102.
NEW HAMPSHIRE
Sci-Tronics Fund, Inc., 6 Manchester
Street, Nashua, N.H. 03060.
NEW JERSEY
Brunswick Capital Corp., 1811 Liberty
Avenue, Hillside, N.J. 07205.
Capital SBIC, Broadstreet Bank Bldg.,
Trenton, N.J. 08618.
Developers SBI Corp., 121 Cedar Lane,
Teaneck, N.J. 07664.
Eastern States SBI Corp., No. 1 Kinder-
karmack Road, Hackensack, N.J.
07681.
Engle Investment `Co., 241 Main Street,
Hacken~ack, N.J. 07601.
First SBI Corp. of New Jersey, 880
Broad St., 18th Floor, Newark, N.J.
01102.
Garden State SBI, 385 North Field
Ave., W. Orange, N.J. 07052.
Growth Ventures, Inc., 840 North Wood
Avenue, Linden, N.J. 07036.
Main Capital Investment Corp., 813
Main Street, Hackensack, N.J. 07601
Monmouth Capital Corp., 1st State Bk.
Bldg., P.O. Box 480, Toms River,
N.J. 08753..
Polytechnic Capital Corp., 17 Academy
Street, Newark, N.J. 07102.
NEW MEXICO
Cable Capital, Corp., 1414 South Sclano
Drive, Las Cruces, N. Mex. 88001.
New Mexico Capital Corp., 1420 Carl-
isle N.E., Albuquerque, N. Mex.
87110.
Roswell SBIC, 126 East 4th Street,
Roswell, N. Mex. 88201.
PAGENO="0222"
218
NEW YORK NEW YORK-Continued
15 Broad Street Resources Corp., 15 First Realty Cap Funds Corp., 770
Broad Street, New York, N. Y. Lexington Avenue, New York, N. Y.
10005. 10021.
Capital for Technology Corp., 299 Park First Westchester Corp., 491 Main
Ave., Rm. 3701, New York, N.Y. Street, New R.ochelle, N.Y. 10801.
10017. FNCB Capital Corp., 399 Park Avenue,
Avionics Investing Corp., 375 Park New York, N.Y. 10022.
Avenue, New York, N. Y. 10022. Franklin Corp., 3 West 57th Street,
Basic Capital Corp., 180 Madison Aye- Now York, N.Y. 10019.
nue, New York, N.Y. 10016. Globe Capital Corp., 221 West 57th
Beneficial Capital Corp., 10 East 40th Street, New York, N.Y. 10019.
Street, New York, N.Y. 10017. Great Eastern SBI Corp., 230 Park
Bonan Equity Corp., 122 East 42nd Avenue, New York, N.Y. 10017.
Street, New York, N.Y. 10017. Hamilton Capital Fund, 660 Madison
Broadway Capital Corp., 80 Pine Street Avenue, New York, N.Y. 10021.
New York, N.Y. 10005. Hanover Capital Corp., 522 Fifth
Buffalo SBI Corp., 120 Delaware Aye- Avenue, New York, N.Y. 10036.
iiue, Buffalo, N.Y. 14202. Intercoastal Capital Corp., 18 E 48th
Canaveral Capital Corp., 301 Third St., New York, N.Y. 10017.
Avenue, Brooklyn, N.Y. 11215. Investor Enterprises, Inc., 295 Madison
Capital for Future, Inc., 635 Madison Avenue, New York, N. Y. 10017.
Avenue, New York, N.Y. 10022. Juster Capital Corp., 654 Madison
Central New York SBIC, 738 Erie Avenue, New York, N.Y. 10071.
Boulevard East, Syracuse, N. Y. Kent Capital Corp., ii W. 42nd St.,
13204. un. 533, New York, N.Y. 10018.
Chase Manhattan Capital Corp., 1 Lake Success Capital Corp., 5000 Brush
Chase Manhattan Plaza, New York, Hollow Road, Westbury, N.Y. 11590.
N.Y. 10015. M. & T. Capital Corp., One M. & T.
CMNY Capital Co., Inc., 20 Broad Plaza, Buffalo, N.Y. 14240.
Street, New York, N.Y. 10005. Maiden Lane Capital Corp., 1 Liberty
Coleman Capital Corp., 56 Cushman Street, New York, N.Y. 10038.
Road (Leon Baker), Scarsdale, N.Y. Mid-Atlantic Fund, Inc., 7 East 44th
10585. Street, New York, N.Y. 10017.
Communications Fund, Inc., 1271 Aye- Midland Capital Corp., 110 William
nue of the Americas, New York, N.Y. Street, New York, N.Y. 10038.
10020. Multi-Purpose Capital Corp., 31 South
Consolidated Capital Corp., 303 West Broadway, Yonkers, N.Y. 10701.
42nd Street, New York, N.Y. 10036. New Amsterdam Capital Corp., 535 5th
Country Capital Corp., 60 Broadhollow Avenue, New York, N.Y. 10017.
Road, Melville, N.Y. 11749. New York Bus. Assist. Corp., 51 East
Criterion Capital Corp., 10 Fiske Place, 42nd Street, New York, N.Y. 10017.
Mount Vernon, N.Y. 10550. New York Enterprise Cal) Corp.,
Diversified Realty Funding corp., 515 500 Old Country Rd., Garden City,
Madison Avenue, Room 2904, New N.Y. 11530.
York, N.Y. 10022. North American Corp., 51 E. 42nd St.,
Empire SBI Corp., 116 East 16th New York, N.Y. 10017.
Street, New York, N.Y. 10003. Omni Investing Corp., 60 Broad Hollow
Equi Tronics Capital Corp., 1441 Broad- Road, Melville, N.Y. 11749.
way New York, N.Y. 10018. Pioneer Venture Corp., 22 East 40th
Equitable Capital Corp., :~o West 42nd Street, New York, N.Y. 10016.
Stree~, New York, N.Y. 10017. Preferred Cap for Small Business, 335
Enuitable SBI Corp. 350 Fifth Avenue, Broadway, New York, N.Y. 10013.
M V .1~ M v 10001 Printers Capital Corp., 1 Broadway,
ow , . . . N YkNY10004
Excelsior Capital Corp., 115 Broadway, Progress Cai~ita1, Inc., 47-49 Chenango
New York, N.Y. 10006. . Street Binghamton N.Y. 13901.
Fairfield Equity Corp., 295 Madison IL & R. financial corp., 1451 Broadway,
Avenue, New York, N.Y. 10017. Ne\v York N.Y. 10036
First Caribbean Mainland Cap Co., Real Estate Capital Corp. 111 Wes6
320 Park Avenue, New York, N.Y. 40th Street, New York, N.Y. 10018.
10022. Realty Growth Capital Corp., 264 West
First City SBI Corp., 60-10 Roosevelt 40th Street, New York, N.Y. 10018.
Avenue, Woodside., N.Y. 113~ 7. Royal Business Funds Corp., 60 East
First of Orange County Corp., 178 42d Street, Suite 4205, New York,
Grand Street, Newburgh, N.Y. 12550. N.Y. 10017.
PAGENO="0223"
219
SB Electronics Investment Corp., 1350
Broadway, New York, N.Y. 10018,
SBIC of New York, Inc., 64 Wall Street,
New York, N.Y. 10005.
Securus Corp. of America, 32 East 57th
Street, New York, N.Y. 10022.
Small Business Assistance Corp., 335
Broadway, New York, N.Y. 10013.
Southern Tier Capital Corp., 114 High-
land Avenue, Woodridge, N.Y. 12789.
Stuyvesant Capital Corp., 118 21
Queens Boulevard, Forest Hills, N. Y.
11375.
Summit Capital Corp., 5 Hanover
Square, New York, N.Y. 10004.
Talco Capital Corp., 405 Lexington
Avenue, New York, N.Y. 10Q17.
Tappan ZEB SBI Corp., 120 North
Main Street, New City, N.Y. 10956.
Transcapital Corp., 866 Third Avenue,
New York, N.Y. 10022.
Transcontinental SBIC, 201 East 2d
Street, New York, N.Y. 10017.
Union SBIC, 261 Fifth Avenue, Room
2102, New York, N.Y. 10001.
Universal SBIC, Inc., 55 West 42d
Street, New York, N.Y. 10036.
Woodhock Business Capital Corp., 100
Park Avenue, New York. N.Y. 10017.
NORTH CAROLINA
Cameron Brown Capital Corp., 900
Wade Avenue, Raleigh, N.C. 27605.
Catawba' Capital Corp., Post. Office Box
3121, Charlotte, N.C. 28203.
Eastern Capital Corp., 306 Oak
Avenue, Spruce Pine,, N.C. 28777.
First Carolina Capital Corp., 4th and
Tryon Streets, Charlotte, N.C. 28202.
Hanover SBIC, 411 South College, Post
Office Box 747, Charlotte, N.C. 28201.
Northwestern Capital Corp., 924 B
Street, North Wilkesboro, N.C. 28659.
OHIO
Capital Funds Corp., 127 Public Square,
`Cleveland, Ohio 44114.
Capitol Investors, Inc., 8 East Long
Street, Columbus, Ohio 43215.
Cleveland Capital, Inc., 75 Public
Square, Room 1000, Cleveland, Ohio
44113,
Columbus' Capital Corp., 100 East
Broad Street, 3rd Floor, Columbus,
Ohio 43215.
Corporate Resources, Inc.; 629 Euclid
Avenue, Room 200, Cleveland, Ohio
44114.
Dycap, Inc., 42 East Gay Street,
Columbus, Ohio 43215.
Gries Investment Co., 1236 National
City Bank Building, Cleveland,' Ohio
44114.
OHIO-Continued
Karr Investment Corp., 923 East
Broad Street, Columbus, Ohio 43205.
Ohio Valley Capital Corp., 18 East
Fourth Street, Cincinnati, Ohio 45202.
Realty & Industrial Capital Corp.,
1621 Euclid Avenue, Cleveland, Ohio
44115.
Union Commerce Capital, Inc., Union
Commerce Bank Building, Room 111,
Cleveland, Ohio 44101.
OKLAHOMA
Alliance Business Investment Co., 11
East Fifth Street, Room 510, Tulsa,
Okla. 74103.
Bartlesville Investment Corp., 108 West
Frank Phi~ljps Boulevard, Bartles-
ville, Okla. 74003.
Capital, Inc., 1919 Penn Square, Okla-
homa City, Okla. 73118.
First American Capital Corp., 2611
Liberty Bank Building, Oklahoma
City, Okla. 73102.
First Growth Capital Corp., 18 North
Harvey, Suite 603, Oklahoma City,
Okla. 73102.
First Industries Capital Corp., 16 South
Penn Avenue, Oklahoma City, Okla.
73102.
Founders Capital Corp., United Found-
ers Tower, Oklahoma City, Okla.
73112.
Henderson Funding Corp., 2410 Plaza
Prom-Sheperd Mall, Oklahoma City,
Okla. 73117.
Morris Capital Corp., 10950 N~rth
May Avenue, Oklahoma City, Okla.
73120.
Oklahoma Small Business Investment,
4415 North Western Avenue, Okla-
homa City, Okla. 73107.
Sooner Capital Corp.,. 302 Railroad
Avenue, Enid~ Okla. 73701.
Superior Business Assistance Corp.,
2209 First National Bank Building,
Oklahoma City, Okla. 73102.
ORROON
Continental Investment Corp., 811
Southwest Sixth Avenue, Portland,
Oreg. 97204.
Northern Pacific Capital Corp., 2300
Southwest First Avenue, Portland,
Oreg. 97201.
Oregon SBIC, 661 High Street NE.,
Salem, Oreg., 97301.
Preferred Growth Capital, Inc., 2035
Southwest 58th Avenue, Portland,
Oreg. 97221.
San Francisco-Pacific Fund, The, 1220
Northeast 17th Street, Box 12105,
Portland, Oreg. 97205.
United Supermarket Investment Co.,
6433 Southeast. Lake Road, Post
Office,. Box 5807, Portland, Oreg.
97222.
PAGENO="0224"
220
PENNSYLVANIA
Adeiphia Capital Investment Corp.,
1518 Walnut Street, Philadelphia,
Pa. 19103.
American Commercial Finance Corp.,
1518 Walnut Street, Philadelphia,
Pa. 19102.
Delaware Valley SBIC, Wolf Building,
Market Square, Chester, Pa. 19013.
Executive Investors, Inc., 121 South
Broad Street, Room 610, Phila-
delphia, Pa. 19107.
Fidelity America SBIC, 106 South 16th
Street, Philadelphia, Pa. 19102.
First Pittsburgh SBIC, 1220 Frick
Building, Pittsburgh, Pa. 15219.
Frankford Grocery SBIC, Inc., G Street
and Erie Avenue, Phil~adelphia, Pa.
19124.
Funds for Business Growth, Inc.,
1609 East Wadsworth Avenue, Phila~
delphia, Pa. 19150.
Great Eastern Capital Corp., 3 Penn-
sylvania Center Plaza, Philadelphia,
Pa. 19102.
Greater Pittsburgh Capital Corp., 952
Union Trust Building, Pittsburgh,
Pa. 15219.
Penn Capital Growth Corp., Girard
Trust Building, Suite 1104, Phila-
delphia, Pa. 19102.
Penn Growth Investment Corp., Room
454, 2 Gateway Center, Pittsburgh,
Pa. 15222.
Quaker City Investment Corp., 1912
Walnut Street, Philadelphia, Pa.
19107.
Recreation Capital, Inc., 117 South 17th
Street, Philadelphia, Pa. 19103.
SBJC of Pennsylvania, The, 1815 Walnut
Street, Philadelphia, Pa. 19107.
SBIC of the .Eastern States, Inc., 251
Indian Creek Road, Philadelphia,
Pa. 19151.
Sharon SBIC, 385 Shenango Avenue,
Sharon, Pa. 16146.
Star Capital Corp., 1900 Two Penn
Center Plaza, Philadelphia, Pa. 19102.
Sun Capital Corp., R.F.D. No. 1,
Imperial, Pa. 15126.
UAG Investment Corp., Post Office
Box 67, Robesonia, Pa. 19551.
Universal Investment Co., 18th and
Chestnut Streets, 12th Floor, Phila-
delphia, Pa. 19102.
PUERTO RICO
Popular Investment Co., Banco Popular
Center Building, Hato Rey, P.R.
00909.
RHODE ISLAND
Industrial Capital Corp., ill Westmin-
ister, Providence, R.I. 02903.
Narragansett Capital Corp., 10 Dor-
rance Street, Providence, R.I. 02903.
Northeast Capital Corp., 111 Wayland
Avenue, Providence, R.I. 02906.
SOUTH CAROLINA
Charleston Capital Corp., 19 Broad
Street, Charleston, S.C. 29401.
Falcon Capital Corp., 89 Broad Street,
Charleston, S.C. 29405.
Floco Investment Co,. The, Lake City,
S.C. 29560.
Lowcountry Investment Corp., Post
Office Box 10447, Rivers Annex,
Charleston Heights, S.C. 29411.
Merchants Investment Corp., Post Off-
ice Box 10401, Rivers Annex, Charles-
ton, S.C. 29411.
SOUTH DAKOTA
Berkshire Capital, Inc., 405 8th Avenue,
Aberdeen, S.C. 57401.
TENNESSEE
Financial Resources, Inc., 1909 Sterick
Building, Memphis, Tenn. 38103.
The Thirds SBIC, Third National Bank
Building, Room 928, Nashville, Tenn.
37219.
TEXAS
Admiral Investment Co., Inc., 1302
Rusk Avenue Guaranty Building,
Houston, Tex. 77002.
Alliance Capital Corp., 1319 Summit
Avenue, Fort Worth, Tex. 76102.
Capital Southwest Corp., 750 Hartford
Building, Dallas, Tex. 75201.
Central Texas SBI Corp., 514 Austin
Avenue, Post Office Box 829, Waco,
Tex. 76701.
First Business Investment Corp., 2515
Irving Boulevard, Dallas, Tex. 75207.
First Capital Copr., 1809 Columbus
Avenue, Waco, Tex. 76702.
First Dallas Capital Corp., 1401 Elm
Street, Dallas, Tex. 75202.
First Texas Investment Co., 120 Jeffer-
son Street Post Office Box 341,
Sulphur Springs, Tex. 75482.
First United Capital Corp., 2200 South
Post Oak, Suite 612, Houston, Tex.
77027.
First West Texas Capital Corp., 305
First National Bank Building, Odessa,
Tex. 79761.
Fort Worth Capital Corp., 1200 West
Freeway, Fort Worth, Tex. 76102.
Foster Capital Corp., 6209 Alameda
Avenue, El Paso, Tex. 79905.
Lone Star Capital Corp., 408 West
Kingsmill, Suite 369 A, Pampa,
Tex. 79105.
M. E. Moore Investment Co., Inc.,
1500, Jackson Street, Fourth Floor,
Dallas, Tex. 75201.
Mideontinent Petroleum Funds, 900
Military Drive NE., San Antonio,
Tex. 78209.
Mid-Tex Capital Corp., 104 North
Avenue East, Clifton, Tex. 76634.
PAGENO="0225"
221
TEXAS-CQntinued
Northwestern Investment Co., 1919
Record Crossing Road, Dallas, Tex.
75235.
Providence SBIC 103 B Vaughn Build-
ing, Amarillo, Tex. 79101.
Republic SBIC, Republic National
Bank Building, Dallas, Tex. 75201.
Rice Investment Co., 3200 Produce
Row, Houston, Tex. 77023.
San Antonio Capital Corp., 1502 Panam
Expressway North, San Antonio,
Tex. 78208.
SBIC of Houston, The, 640 West Build-
ing, Houston, Tex. 77002.
So-Tex Investment Corp., 103 North
Aransas Street, Post Office Box 771,
Alice, Tex. 78332.
South Texas SBIC, 204 North, Brown-
son, Post Office Box 1638, Victoria,
Tex. 77901.
Southern Business Investment Corp.,
Post Office Drawer 6729, Corpus
Christi Tex. 78411.
Tarrant áapital Corp., 800 Main Street,
Fort Worth, Tex. 76102.
Techno-Growth Capital Corp., 1500
West Mockingbird Lane, Dallas, Tex.
75235.
Texas Capital Corp., 104 East Eighth
Street, Georgetown, Tex. 78626.
Texas Equity Corp., 215 Cotton Ex-
change Building, Post Office Box 1704,
Dallas, Tex. 75201.
Trammell Crow Investment Co., 2720
Stemmons Freeway, Dallas, Tex.
75207.
Trinity Capital Funds, Inc., 2133
McKinney Avenue, Suite 108, Dallas,
Tex. 75201.
United Business Capital, Inc., 1102
South Broadway, La PQrte, Tex,
77571.
West Central Capital Corp., Post Office
Box 412) Dumas, Tex. 79029.
Western Capital Corp., 2123 First
National Bank Tower, Dallas, Tex.
75202.
UTAH
Utah Capital Corp. 2510 South State
Street, Salt Lake àity, Utah 84115.
VIRGINIA
American SBIC, 1704 North Rhodes
Street, Arlington, Va. 22201.
Bayside Capital Corp., 706 One Main
Plaza East, Norfcilk, Va. 23510.
Capitql Are~i, Investoi~s, Inc., 3701
Chain Bridge Road, Fairfax, Va. 22030.
VIRGINIA-?ContlnUed
Chesapeake Capital Corp., 120 North
Asaph Street, Alexandria, Va. 22314.
Investment Funds, Inc., Po~t Office
Box 12300, Norfolk, Va., 23452
Old Dominion Capital Corp., 3333
Virginia Beach Boulevard, Virginia
Beach, Va. 23452.
REBA Investment Co., 102 West
Olney Road, Allard Building, Norfolk,
Va., 23510.
SBI Corp. of Norfolk, 1216 Granby
Street, Norfolk, Va. 23510.
Security SBIC, 1400 North Umle Street,
Arlington, Va. 22201.
Tidewater SBI Corp~, 746 Granby
Street, Post Office Box 479, Norfolk,
Va. 23510.
Tidewater Iz~dustrial Capital Corp., 207
Cranby Street, Norfolk, Va. 23510
Virginia Capital Corp., 907 State
Planters Bank Building, Richmond,
Va. 23219.
WASHINGTON
Northeast Business Investment Corp.,
929 West Sprague Avenue, Spokane,
Wash. 99204.
Pacific SBIC, 1608, Norton Building,
Seattle, Wash. 98104.
SBIC of America, 2013 Fourth Avenue,
Seattle, Wash, 98121.
Traders Investment Corp., 500 Wall
Street, Suite 402, Seattle, Wash.
98121.
Trans-America Equity, Inc., 1021 West
Lake North,. Seattle, Wash. 98109.
Washington Capital Corp., 106 North
Second Avenue, Post Office, Bo~ 1517,
Walla Walla, Wash. 99362.
WISCONSIN
Capital Investments, Inc., 238 West
Wisconsin Avenue, Milwaukee, Wis.
53203.
Commerce Capital Corp., 6001 North
91st Street, Milwaukee, Wis, 53225.
First Wisconsin Investment Corp.,
735 North Water Street, Milwaukee,
Wis. 53202.
Northern States Capital Corp., 330
East Wilson Street, Madison, Wis.
53703.
Northwest Capital Corp., 225 East
Mason Street, Milwaukee, Wis. 53202.
Thorp SBI Corp., Thorp Office
Building, Thorp, Wis, 54771.
Wisconsin Capital Corp., 840 North
Third Street, Milwaukee, Wis. 53233.
95-193-68---15
PAGENO="0226"
222
Mr. CONTE. How many cases are pending at the Justice Depart.-
ment?
Could you also give us a statement for the record as to the length
of time that these cases have been pending? These are criminal cases.
Is that correct?
Mr. BROWN. Yes, Congressman. Fifty-eight civil cases are pending
right now at the Department of Justice. And we have submitted as
exhibit No. 5 the aging of these cases.
By the way, there is a correction or two that has to be made, and
a corrected copy has to be submitted.
The CHAIRMAN. Elaborate on the table, Mr. Brown, for the coin-
mittee.
Mr. BROWN. These show the months that these cases have been at
the Department of Justice, and the civil cases that have been trans.-
initted over there from August 1, 1966, which was just after the
hearings held by this committee, to April 30 of this year.
It shows a total of 65 cases that have been there less than 6 months;
39 cases have been with the Department of Justice from 6 to 12
months; 17 have been with it for a period of 12 to 18 months, and
five from 18 to 24 months, for a total of 126 of completed and incom-
plete cases transmitted between August 1, 1966, and August 30, 1968.
Mr. CONTE. Criminal cases went down.
Prosecution declined 10. Can you elaborate on that?
Mr BROWN. These are cases that the Department of Justice has
returned to SBA with the notation that there is not sufficient evidence
to prosecute the licensee under the criminal violations. And 10 are
pending over there in the criminal, and 58 are pending in the Civil
Division of the Department of Justice.
Mr. CONTE. How long have those 10 been pending?
Mr. BROWN. I am not sure that we have a break-out on these 10,
but we can certainly supply it for you, Congressman.
Mr. CONTE. Why don't you do that?
(The information referred to follows:)
CRIMINAL REFERENCES PENDING AS OF APR. 30, 1968
Date reference Length of
Name made to time at Justice
Justice (months)
1. Sunset Capital Corp Nov 3, 1967 5
2. Summit Capital Corp Apr. 29, 1968' 0
3. Sterling Fund, Ltd Apr. 27, 1967 12
4. Pep Capital, Inc Jan. 24,1968 3
5. Northwest Science Investment Corp Jan. 17, 1968 3
6. Medical Capital Corp May 8, 1967 11
7. Hydrocarbon Capital Corp Aug. 4, 1967 8
8. Hawkeye Venture Capital Corp Apr. 1,1968 0
9. Diversified Capital Funding Corp., and Citizens Funding Corp. of Texas 2 June 20, 1967 113
10. First SBIC of Tampa, Inc.3 Sept. 22, 1967° 7
1 CrIminal reference declined on Maj 14, 1968.
2 2 licensees are involved in the single criminal reference An indictment was re°urned on Mar 21 1968
The criminal reference in this case was erroneously omitted from the information previously furnished There are 10
pending criminal references at the Department of Justice An indictment was returned in First SBIC of Tampa Inc ors
Feb. 20, 1968.
Mr. CONTE. Mr. Brown, there is pending at the present time before
the SEC an application requesting an exemption for all SBIC's from
most of the SEC regulations. This is based on the opinion of many
SBIO's that the present regulations by SEC and SBA are too cumber-
PAGENO="0227"
223~
some. Do you believe that a compromise can be worked out so that
public investors in SBIC's will still continue to have the protection
provided for them by our security laws?
Mr. BROWN. We have been working, Congressman, with the Securi-
ties and Exchange Commission and the industry for some time to try
to eliminate as best we can the dual regulation of the industry. We
are in sympathy with the industry on this point. And we would like
to see the number of things where they have to go to both SEC and
SBA cut down to the very minimum. There are some problems in-
volved. SEC is primarily a stockholder protection agency, while our
primary mission is to protect small business. And we have had several
meetings, both with SEC alone and with the industry and SEC, and
we are going to have more. And we feel like we are making progress.
We are going to do our best to try to cut down the number of areas
where the public SBIC's have to make dual reports when it is not
necessary, and in other areas where perhaps one of the two agencies
can do the whole job, and they don't have to go to both of them.
Mr. CONTE. I imagine that you agree with me, though, that the
public investor should be protected as he is at the present time under
SEC rules, whether they be SBA rules or not.
Mr. BROWN. He certainly has to be, Congressman.
Mr. CONTE. When will you come up with a final decision?
Mr. BROWN. I am not sure about that. We just had a meeting with
the SEC and the SBIC industry about a week ago, and we have got
another one scheduled to come up very soon. We hope to do it as
quickly as possible.
Mr. CONTE. I have no further questions, Mr. Chairman.
The CHAIRMAN. Congressman Morton.
Mr. MoRToN. Thank you, Mr. Chairman.
Mr. Brown, in the early warning system you touch on, precisely
what is the system you use to give you the early information that
something is wrong with the transaction?
Mr. BROWN. Congressman, generally we consider that an SBIC is
capital impaired when it has lost 50 percent of its private capital. Now,
this is not Government money; they have to lose their private money
before Government money is lost. But we consider it capitally im-
paired when 50 percent of its private capital is in jeopardy. And
formerly, before this, we would just wait until we were able to pick it
up on an examination report or in some other manner. And sometimes
the first time we would know about it, it would be 55 or 60 percent
capitally impaired. We have now got this regulation where the SBIC,
if it knows about this, must report at the earliest possible moment,
when it reaches a certain point of capital impairment, a certain part of
its private capital is impaired. And then when it does tell us about this
we try to do what we can to prevent that company from going down
the drain creditwise.
Mr. MORTON. Do you have any guidelines on which SBIC's can
base a judgment of impairment?
Mr. BROWN. Yes, sir. In other words, they understand it just means
the amount of money in jeopardy of their private capital, and I think
it is a fairly simple test.
Mr. MORTON. Do you have any centralized data processing system
which could be used to monitor SBIC investments?
PAGENO="0228"
2~4
Mr. MOOT. We have a reporting system, Congressman Morton,
which is imperfect at the moment and incomplete in coverage. We are
feeding the data into our computer here in Washington, and alining
the data, and relating the data to get maximum use for both us and the
industry. And some of the data that we will be supplying for the record
is a result of this computer data processing. But we are still a long way
away from the complete data collection and data monitoring system
for the industry.
Mr. MORTON. Are you anxious to employ a complete computer
data processing system which will monitor the investments?
Mr. MooT. We are very anxious to. We think it is part of our
responsibility. And I have explained this to the industry, that the
only way that we can come up to Congress and justify the industry is
to be able to explain exactly what is happening as a result of the
industry's investment in the small business community. I consider
this as one of our primary responsibilities, and have so indicated to the
industry.
Mr. MORTON. I believe that, too, because I think the chairman's
question as to what the impact really is was answered as a matter
of your judgment, and not as an analysis of criteria. Isn't that correct?
Mr. MooT. I want the Small Business Administration to be able
to fully justify this industry and/or recommend modifications in the
legislation concerning the industry, based on data collected from the
investments made by the small business investment company industry.
Mr. CONTE. Will you yield there?
Mr. MORTON. Certainly.
Mr. CONTE. Do you have any data processing equipment in. your
shop now?
Mr. MooT. We have a computer here in Washington, just the one.
Mr. CONTE. Would that be sufficient to handle this?
Mr. MOOT. What we do each year is to project our requirement-we
are losing equipment-project our requirements for the next 2 years
so that we can properly figure the requirements of our hardware. At
the present time with the information we are getting we can use the
current computer we have.
Mr. CONT.E. I sit on the Treasury-Post Office Subcommittee of the
Appropriations Committee. We have the Bureau of the Budget, the
Internal Revenue, and you name it, under that umbrella. `There are
a lot of computers that aren't being used. There should be greater
cooperation among agencies in the Government to utilize these to the
fullest extent.
Mr. MOc~T. Yes. We do work with the General Services Administra-
tion, which is charged, as you know, with interagency utilization. And
we have over the period of the last year or 2 years had extensive utili-
zation of other computers in the Government.
Mr. CONTE. Thank you.
Mr. MORTON. I want to deal just for a minute with public informa-
tion. Recognizing the fact that there is Federal money invested on a
matching basis, what is the policy of the SBA as far as SBIC's making
available to the public information on their transactions?
Mr. MOOT. Congressman, I am not sure that I can accurately cover
the freedom of information aspects of the individual SBIC's. With
your permission. I would be glad to put an accurate legal answer into
PAGENO="0229"
22~
the record. It hasn't reaehed an i'ssue point yet other than the general
information that SBIC's and the industry publish frequently.
Mr. MORTON. I will tell you the reason for the question. Of course,
on your listed companies, the 36 companies that are public, a prospec-
tive buyer could go in and get complete information. In ease those
people would like to form an SEIC to serve a given area, it would seem
to me that one of the basic foundations for the judgment as to whether
they should invest would be what the SBIC community as a whole is
doing in servicing small business in this given area. I have had people
discuss with me the proposition of starting an SBIC. They ran into
the difficulty of trying to find out what the SBIC impact already was
in that area. I wonder if there is a policy or guideline that would make
it mandatory that SBIC's furnish information as to their transactions.
Mr. MooT. I think that I can partially answer this question, Con-
gressman. With the industry as represented b~r the National Associa-
tion of Small Business Investment Companies, the president of which
I will listen to a little later this morning, we have developed a program
whereby people who are desirous of forming an SBIC in an area can be
counseled not only by SBA, but by the SBIC industry in the area as
to its potential, becausb they are equally as alert as we are to the need
to get proper geographic coverage throughout the country for the small
business investment program.
So I think even on a voluntary basis that we are developing the kind
of a system that will provide the information to new entrepreneurship
in this area.
Mr. MORTON. ii think it is very important that it be done, because
you want to prevent the formation of SBIC's in areas where such
SBIC's have an unlikely chance of success.
Mr. Moor. That is absolutely right, sir.
Mr. MORTON. What is the competitive relationship. between the
SBA regional offices and SBIC's as far as furnishing capital to small
business?
Mr. MOOT. I would rather say that the relationship is complemen-
tary rather than competitive. As you know, the SBIC industry is
designed primarily to furnish equity capital. And SBA, through its
regional offices, is precluded from providing equity capital. There is a
growing and closer relationship between the regional officesof SBA
and the SBIC's. And we have fostered this, we have written program
information, guidelines which both the industry and we have dissemi-
nated. So that we have a small business concern needing equity
capital, but coming to the SBA for a long-term `loan or `relatively
long-term loan, in which the prospects for its success look as though
they need equity injection versus another debt situation, and w~ get
frequent reference to the SBIC's in the area.
On the contrary, the SBIC's, looking ~at a small business concern,
will frequently refer them to us, if it looks as though it is a short-term
working capital financing that is required. ` ` . .
Mr~ MORTON. The facts are, are they not, that SBIC investments
*are predominantly rionequity? . . , ,
Mr. MOOT. Well, the answer is "Yes.." Of~course, this is one of the
concerns of SBA and the Congress. And the reason for' the change in
the' legislation is to provide the incentive to get a greater degree of
equity financing. B31t generally speaking there is some combination of
PAGENO="0230"
22fi
financing, whether it is convertible or debentures or warrants, stock
warrants or rights. So that there is a combination in the SBIC financ-
ing. And many of the SBIC financings in terms of loans follow or are
in conjunction with equity financing initially.
Mr. MORTON. You don't feel that the credit evaluation is basically
different and results in a different position, as far as risk is concerned,
of the SBIC coinnmnity versus the SBA community? It is just a
different type of investment. You wouldn't say, would you, that the
SBIC's would handle less risk, for example, than the SBA would
handle?
Mr. MOOT. No; I think except for time difference in financing, that
both SBA in its regular programs and SBA ill its SBJC programs are
looking for growth potential. It so happens that th.e SBIC industry, in
my opimon is best postured to help small manufacturing concerns,
while SBA can do that also, but in a different type of financing.
Mr. MoRToN. One or two other very short questions.
You pointed out that there had been an increase of $19 million in
short-term. borrowing by the beneficiary companies of SBIC traims-
actions. Do you regard that as good or poom?
Mr. BROWN. Congressman, if 1 iiiay answer, I would say that we
want to increase it, and we think it will increase, but it is certainly
good in comparison to what it; was a few years ago. And we think that
the more these SBIC's are able to provide small business concerns in
long-term money, the better they are going to be, time better Posture
they are going to be in to borrow from short-term sources. We think
it is getting better and will be better.
Mr. MOOT. it does two things, Congressman. It takes the load off of
rfreasiir~T dollars for short-term financing; and it reflects a growing
confidence in small business investment company portfolios by the
private sector financial institutions, both of which we think are good.
Mr. MORTON. Time figure just struck me as being pretty low com-
pared to the investment you made and time investment they have
made. I wonder if there is a tendency of companies to stay in SBIC
laier rather than to move out into normal financial channels, because
it is easier to get and they aren't willing to face up to the hard job of
justifying their position to commercial banks.
Mr. BROWN. We feel, Congressman, that we have some limitations
on short-term financing, and we feel like they are going more and more
into the private sector. And we are encouraging them to do so. And I
think the new legislation encourages them to do so.
Mr. MORTON. I hope that comes about because I believe we have
to have a continuing foundation for the development and growth of
small business. We don't want to lock this progTam into a block of
equity, and then have the new businesses which are formed arid are
growing up and coming along later to be denied the credit opportunities.
We hope the companies which have been helped will throw away
their crutches and get into the normal money market, particularly for
seasonal requirements and normal short-term business requirements
for money. I hope you are really encouraging this arid not being con-
tent with a 22.2-percent increase, which is such a small percent of
our total outlay.
Mr. MooT. No; we are not content. And this we are very alert to.
As a matter of fact, we are seeking greater and greater means of en-
couraging private sector financing, to the extent that we are consider-
PAGENO="0231"
22~
ing guaranteeing from the SBA level bank loans to SBIC's in order to
prevent the Treasury impact.
I might give you one indication which Mr. Brown touched upon as
to the success of getting private sector money. For each dollar of
Treasury money in the SBIC program there are two of private sector
money. So that there is a leverage of 2 to 1. You will recall that when
we testified on Monday we indicated that our regular loan programs
are now on about a 1-to-i basis, for each dollar of Treasury money
there is about a dollar of* private sector funding. So that this reflects
that this is a .growing private sector participation program. And we
want to encourage it.
Mr. MORTON. Do you feel the third-dollar opportunity you offer
SBIC's that have proven their worth, so to speak, gives an unfair
advantage in any way to the larger SBIC's against the development
of the smaller ones?
Mr. BROWN. No, and of course, this is only available for com-
panies, as you know, with $1 million or more in private capital. But
as you know, we are trying to encourage the smaller SBIC's to grow,
and many of them are adding private capital. We are trying to en-
courage equity type financing. And formerly in the program the
borrowings were pretty well stacked against the larger SBIC's. We
are trying to correct that and give the large viable type SBIC's
incentives to invest in these kinds of financing that we think Congress
intended.
Mr. MORTON. We are not creating a situation among SBIC's
where we will be faced with the possibility or probability of restraint
of trade, are we?
Mr. BROWN. We certainly do not think so, Congressman. We do
not have any information or feeling that this is going to be developed.
Mr. MORTON. My last question deals with personnel. Do you have
any sort of ongoing qualitative analysis of personnel and the ~manage-
ment of SBIC's which gives you a criterion for making comparative
analysis and reviews of the management of a company?
Mr. BROWN. We at SBA do not have such an analysis. The
industry has an analysis. And we have information that we get which
indicates-and we have to. approve, of course, anyone that goes into
an SBIC in a full-time capacity or as an officer or director. And the
people that manage SBIC's have to have a~ certain amount of experi~
ence in the financial area. We do not just allow anyone to go in and
manage one or to come in and manage one. But we will try to develop
sort of a continuing look at these people as the industry progresses.
Mr. MORTON. Is the effort to develop this continuing examination
one you ~are thinking of for the future, or do you regard this as some-
thing you might be able to put into a centralized processing system.
Mr. BROWN. I think we could put it in as part of the same thing;
And we get information, of course, from those SBIC's on a continuing
basis when they report. Of course, it is very difficult for us to make a
qualitative measurement of these people from Washington. It would be
a very difficult process for us.
Mr. MORTON.. Is your system of examination pretty well stand-
ardized, so you examine records and activities of SBIC's in California
pretty much on the same basis as you examine them in Baltimore, Md.?
Mr. BROWN. Yes, Congressman.,. we are. We have the SEA exami~
nation people, who are under the Assistant Administrator for Admin-
istration, that examine these companies throughout the country.
PAGENO="0232"
22~
And we have guidelines issued. And they are all operating under the
same set of guidelines, and should have no deviation at all from
company to company on what they look for and how they examine
them.
Mr. MORTON. Thank y~ou very much.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Congressman.
Our counsel, Mr. Mitchell, any questions?
Mr. MITCHELL. 1 noted on page 7, Mr. Brown, you discussed the
job producing aspects of the money that had been put into small
business concerns by SBIC's, indicating that for the ones you had
analyzed, a job had been produced for each $3,000 invested. Am I
incorrect if I remember the testimony before this committee concern-V
ing other programs of SBA, financial assistance programs, specially
development company loan programs, and other Government pro-
grams, it usually takes around $10,000 to generate a job?
Mr. Moop. In the local development company program, Mr.
Mitchell, the figure was running $4,000 of SBA money. I see, it is a
combination of private sector money and SBA money. The $3,00&
is SBA money.
Mr. MITCHELL. I understand that. The point I am trying to get at
is that of the overall money from SBA. It usually takes $9,000 or
$10,000 to generate a job on those financial assistance programs. And
I point out here that under this program SBA is doing it with seed
money of only $3,000, which would appear to me to be a very good
thing.
Mr. BROWN. Mr. Mitchell, I may never get this chance again, so
I would like to take this opportunity to say that we are very proud
that we can use only $3,000 of Government money to produce a job
with the kind of private sector participation that we have. And I am
very serious in this. We feel that with the 2-to-i leverage that
the Administrator mentioned, with the amount of Government money
that is going into this program, that it is producing an awful lot of new
jobs for this country.
Mr. MooT. You probably cost me a half dozen personnel on that
question, Mr. Mitchell.
Mr. MITCHELL. I thought that the point should be made that the
money that is going into small business concerns is doing an effective
job, and producing employment opportunities, and in. comparison
even with other programs, is perhaps doing a better job in generating
other funds and producing the jobs.
Concerning the reporting of companies, I believe your statement
referred to the fact that on April 30, 1968, you had 537 licensees.
And then you refer. to your September 3.0 reportings of 478 reporting
companies. Are those other 50 to 60 companies not reporting?
Mr. BROWN. Well, these are the reporting companies, Mr. Mitchell,
on September 30, 1967-the 478 reporting companies. excluded some
licensees that were at that time in the process of litigation, or under
investigation, and for other reasons-we had other types of very close
scrutiny going on-they did not make the normal September 30, 1967,
report. But all companies in the program are either reporting or they
are under some very close scrutiny, or in litigation. And we have a good
many in litigation, both in the Department of Justice, and in our
Office of General Counsel. .
PAGENO="0233"
229
Mr. MITCHELL. Since the policing amendments were passed, in
1966, I believe, has SBA fined any company for failing to report?
Mr. BROWN. Yes, Mr. Mitchell, we have. I believe we indicated
in the statement that there have been referrals to the Department of
Justice. We have fined more than 20 companies for either late reporting
or not reporting at all. That was a result of the 1966 amendments.
Mr. MITCHELL. Then you feel that you have no reporting problem
now as far as the companies are concerned?
Mr. BROWN. It certainly has lessened a lot. That legislation has
helped' tremendously. We are keeping a very close look at it, and we
probably will continue to find a few each reporting period. It certainly
has a very fine effect on getting' them to report and report on time.
Mr. MITCHELL. Has SBA administratively revoked any licensees
since the passage of Public Law 89~-779 in the 89th Congress?
Mr. BROWN. I believe hot, Mr. Mitchell. There have been a good
many revoked, `there have been' several revoked through judicial
processes, but none revoked administratively. But we have used the
administrative route for some suspensions and cease~.and-desist orders.
Mr.~ MITCHELL. Has SBA issued any cease-and-desist orders against
an individual separate from. companies since that legislation was
passed? ` `
Mr. BROWN. No, Mr. Mitchell, not against individuals, against
oompanies. ` . `
Mr. MITCHELL. The next questions I have are concerning interest
rates. I believe you mentioned in your statement that the average
interest rate is a little more than 8 percent. Is that the interest rate
charged by SB1C's to small business concerns?
Mr. BROWN. Yes,~Mr. Mitchell.
Mr. MITCHELL. What is~ the ceiling on interest rates that SBA
imposes-this is disregarding the legal interest rate in various States
that we know have to be abided by-what is the ceiling that SBA places
on interest rates that ~can b'e charged to small business' concerns by
SBIC's?
Mr. BROWN. Fifteen percent, or the maximum allowable cost, as
you indicate, under State `law, whichever is. lower.
Mr. MITCHELL. Now, is that 15 percent the effective interest rate,
or is that just a simpie~stated interest rate?
Mr., BROWN. No, that is effective interest rate.
Mr. MITCHELL. Do you go in behind these matters in your exami-
nation of these concerns to determine the manner in which they are
abiding by the authorized rate, that i~, as to add-one, discounts, and
so forth, to,find out what the effective cost i~?
Mr. BROWN. We certainly do. They are examined once a year. And
the total cost of money is included. And that includes all interest and
discounts as well as fees' aud other kinds of charges. We include all
of these things. The only thing that we don't include are consulting
services or advisory services when they are duly rendered. But th'ey
have to show that these have been duly rendered. SQ all of these dis-
counts and fees are all included in the effective cost of woney.
Mr. MITCHELL. Are these other factors, the effective cost, included
in this a-percent figur~ when you.say that is the~average? `
Mr. BROWN. No, Mr. Mitchell, that' is the stated. rate, It isimpo~-
sible for us when they report these things to us to give anything other.
than the stated' rate. But as' I say, by examination we go in there
PAGENO="0234"
230
and take a look to be sure that no one exceeds-and we have had very
few violations of this-we have had some. And in these we proceed
against them very quickly and very strongly. But we have had very
few violations of that 15-percent effective interest rate.
Mr. MITCHELL. One of the prime complaints the committee has
from some small business companies is concerning the effective cost
of SBIC money to the small business concern. And there are indica-
tions that in some instances the effective cost runs over 15 percent..
But from what you are stating, you police that carefully?
Mr. BROWN. That is right, Mr. Mitchell. And every time we get
a complaint from a small business concern we investigate it quickly
and diligently. And if we find that excessive interest rates have been
charged, we proceed against these companies very strongly. This is
something we are not going to allow to happen. And I think it hap-
pens very little. And we are going to make sure that it does not.
They have to make a settlement statement, the SBIC's do, when they
make any financing to a small business concern. And in that settle-
ment statement they have to show exactly how much money is ~oing
to any sort of fees, discounts, commissions, charges, and anything
else. And we have to review the settlement statement that is submit-
ted to us. And we require this for every financing of a small business.
concern.
Mr. DINGELL. Mr. Chairman, if the counsel would yield to me very
briefly.
The CHAIRMAN. Mr. Dingell.
Mr. DINGELL. Mr. Brown, I am curious about one thing. You have
discussed a number of matters, but you have not mentioned whether~
or not it is the standard practice here for SBIC's to, so to speak,.
take a piece of the action, that is, to insist the conveyance of interest
in the borrower. Is this a fact?
Mr. BROWN. To make an equity type financing instead of just
straight loans, yes, Mr. Dingell, it is. The last figures that we had,.
Congressman, show about 145 in debt securities, $145 million, $86.7
million in capital stock, and about $250 million in loans. So it comes
close to being a 50-50 split, when you consider the stock and equity
type securities on one hand versus the long~term loans on the other
hand. Of course, we are trying to encourage these companies to make
equity type investments. Many of them make a combination type
investment, the debenture with some sort of warrant or options at-
tached. Of course, these have to be worth what they pay for them at
the time of investment is made. And it is an investment in this small
business concern's future. And we feel like these are the type of invest-
ments that Congress had in mind when it started these programs.
Mr. DINGELL. Do you impose controls to insure that these are fairly
done, and that they are equitable to the small business firm?
Mr. BROWN. Yes, we certainly do.
Mr. DINGELL. Have you indicated what those are for the purposes
of the record already?
Mr. BROWN. We have, but we will try to elaborate if you would like,
Congressman.
Mr. DINGELL. So long as you have indicated it for the report, all
right, because I intend to scrutinize the record. Have, you had any
situatAons where there have' beefi violations of your rules or breaches
of good conscience, or where there has been the taking of control as
opposed to making equity financing?
PAGENO="0235"
231
Mr. BROWN. Ye~, Congressman. As indicated earlier, there were 97
control violations. And we have some other oases of violations. And
we look on these very harshly.
Mr. DINGELL. Do you have regulations to control this?
Mr. BROWN. Yes, we do.
Mr. DINGELL. And do you enforce the regulation in matters of this
kind wherever necessary?
Mr. BROWN. Yes, sir.
Mr. DINGELL. I am apparently asking questions about matters
which have already been gone into.
Thank you, Mr. Chairman.
The CHAIRMAN. Congressman Morton.
Mr. MORTON. I would like to request of the Chair that the next
time this fine group of people is brought before the committee to
report on the condition of the industry, they also present us with a
profile of their own management and their goals toward perfecting
their management. Information about the use of control data process-
ing, centralized data processing, and other management techniques
they employ at that time versus what they did before, will give us
a better feel, not only for the condition of the industry, but for the
method by which the Small Business Administration is striving toward
better monitoring of the industry, toward better exercising of their
controls and regulatory obligations, and toward the development of
information throughout the industry which will give them greater
management skills and techniques for its control~ I think this will be
interesting to us and give us a little more knowledge of how they are
going about it.
The CHAIRMAN. Without objection, I suggested earlier that the
Administrator and the associate Administrator could extend their
remarks and submit any additional information on the program for
the record that they may desire.
Mr. MORTON. The point that I make is, if you have this instruction
now from the Chair, then when we come to meet again at some future
date, hopefully, we will then be able to have something that has been
prepared over an extended period of time that will give us a little
better feel of how you are really trying to do it.
Mr. MOOT. We will be happy to.
The OHAIJiMAN. Any further questions? Mr. Dingell?
Mr. DINGELL. No, sir.
The CHAIRMAN. Mr. Mitchell?
Mr. MITCHELL. May we, for the purposes of the record, at this time
receive into the record your regulations concerning control and di-
vestiture of small business concerns by SBIC's.
Mr. BROWN. We would be glad to do so, Mr. Mitchell.
The CHAIRMAN. Without objection it will be included.
(The information to be furnished for inclusion in the record at this
point follows:)
[From Federal Register, vol. 33, No. 5-Tuesday, Ian. 9, 1988)
RULES AND REGULATIONS
* * * * * * *
§ 107.703 Pledge of Licensee's shares.
Whenever 10 or more percent of a Licensee's stack is pledged or hypothecated.
by any person (or group of two or more persons acting in concert) as collateral for
PAGENO="0236"
22
an indebtedness, and such pledge or hypothecation does not involve any transfer
for which prior approval is required under § 107.701, written notice setting forth
the terms of such transaction shall be furnished to SBA by the person (or persons)
making such pledge or hypothecation within 5 calendar days from the date of the
pledge or hypothecation.
LAWFUL OPERATIONS
§ 107.801 Amendments to Act and regulations.
A Licensee shall be subject to all existing and future provisions of the Act and
regulations issued thereunder.
§ 107.802 Other laws.
Each Licensee shall comply with all applicable State or Federal law affecting its
operation.
§ 107.803 Operations under Act.
A Licensee shall engage in and conduct only the activities set forth in and con~.
templated `under the Act and shall not engage in or conduct any other activities.
§ 107.804 Identification as SBIC.
Any written communication made by or at the behest of a Licensee, shall iden-.
tify that Licensee as "a Federal Licensee under the Small Business `Investment Act
of 1958."
§ 107.805 Postlicensing issuance of securities.
A Licensee may issu'e any of its securities, including stock options to manage-
ment and employees, for (a) cash, (b) direct obligations of, or obligations guar-
anteed as to principal and interest by, the United States, (c) securities of which it'
is the issuer, in conneqtion with a reclassification approved by SBA, (d) services
previously rendered to the Licensee not to exceed fair value thereof, (e) physical
assets to be' currently employed in the operation of the Licensee at fair market
value thereof, (f) as a dividend, and (g) in connection with a merger, consolidation,
or reorgauization approved by SBA: Provided, however, That any shares of stock
issued as part of Licensee's minimum capital pursuant to § 107.101(e) must be
paid for in cash or securities permitted by the last sentence of section 308(b) of the
Act.
§107.806 Retention of loans and investments.
A Licensee may retain its investment in a concern which qualified as a small
business concern at the time of Licensee's initial financing but which subsequently
became large. Securities' of a large business received by a Licensee in connection
with the merger, consolidation, or affiliation of a portfolio concern with such
large business may be retained, as long as continued ownership does not interfere
with the Licensee's ability to maintain on hand funds in adequate supply for the
financing of small business concerns. The Licensee may, however, in any event
retain such securities until it has fully recovered the amount of its original invest-
ment plus a reasonable return thereon. Additional financing may be `provided
only to the extent necessary (a) to honor a commitment made while the concern
still qualified as a small bilsiness concern or (b) to protect Licensee's original
investment.
§ 107.807 Purchase of securities from another Licensee.
A Licensee may exchange with or purchase for cash from another Licensee,
without recourse against the seller (except for such liability as may result from
the falsity of representations or warranties as to matters of fact), portfolio secu-
rities (or any interest therein) acquired from small business concerns, by such
Licensee or any other Licensee: Provided, however, That a Licensee shall not have
invested at any one time more than one-third of its total assets in such securities
of small business concerns through such exchanges or purchases.
§ 107.808 Idle funds.
Idle funds of a Licensee ,not employed in current financing of small business
concerns and not invested in accordance with the last sentence of section 308(b)
of the Act shall, without delay, be placed on demand deposit, or in Time Certifi-
cates of Deposit maturing not later than 1 year after issuance, in any bank or
banks which are members of the Federal Deposit Insurance Corporation: Provided,
however, That a Licensee may maintain an imprest petty cash fund in an amount
not to exceed $500 at any one tiine~ `
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233;
§ 107.809 Investment adviser.
(a) General. A Licensee may contract in writing with an individual or non.
Licensee concern to serve on a continuing basis as its investment adviser. Services
performed shall be advisory only and shall not include the actual performance of
management or operating activities of the Licensee. The Licensee shall, on or
before the effective date thereof, furnish SBA with a copy of such contract. Where
the Licensee is indebted to SBA, SBA reserves the right to approve the compen-
sation of the investment adviser.
(b) Common investment adviser. Two or more Licensees may, with prior SBA
approval, contract in writing with an individual or non-Licensee concern to serve
on a continuing basis as their common investment adviser.
(c) Exempt contracts. Contracts for appraisal, custodial, collection, bookkeeping,
accounting, and legal services shall not be considered advisory services for the
purposes of this section.
§ 107.810 Assets acquired in liquidation.
Where property is acquired by a Licensee in full or partial satisfaction of an
obligation of a portfolio concern, Licensee may incur reasonably necessary ex-
penditures for the care and preservation of such property: Provided, however, That
except as specifically permitted in writing by SBA, such expenditures (other than
ordinary and necessary expenses for the maintenance of such assets) plus Licensee's
funds attributable to such assets in liquidation shall not exceed an amount
equivalent to Licensee's investment limit under § 107.301(c). Licensee shall take
steps to dispose of assets in liquidation within a reasonable period of time.
§ 107.811 Additional investment by bank.
A bank which on January 9, 1968, holds fifty (50%) pç~rcent or more of any class
of equity securities issued by a Licensee and having actual. or potential voting
rights, may, pursuaut.to section 302(b) of the Act, make further investments in
such Licensee only if such investments would not increase its percentage holdings
of such securities. Such capital increases shall be subject to SBA post-approval
under § 107.1105,
RESTRICTED ACTIVITIES
§ 107.901 Control of small business concern.
(a) Generah The Act does not contemplate that Licensees shall operate business
enterprises or function as holding companies exercising control Over such enter-
prises. Accordingly, neither a Licensee, nor a Licensee and its Associates, nor twO
or more Licensees may, except as hereinafte~v set forth, assume control over a
small business conCern pursuant to management agreements, voting trusts,
majority representation on the board of directors,, pr otherwise, .
(b) `Presumption of control: Control over a. small business concernS will be pro,-
sumed to exist whenever a Licensee, or a ,Licensee and its Associates or two or
more Licensees acting in concert, own, hold, or control, directly or indirectly,
voting securities equivalent to (1) 50 or more percent Of the outstanding voting
securities, if the voting securities of such concern `are held by less than 50 share-
holders; `(2) 25 or more percent of the outstanding voting securities; if the voting
securitieS of `such cohcern' are held by 50 `or more shareholders, or `(3) ,a block of
stock of 20 or more percent of the outstanding voting securities which is' as large
as or larger than, any other outstanding block of stock. This presumption may be
rebuttsd by the submission of appr~pria'te evidence satisfactory to SBA.
(c) Temporary control permitted: A Licensee may acquire temporary ~ontrol
over a small business concern in connection with' financing su~~1ied to' it `only
where assumption of control is reasonably'necessary for the protection of'Licensée's
investment. , ` . ` `
(d) Plan to relinquish or divest control: A Licensee shall not assume control
over a small, business concern pursuant to paragraph . (c) "Of this section unless `it
has negotiated `and has entered int~~~a'fair hnd reasonable written. `plan at the
time of financing, as a contractual obligation on its part enfor~eabie by the small
concern or its shareholders providing'for'relinquishment of cOntrOl withiria rea-
sOnable p~Fiod of time not exceeding 7 `years. Such plan shall contain' provisions
`expressly stating `that it is subject to SBA~approval under this~s'Cction' and that
the parties consider the plan t~ be fair and, reasonable., The plans `sha'ft~befil~d
with S,BA not' later `tha~i*'thitly ~(3~) `days' afi~e~ ae4nisitioii of control `and~sha1l
`be `,~ubjeet `to SBI&'C p~Stappre~al~a~ a ~nditlOn.for"th~ cbfitth'nianee ~f the
`Li s~e~ The, plan `shall' be ~deem %Pp'iove~' u~ie~s' `Licensee in nOtified `to r(~be
eoiltrary by SBA within ninety (90) days after its rêcoipt "by SBA Where the
PAGENO="0238"
234
plan appears inadequate or unreasonable, SBA may notify and afford the Licensee
and other parties concerned an opportunity to submit evidence as to whether
renegotiation of the divestiture plaii should be required. SBA approval shall be
contingent upon full disclosure of all relevant facts and shall be subject to such
conditions as SBA may determine are appropriate.
(e.) The Licensee shall report to SBA in its annual financial report (SBA Form
No. 468) a statement (in triplicate) setting forth current prospects for the im-
plemnentation of the divestiture plan, and additional factors, if any, affecting the
status or feasibility of relinquishing control.
(f) Subsequent events affecting plan: WThere changed circumstances indicate
that a workable arrangement no longer exists, SBA may, on its own initiative or
upon application by the Licensee or other interested person, notify and afford the
Licensee and other parties concerned an opportunity to submit evidence as to
whether renegotiation of the divestiture plan should be required.
(g) Enforcement actions: (1) Divestiture plans entered into pursuant to this
section shall not adversely affect or interfere with enforcement by the Licensee
of its legal rights against a concern which has defaulted on its obligations to the
Licensee and shall no longer continue in effect as a binding obligation on Licen-
see's part in the event of such enforcement action. (2) If the Licensee acquires
control of the small business concern as the result of enforcement action taken,
the Licensee shall immediately notify SBA and shall take steps to divest itself
of control within a reasonable period of time pursuant to a plan approved in
writing by SBA. In connection therewith, the Licensee shall be free to negotiate
with any appropriate person or entity necessary to accomplish relinquishment
of control.
(h) Licensees with existing plans: Licensees which have control of a small
business concern on the effective date of this section, shall bring their plans for
divestiture of control into compliance with this section not later than March 31,
1968: Provided, however, That the plan shall provide for relinquishment of such
control within a reasonable period of time, but in no event later than March 31,
1975. Such plans shall be filed with SBA not later than April 30, 1968, and will be
subject to SBA approval in accordance with the provisions of this section.
(i) Additional financing: Whenever a Licensee assumes control of a small
concern, and later provides additional financing to it, the Licensee shall within
thirty (30) days resubmit its divestiture plan (amended if necessary or appro-
priate) for SBA review and approval in accordance with the provisions of this
section.
§ 107.902 Voluntary capital decrease.
A Licensee shall not voluntarily reduce its paid-in capital and paid-in surplus
without prior written SBA approval. A Licensee may not purchase and hold
more than 2 percent of any class of its stock without prior written SBA approval.
§ 107.903 Mergers, consolidations, and reorganizations.
Subject to the prior written approval of SBA, a Licensee may participate as a
party to a statutory or other type of merger, consolidation, or reorganization
with another Licensee or non-Licensee company where the resultant company
will qualify as a Licensee. SBA's approval may be conditioned on such reasonable
terms and conditions as it determines appropriate.
PROIIIBITIONS
§ 107.1001 Prohibited uses of funds.
No funds may be provided by Licensee for:
(a) Relending, reinvesting, etc. Relending or reinvesting by the small business
concern, nor may funds be provided to a small business concern if the business
activity of such concern involves directly or indirectly the investing, lending, or
other providing of funds to others in exchange for an equity interest or monetary
obligation, purchase or discounting of debt obligations, factoring, or long-term
leasing of equipment with no provision for maintenance or repair.
(b) Financing Licensees. Use, directly or indirectly, to purchase stock in or
otherwise to provide capital for a Licensee, or to repay an indebtedness to accom-
plish such purpose.
(c) Investments in unimproved real estate. The acquisition, or payment of obliga-
tions relating to the prior acquisition, by a small business concern of land or
improved real estate to be held, without prompt and substantial improvement
or development, for resale or leasing to others. Improvement or development shall,
for the purposes of this paragraph, be deemed prompt and substantial. if (1) an
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235
amount equivalent to 50 or more percent of the financing supplied or committed
by Licensee is used for land improvement, new construction, renovation, or other
types of improvement or development, and (2) such improvement or development
is undertaken within one (1) year from date of acquisition or date of Licensee's
financing, whichever iS later.
(d) Purposes contrary to the public interest. Purposes contrary to the public
interest, including but not limited to gambling enterprises and activities, and
any purpose which would encourage monopoly or be inconSistent with accepted
standards of free competitive enterprise.
(e) Foreign investment. Use outside the United States: Provided, however, That
a Licensee may provide funds to a small business concern which is subject to state
or federal jurisdiction, (1) for use in the domestic production of products for
distribution abroad, or to acquire abroad materials for such operation or (2) for
use in its branch operations abroad or for transfer to its controlled foreign sub-
cidiary; so long as the major portion of the assets and activities of such concern,
after funds are so employed, remains within the territorial jurisdiction of the
States.
(f) Passive businesses. Any person that is not engaged in a business operation
conducted as a regular and continuous activity.
(g) Licensee associated sup piier. A small business concern which purchases
goods or services from a supplier; which supplier is an Associate of the Licensee,
if 50 percent or more of the funds (or funds of the small business concern released
by such financing) are used by the concern to purchase goods or services from
such supplier.
(h) Alcoholic beverages. Enterprises which derive a substantial portion of their
net sales from the sale of alcoholic beverages, where such funds represent proceeds
of loans obtained from SBA. Accordingly, within thirty (30) days after the dis-
bursement of any loan funds to Licensee, and thereafter during the period in
which any part of such loan, remains unpaid, the Licensee shall maintain assets
consisting of cash, eligible Government obligations, and portfolio investments
and loans involving enterprises which do not derive a substantial portion of their
net sales from the sale of alcoholic beverages (exclusive of all investments and
lOans already in the Licensee's portfolio at the time that the proceeds of such
loaus were disbursed), equal in face value to no less than the unpaid principal of
such loan.
(1) Agriculture. Concerns engaged solely or primarily in the production of
agricultural commodities.
§ 107.1002 Capital Impairment.
(a) Each Licensee shall maintain at all times an unimpaired capital. An im~
pairment shall be deemed to exist when the retained earnings deficit exceeds fifty
(50%) percent of the private paid-in capital and paid-in surplus. Treasury stock
shall not be considered as part of private paid-in capital and paid-in surplus.
(b) A debtor Licensee shall promptly inform SBA when its retained earnings
deficit exceeds thirty-five (35) percent * *
* ** * * * * *
Mr. MrPCHELL. I have one question concerning a proposed capital
bank. 1 believe recent legislation requires SBA to study this matter
and report to the Congress on it when they are prepared, or within a
certain time. You probably are not prepared yet. But do you have
anything you can say to the committee concerning a proposed capital
bank?
Mr. BEOWN. All I can say-the Administrator might have some~
thing to add-is that we are happy to see the work being done in this
area, both by the industry and some work, cooperation being given
by the Small Business Administration. And we hope that this will be
something that will be taking *piac~ at some time in the not too distant
future. We feel like it would be good for this kind of private capital
injection into the program. I do not know whether the Administrator
has anything else to add.
Mr Moo~r I thrnk that is a proper statement, Mr Mitchell
Mr. M tc~urn~x4. That is all Ibave.
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236
The CHAIRMAN. Gentlemen, I think that it is worth alluding to
table III, which will be included in the record, which shows a total of
8,045 types of businesses assisted~ And the amount is $321,259,000.
Mr. MOOT. Could we swing to the next page, Mr. Chairman. That
looks like the total, and it is our fault, but the grant total is 10,252.
The CHAIRMAN. 10,250. I stand corrected. It is on page 2. And
there are types of industries aided, nonmanufacturing industries,
agriculture, forestry, fishing, mining, and then the retail trade, and
the wholesale trade, and the manufacturing industry-I was interested
in the largest number, probably, in building construction, and other
large areas, building materials. An interesting one that has been
assisted is museums, art galleries, botanical and zoological gardens.
They made loans to them. And food and textiles. That is a very inter-
esting tabulation of the types of loans made and the total number as
the Administrator pointed out, is 10,252, for $481 million.
Mr. Administrator, Mr. Brown concluded his statement earlier by
stating that SBA considers this program to be one of the most impor-
tant of his activities. Well, I say that some of us on this side of the
table still hope that it will achieve its intended goals.
Thank you, gentlemen; if there are no further questions, we will
call our friend Mr. Walter Stultz.
Mr. MITCHELL. Mr. Chairman, the Small Business Administration
has submitted a breakdown of all of their loans and programs by
congressional districts for the last several months. May it be received
in the record?
The CHAIRMAN. Without `objection it will' be included in the record.
Mr. MITCHELL. Thank you, Mr. Chairman.
(The document referred to for inclusion in the record at this point
can be found in the appendix to this record, p. `269.)
The CHAIRMAN. Mr. Administrator, we thank `you.
We will call Mr. Elliott Davis, president of the National Associa-
tion of Small Business Investment Companies, as our next witness.
And also' Mr. George C. Williams,, xice president, and Mr. Walter
Stults, executive, director. ` ` `
Mr. Davis, we will be pleased to hear your statement at this time,
TESTIIVIONY OF ELLIOT T. DAVIS, PRESIDENT, NATIONAL ASSOCIA-
T~QN OE SMALL $USI~ESS INVESTMENT ,COMPANIES;'~ ACC~M-
PANIE~ BY: GEORGE .0. WILLIAMS, FIRST VICE ThESI~E1'TT, A1W
WALTER STULTS, EXECUTIVE DIRECTOR
Mr~ DAvr~. Mr. Chairman and members of the *eoinmitteey my
name is Elliott Davis and I am appearing here today as president
of the National Association of Small Business Investment.'Compa~iies.
In my individual' capacity; I serve as president of' Alliance. Business
Investment Co.,' a privately owned SBIC located in ~Tulsa,~,Okla.
1. 1967 AMENI~MENPS . ..
First, let me express the gratitude of the SBIC mdnstry to all
members of this committee for their support in, ~chie,viiiig. ~lie, pa~sage
of the; 1967; amendments .,to .the~'~m.alJ, Business .Inves~~ent'~ct.
This `was truly vital legislation, since I aw afr~id we would. not have
survived, as a true industry, without them. The backing the House
PAGENO="0241"
237
Small Business Committee has given to the SBIC program over the
past 10 years was extremely important to the initiation and passage
of the 1967 amendments.
IT. SBIC TAX BILL
The second half of the 1967 legislative package for SBIC's is still
pending. A bill proposing five significant amendments to the Internal
Revenue Code was introduced last May by the chairman of the House
and Senate Banking and Currency Committees with the backing of
the administration, SBA, and a statement of "no objection" from the
Treasury Department. I have personally spoken with the chairman
of the House Ways and Means Committee and with ranking members
on his committee and have every reason to hope that this important
second step in the redesign of the SBIC program will be passed before
this summer is out.
Incidentally, I am attaching brief summaries of the 1967 amend-
ments and of the SBIC tax bill to my statement for inclusion in the
record of these hearings.
III. STATUS OF THE INDUSTRY TODAY
As I have already stated, the very existance of the SBIC program
was in jeopardy last year. More than $100 million in private capital
left the industry and many more companies were preparing their
p'ans to leave. It was at this critical point that the 1967 amendments
were passed and gave us at least a short respite.
In the months since the October passage of the SBIC legislation,
a few significant brightspots on the program's horizon have appeared.
Several new companies have been licensed and a number of privately
owned SBIC's have increased their capital.
I am sure that you already know that our industry has reported
heartening progress in profitability during the year ending last
September-the latest period for which SBA has data. This improve..
merit has come from a. combination of the departure of a large number
of- financially ailing SBIO's and of better operating and investment
results by those companies remaining. As you know, stock market
quotations for relatively speculative issues have been strong during
the past year. That has given SBIC's a chance to realize profits on
some of the winners in their portfolios The improved profit picture
has also come from tire inevitable strengthening of our portfolios.
Most of us have been in business for at least 6 years and the early
lossè~ we sustained have now been outweighed by the l~ter-matu4ng
successful small businesses in which we have invested. Finally, I think
it is safe to say that we have learned a great deal in these past years-
we are better investment enalysts, betthr menagement advisers, better
equipped to make profits without successful clients.
One word of caution here, however even though the overall SBIC
financial data are enceuraging, they are still no cau~e for dancing
in the street. Our average returp on invested capital is still far, below
that expected by investors in other industr'ies-arid in other segments
of the financial industry We must Improve it substantially a~ross-the-
board if our industry is to attract the vast additional amounts df
private capitalit must have.
95-193-68-16
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238
Another somewhat gloomy aspect of our story is this: for the past 2
years, SBIC's haven't been disbursing dollars to worthy and qualified
small businesses at the rate they did earlier. At least four reasons can
be cited for this choking off of the flow of equity capital and long-term
credit:
(1) A number of large SBIC's have left the program, so their
resources are no longer available;
(2) Many SBIC's became fully invested by 1966 and were able
to relend only those dollars which they were able to generate
through amortization or pay back of earlier investments;
(3) New administrators and new policies at SBA which led to
great uncertainty about where the SBIC was heading-if indeed,
it was going anywhere at all; and
(4) That uncertainty obviously led to curtailed operations by
all licensees.
In sum SBIC's are generally feeling better today only by comparison
with the same period a year ago; there still remain, however, too many
disturbing features to give us any right to become free from serious
alarm.
In the light of the desperate need for our help by the small business
community, the real issue is: What can be done to make the program
sufficiently attractive and desirable to retain the existing funds and
attract new dollars? This answer must be forthcoming soon.
LV. REPORT ON PRIVATELY OWNED SBIC'S
Going from an overall view, let me expand briefly a review of one
important part of the SBIC industry. My own company is privately
owned and is still relatively small, even though it has grown substan-
tially from the time a number of us organized it back in 1959.
You will remember that SBA proposed in last year's legislation to
phase out smaller SBICs entirely. We at NASBIC believe that
Congress was wise in not accepting that premise legislatively, even
though it is more difficult for very small SBICs to perform profitably
and render a substantial service to the small businesses in their
communities. It is my position that these small companies can attain
some degree of success, and in so doing, can provide the personnel
and the vehicle for enlarged operations.
I believe that the new financing instruments authorized by the
1967 amendments will help privately owned SBICs raise additional
resources through outside borrowing and this will improve their
profitability and give them more resources to transfer to their capital
structure.
A significant number of privately owned SBIC have been real estate
specialists. Even since the fall of 1965, these companies have been
under a virtual death edict-lifted only by congressional action last
year. The recent report of SJ3A to Congress on these real estate oriented
SBICs leads us to hope that this difficult problem is on the way to
solution at long last.
Under new regulations, existing SEICs must have fulitime opera-
tions by June 30, 1968. In the early days of the program, too many
SBICs were not truly operational businesses-they did not have regular
offices, office hours, and personnel. Obviously, small businesses seeking
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SBIC financing were hard put to apply to such licensees. Now, all
SBICs must have regular business offices open at normal business
hours. I think this is a proper step forward., and I am sure that SBA
will continue to be reasonable in enforcing these new rules, so no
hardship is worked during the transition period.
At this point, Mr. Chairman, may I ask George Williams to cover
the next portion of the NASBIC testimony.
The CHAIRMAN. Yes, Mr. Williams, you may proceed.
TESTIMONY OP GEORGE C. WILLIAMS, PIRST VICE PRESIDENT,
NATIONAL ASSOCIATION OP SMALL BUSINESS INVESTMENT
COMPANIES, WASEINGTON, D.C.
Mr. WILLIAMS. Mr. Chairman and members of the committee, I
appreciate your permitting me to appear before you today as you
hear a status report on the SBIC program.
I am president of Allied Capital Corp., a publicly-owned SBIO
located here in Washington. I am also first vice president of NASBIO
and a member of its Committee on Publicly-Owned SBIO's and it is
on behalf of the latter that I wish to speak.
From late 1959 on, publicly owned SBIC's have been an important
part of the SBIC industry, holding as they do a majority of the private
dollars invested in the program. At one time, we had almost 50 public
companies with well over $300 million in private capital; now there
are under 30 and, in the absence of definite data from SBA, I estimate
that they hold private capital totaling substantially less than $200
million.
Many factors have contributed to the declining capital of public
SBIC's. They were hard hit ~by the market break in the spring of
1962, soon after most of them &cquired their funds. The quotations
for their stocks have been depressed badly ever since early 1962-~
although there was a signi~antrise during 1967. They were particu-
larly hampered by the overlapping and often contradictory rules and
regulations of SBA and the Securities and Exchange Commission.
Their stockholders often did not understand the nature of the SEIO
program and put pressure on management to withdraw. And, finally1
the incentives given SBIC's definitely discriminated against the larger
SBIO?s, public or private.
Obviously, this has not been a happy period for the owners or
managers of public SBIC's. As. a result, we have lost a number of our
very best companies and we have lost a large ~umher of *e very best
men in the ind~ustry.
The passage `bi the 1067 amendments marked the beginnings of a
new phase in our industry's development. The leverage incentives
given SBIC's were improved, so that SBI(Ys with private capital of
up to $3,750,000 were treated equally. Special incentives were given to
venture capital oriented SB1C's with private capital between $1
million and $3,~67,O~.
It is apparent, then, that mediuxn~size SlilO's, with private capital
of up to about $4 million, are treated better from a leverage standpoint
now than they were earlier. SBliYs with larger capitalizations still are
weighing whether or not it makes economic sense for theirstockholders
to stay in the pregram, and NASB~IC and ita publiciy.~owned SBIC
PAGENO="0244"
240
committee are striving desperately to increase aid incentives for such
companies to stay in the program-and for SBIC's with capital below
that level to increase their capital.
These are some of the projects now underway to bring about this
result:
1. ovERLAppING REGULATIONS
NASBIC has filed a formal application with SEC for exception of
public SBIC's from a number of the provisions of the Investment
Company Act of 1940. SBA and our officers are holding conferences.
with SEC staff on our application.
2. TAX FEATURES
In common with other SBIC's, we are pressing for the passage of the
SBIC tax bill and are cooperating with SBA and the Internal Revenue
Service on two critically important subjects: continuation of the 10
percent floor on reserves against bad debts and on the taxation of
profits arising from the exercise of warrants or options. We hope both
will be resolved soon.
8. THE CENTRAL, OR CAPITAL, BAN,K
Mr. Davis will mention this hoped-for innovation. Tf it can be estab-
lished, it will certainly encourage larger SBIC's to stay in the program.
4. STATE INCENTIVES
This is another project we are working on which can be very valuable
for all SBIC's, but particularly so' for larger SBIC's which are restricted
in the leverage they can `obtain from SBA.
5. OPTIONS FOR `MANAGERS. OF PUBLIC SBIC'S
The Investment Company. Act 0 1940, as interpreted by SEC~.
prohibits the issuance of restricted stock options to officers of registered
investment companies, which presently include publicly held SBIC's.
As a result, these SBIC'5 too' often have been unable to retain their"
most capable executives. We strongly believe these management.
incentjyes are particularly important for SBIC. officers and we are
trying to obtain them through ~.dministrative or legi~latiye action.
Perhaps I have dwelt, too long on the. pessimistic ~sp'eôt of our seg-
ment of the industry. On the other hand, the, loss of, these good
SBIC's, . these good SBIC executiv~s, and these SBIC resources places
upon. me a responsibility to he completely, `candid with you men who
are appraising the present po~tura and the future of our program...
In conclusion, though,, let me point ont some encouraging develop~
ments, ` . ` ` , `
First of all, the investment performance of most of the public. SBIC's
during the past 2 years has been tremendous A number of the public
SBIC7s outperformed the very best of the ~o-c.alle4 `~go-go~' mutuaL
funds which have gained{ the' ~ttention~ ~f Wall `Street., We public
SBIC's have been making more~o.ney,~nd our portfolio, .compa~ies
ere stronger than eyer .befo~ in o~r .his,tory~, Wek~ok toe~ coutiuuiug
flow of capital gains as our stronger portfolio companies go public.
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2~1
We hope that the vexing problems of dual regulation and ever-
~changing SBA regulations and policies will abate in seriousness and
that we can henceforth spend more time in analyzing new invest-
ments and advising present portfolio companies and less time on trying
to figure out the meaning of new policies and new regulations.
Finally, we are aware of the support of Congress, of SBA, and of the
administration for our SBIC program. We also recognize the crucial
role SBIC's can play in a number of important areas of national
concern. I am sure that I speak for all my colleagues in the SBIC
industry when I say this is an exciting undertaking-and we know it is
important. As long as it is an industry where we can honestly commit
our stockholders' money, all of us will wholeheartedly take on the risks,
the difficulties, and the challenges.
Thank you.
TESTIMONY O~' ELLIOTT DAVIS-Besumed
Mr. DAVIS~ Thank you, George~.
Now, Mr. Chairman, before concluding this statement, I want to
stress one thing: We are appreciative of congressional and administra-
tion support of our industry. `.
V. THE FUTURE OF SEIC'S
When Congress was considermg the bill establishing the smal
~business investment compa~ny progra~n in 1957 ,and 1958, a tiu~aber. of
witnesses testified that they were sure, that there was no r~al. demand
for the type of dollars which the SBIC's would offer-and that, even
if there were an "equity gap," small businessmen would n~t be willing
~to become partners with SBIC's to get the money they needed.
Well, we have proved in the l~st 9 years that those experts were
completely wrong. Almost 25,000, small businessmen `have already
been served by SBIC's, drawing down an e~t~rnated billion and a
quarter dollars in the process. So there has been, an effective demand
or SEIC help.
Furthermore, all active SBIO. officers can tell you that thedemand
~runs far above what we can handle. NASBIC estimates that we could
profitably invest four or five, times `as much, as we have averaged over
the past several years. That means at least $1 billion a year.
With our present resources, we can put out only. $200 million annu-
ally. Obviously, we need substantial buttressing if we are to do the
job Congress has assigned to us. Let us look at some of the ways
we propose to accomplish that mandate. , .
First, we seek national covera~e. Eight States have no SBIC's at
all-seven others have. only oi~ie licensee. Similarly, a large number of
major metropolitan areas are also without S~IQ facilities. NAS~IO
is presently assisting SBA in meeting its responsihi4ities in. achieving
national coverage. . `. ` .
Secondly, we are conducting . discussions with representatives of
other financial institutions to try ~o. establish .a central, or capital,
bank for SBIC's which would. be privately financed. If we can bring
:such a new source of funds into being, we shall greatly increase the
resources we have available~to invest: in small businesses. ,,
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242
Our third program is designed to encourage States to provide in-
centives for SBIC's to organize or invest within their borders. This
program is in its embryonic form, so we cannot report fully on it-or
on its prospects at this time.
Fourth, we are cooperating fully with SBA, with the Securities
and Exchange Commission, the Treasury Department, and the In-
ternal Revenue Service to bring about the kind of regulatory climate
which will allow our industry to survive and grow. This is not an easy
task, either for the agencies or for the industry, but I believe we can
jointiy devise means for carrying out our individual responsibilities
without crippling the industry.
VI. THE ROLE OF SBIC'S IN THE AMERICAN ECONOMY
You have heard Mr. Williams tell of our increasing concern with
the attrition in industry assets. as present SBIC's leave the program.
completely or in part.
Nonetheless, let me give you NASBIC's look down the road 5 or
10 years.
In the first place, we have set these goals for the SBIC's 15th
birthday party in 1973; $5 billion in resources; this will allow us to
provide at least $1 billion a year to new and growing small business
concerns. And we predict a full spread of all types of SBIC's in every
State and in every major metropolitan area.
Secondly, we shall augment our ability to work toward other
national goals. I foresee the day when SBIC's are cooperating with
governmental and other private institutions in working toward these
goals:
(1) Increasing competition in our economy;
(2) Achieving business ownership by minority groups;
(3) Assisting small firms to sell in the export market;
(4) Helping small firms to get research and development
work-and to perform on it; and
(5) Guaranteeing that small business gets a fair share of
Government contracts.
As members of this committee know all too well, the pace of eco-
flomic concentration is accelerating each year and 1967 witnessed the
greatest number of giant mergers ever. Today, some 2,400 corporations
hold 85 percent of all the manufacturing and mining assets. Obviously,~
present SBIC assets represent only a tiny B-B shot against the hide
of a rhinoceros, but it need not remain that way in the crucial years
to come.
In all these fields, we will be participating in a tremendously chal-
lenging and exciting experiment-the partnership between business
and Government to achieve goals we all recognize to be crucial to the
health and vigor of our national economic life. We will be working at
the grassroots level and I am absolutely convinced that we can do all
these things at a profit and that we can continue to return to the
Federal Government several dollars for every dollar it has loaned us.
We pray for the continuing~ support of this important committee;
we pledge that we shall be increasingly worthy of your backing.
Thank you.
The CHAIRMAN. Thank you, Mr. Davis, for a very fine statement.
And thank you, Mr. Williams, also, for your excellent statement.
PAGENO="0247"
243
Just let me ask one or two questions of you gentlemen collectively..
I believe it was Mr. Davis who testified that he thought Congress
was wise in not buying the package proposed, of eliminating entirely
the small business investment companies in the small category. We
recognize that they have had problems, they have had difficulties in
getting on their feet. But I have a feeling that they could be of great~
service, as was intended earlier.
Wouldn't it be wise to strengthen the smaller rather than make it
bigger? Haven't we got up to the 10-million category now? I know
Mr. Stults is an excellent man in your industry. We admire your in-
dustry, and I see your projection in 5 years to a $5 billion industry,
and this goal is good. We hope we can be around to attend your party.
But wouldn't it be wise to broaden the base, to strengthen the small
ones instead of making the big ones bigger?
Mr. DAVIS. Having been a small SBIC to begin with-we are still.
small by certain standards-I am convinced that there is a great need
for the small SBIC. It serves a purpose, first of all, in assisting the
smaller businesses, it serves as a training ground for a development of
trthxed cadres. It creates and develops an experienced vehicle that
can go intO the market and get additional funds. Absolutely there is-
a need for an extended effort to include the influence of small SBIC's.
lit does not have to be done, however, at the expense of the larger com-
panies. I think this is a program that is nationwide-
The CHAIRMAN. Those that are large today in your industry would
probably have been small SBIC's in the beginning?
Mr. DAvIs. Yes. Some of them started out large, and then got
larger.
The CHATEMAN. As we keep injecting more Federal and private
fuTid~ into them, they have grown.
Mr. DAVTS. Yes, sir.
The CHAIRMAN. We have pressed it home several times that this
industry would get on its feet and be able to achieve its goals, its
declared purpose. But for 10 years it is constantly seeking more
legislation, and more liberalized legislation, an~ more amendments.
And now you have two big goals, (1) a capital bank, to make the
bigger have more liquidity, and (2) an SBIC tax bill. We all likethe
tax reductions and favOred tax treatments. These are your two goals,
I understand, at this time?
Mr. DAvis. That is correct.
The CHAIRMAN. Mr. Williams, let me ask you one question. You
alluded tt the difficulty' of getting private capital to flow into these
institutions. And this is desirable. Based upon your experience in the
field, what is the- real difficulty? What can we do to influence them to
get more private capital to flOW into these institutions?
Mr. WILLIAMS. Mr. Chairman, I think I mentioned-
The CHAIRMAN. They are desirable goals, but based on your expe~
rience, what can be done about it?
Mr. WILLIAMS. Shortly ~after, many companies went public in early
19~2, hs you all r~cail there was a strong market decline. I feel that
since that time ma~of the p~rblicly held' SBiC's have proveii that
they can p~rforrn; theyoa~n show' a profit; they can show a i~eturn on
investment. And I thh* that the picture is changing. I think more
private money will eon~e in to SBIC's private investors. I think that
picture is changing now.
PAGENO="0248"
2~4
The CHAIRMAN. We think you have a very able and effective legis-
lative representative, in your executive director. And we would, like
to hear from him, for the record.
Mr. Stults, what would you. recommend to this committee? We
would be glad to have your views. You can give them to us orally or
extend them if you wish..
Mr. STULTS. If you gentlemen have a little time-
The CHAIRMAN. Well, if you can. make it brief.
Mr. STULTS. I wifi make it really brief.
You asked one reason why private money h&s not conie in; that is
one of the difficulties. I have seen the statement that Grogan Lord
has submitted to this committee in his role as Chairman of the SBIC
Advisory Committee. He pointed out that sinc;e the passage of the
Small Business Investment Act, in, 1958, we have had Administrators.
Barnes, McCallum, Home, Foley, Boutin, and Moot, in addition to
Acting Administrator Davis, who served for 9 months.
The CHAIRMAN. Hasn't every one of them been helpful. and con-
structive, haven't they taken you by the hand and led you on?..
Mr. ST.ULTS. Certainly, every one has been helpful. There have also
been six Deputy Administrators or Associated Administrators in
charge of the Investment Division. Every one of these men has had a
different concept of what an SBIC-what it ought to be doing and
what it ought not to be doing.
The CHAIRMAN. Maybe we should have a Walter Stults over there.
Mr. DAVIS. We will buy that.
Mr. STULTS. No, sir. .
Those have all been fine men. But each one has had a very different
point of view. It is difficult for us to talk to some man and say "Won't
you invest a few thousand dollars in my SBIC," b'ecau~e we are not
sure that SBA is going to want our kind of SEIC, or they. might
change the ground rules right down the road a little bit.
The CHAIRMAN. It has been our impression that they have all been.
very helpful. And certainly the Congress has been helpful. This com-
mittee has tried to be constructive and has supported your positions.
Mr. STULTS. Absolutely. We have no complaints at all about the
congressional treatment we have received, Mr. Chairman.
The CHAIRMAN. Well, do you think this capital bank could be
established by private capital, or will it require congressional action?,
Mr. STULTS. We are working now very diligently on trying to get it
funded privately.
The CHAIRMAN. Then you would not have all these problems?
Mr. STULTS. We would have many fewer problems if our partner,
Uncle Sam, were not both a creditor and a regulator...,This brings up,
obviously, some very basic questions.
The CHAIRMAN. Mr. Davis, leave with the committee a copy of
your SBIC tax bill for its consideration and evaluation.
Mr. Morton?
Mr. MORTON. Thank you, Mr. Chairman. ,
I certainly .have gotten a lot out of the statements of Mr. Davis
and his associates, and out of Mr. Stults' remarks. ,
I do not quite understand the position of the intermediate bank
that you intend to establish. What credit position will it have vis-a~vi~
the public funds used through the Small Business Administration?
PAGENO="0249"
245
Mr. DAVIS. We are hopeful that we can obtain the `private funda
to fund the bank with' no assistance at the Federal level. This is some-
thing we are going to have to explore. However, if it is necessary that
there be a degree of assurances furnished, the private bank sector or
the `bank and insurance sector that `will be the source of the funds,
why then we will have to come back and we will have to explain the
circumstances. In any instance, it is anticipated that there will be a
lesser requirement from the Federal establishment with the establish-
ment of this, and it will create funds that will move more easily into
the marketplace than the present funds are moving.
Mr. STULTS. Just to supplement that, specifically we would envisage'
the SBA's fund remaining subordinate. SBA testified and the industry
testified. during the passage of the 1967 amendments that one of the
reasons to make these instrumentalities subordinate was to encourag&
private advances in a senior position.
Mr. MORTON. Do you have in the SBIC's joint participation, say,
with an insurance company, where you supply only a part of the credit
or the funds that go to a company? Do you normally subordinate'
your money to any other institution that is participating?
Mr. DAVIS. The funds that SBIC will normally contribute to
financing is invariably subordinate, or it has a longer term of non-
amortization. It may be equal in the event of a default, but in most
instances it is subordinate in the event of a default. We do that to
encourage these other sums of money to enter the transaction.
Mr. MORTON. Is it your plan. that this bank would be publicly
held or would it be held' by participating SBIC's?
Mr. DAVIS. We have considered that participating SBIC's would
contribute a portion of their capitalization to assist in funding this.
Mr. MORTON. This, then, would give a real shot in the arm to the
value of the stock of the SBIC's in the marketplace. I can see that.
Mr. DAVIS. Yes, sir.
Mr. MORTON. I know we are going to run out of time here, but
let me ask a couple of other questions. Are most SBIC's specialized
as to the type of loans and to the industries which they serve?
Mr. DAVIS. There are a few who started as specialists and continue'
as specialists. In a great number of instances they entered the pro-
gram with a plan that they would be diversified, but their investment
direction wil1~ move them into certain areas of specialization. And
once they attain this specialization an'd ~recogni~e the pros and cons
of the business, if' it is attractive, `then they develop a degree of'
specialization. The tendency, I would say, ~is for companies, after a
period of time,and' an experience in the broad marketplace, to develop
specializations.
Mr. MoRToN. "Are, companies which' have developed a specializa-
tion the most successful ones?
Mr. DAvIS. I would say that that is so, `because they have had
good results, and therefore they concentrate in that' market. This is'
a tendency.
Mr. ~MOETON~ And, `of' cOurse, they develop the expertise required
to handle it?
Mr. `DAvis. Exactly. This is `what is required. If their exposure is
bad, th'at is tire last time th~ specialize in that" area, generally speak-
ing. This is ,a s~pecialization that' develops through the years. As for
mys~1f, I am~ a geologist `by nature; `Thus, I' am oil `oriented. Even the
PAGENO="0250"
24G
manufacturer in industry is oil oriented. `We happen to be in textiles
and other things too. That happened because these things came
along. The geographic location also determines-if you are in Montana
~r Idaho, mining may become appropriate, and a specialization
develops. A particular individual who is running that SBIC may
have had small business experience in his own line. `1 his is where he
starts with his specialization.
Mr. MORTON. Are there many "shoppers" in the marketplace who
go from. SBIC to SBIC looking for a better deal?
Mr. DAVIS. They tell me that that occurs in some areas. I have to
say to you that there is such a tremendous demand for our funds and
our assistance that I think it is really an inconsequential development.
You mentioned earlier in questioning whether we were going to
have restraint of trade problems. Generally speaking among knowl-
edgeable SBIC's, we eagerly look for additional SBIC's, because it
will broaden our impact. There are too few people who know what
the SBIC is and what it can do for them. This is part of the educational
program. The more companies that are available, the more exposure,
the better the opportunity to have more of that assistance come from
us. And we are available. At a time when few dollars are available in
the marketplace today, we have money. The problem is, How do we
get business to know that we are here ready to help them? We are
proceeding in that direction.
Mr. MORTON. One final question. How do you feel toward equity
versus straight loan financing? Do you feel the SBIC industry gener-
ally should leaii more toward the purchase of part of the equity or
should it, perhaps, continue in long-term funding, bonds and
loans?
Mr. DAVIS. Well, my company originally was predicated on the
basis that we would loan only, with an eleven times leverage. I had it
all carefully figured out. I discovered within 18 months that it was
iiiipossible.
Since that time practically all of our deals are combiiiation-equity
in portion, and loan in large portion. In my opinion the pattern of
what will develop in this industry in the next 5 years is that in excess
of 80 percent of the fund will go into the combination transaction.
Now, the danger is that in reporting the equity portion may repre-
sent only $50,000. And the loan portion may be $500,000. But the fact
is that it is an equity transaction in combination. I think that the
days of the SBIC people that are exclusively lending money-they are
lending it because they understand that. Once they get a taste of the
opportunities tha.t exist in equities, then they will be willing to let
their money stay in. They are willing to ride for the benefits, because
th~y can be so great. And with success stories all a.round them, the
lenders are going to turn into equity operators; they have to.
Mr. MORTON. Do the regulations, which are an umbrella over your
business, restrict you in-
rFhe CHAIRMAN. Are they burdensome?
Mr. MORTON (continuing). Going to the marketplace for executive
talent?
Mr. DAVIS. I must say this, that the greatest single problem that
SBIC's have are the regulatory problems. This is not that we do not
imclerstancl the problems that SBA has. We understand. For example,
the industry is against control situations, just as the SBA is against
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control. What happens is that we run into a problem of what consti~
tutes control. An intelligent SBIC operator can engineer a loan agree-
ment and can have control with 20 percent stock ownership. The
important thing is that once an SBIC has been in operation for a
great number of years, you can look at the overall pattern of that
operation, and you can tell, is this an SBIC which seeks control, or
is this one that runs from control? All most SBIC's want to do is
make certain that it is in a position where it can enforce the agree-
ments that it has with the small businesses it has financed.
I think this is generally the area. I have had lengthy discussions
with SBA. You see, the problem is that whenever one thief is un-
covered, there are a whole bunch of fences that are closed. And then
that makes it more restricted for all the honest ones. Then if SBA
finds another thief in another area, it closes more fences. And all these
things become more and more restrictive. And finally it became so
difficult that we have serious problems in operating at all.
Mr. MORTON. That is all. Thank you.
The CHAIRMAN. Mr. Mitchell.
Mr. MITCHELL. Are you suggesting on these matters that SBA
should not have regulations and guidelines, definite regulations which
they should enforce and go by?
Mr. DAVIS. By all means. SBA should have regulations and should
enforce them. We favor them. The problem lies in the fact that re-
cently we have had a change in regulations. For example, SBA set
one policy and held it for years. Now we have a change in position.
This has created tremendous problems, for all SBIC's particularly
smaller ones, because they are dealing with companies that are not
established, that do not have management depth. You have a difficult
situation in terms of trying t~ make sure that the terms of a loan
agreement are complied with.
Mr. MITCHELL. You are thinking of stable, set rules, instead of
indefinite rules.
Mr. DAVIS. Yes, that are worked out in conjunction with the
industry and the SBA, with the industry recognizing what SBA's
problems and obligations to the Congress and to the small business
are,
Mr. MITCHELL. You do not want it lax, then?
Mr. DAVIS. No, we want it firm and reasonable.
Mr. MITchELL. For a few years it was rather lax, and then-
Mr. STULT5. On this question of controlled comp~nies-there were
97 control cases in 1966 and 1967, according to Mr. Moot. There are
20,252 outstanding finançings right now. That's a tiny percentage.
One thing that really hurts us is that 2 years ago a brandnew ad-
ministrator came in and said that there are not more than 200 decent
guys in this whole industry. Today Mr. Moot says there are 395 good
ones who will serve as the nucleus of an industry. That really hurts.
How do you attract capital to an industry when Uncle Sam is saying:
"Two-thirds of all SBIC's should be thrown out"? I just plead-
The CHAIRMAN. When you revise your remarke'-
Mr. STULTs. I just make a plea for the fact that here we are operat-
ing in the free enterprise tradition of venture capital. It is a tough
enterprise. You have to keep alert. And at the same time we are
operating within a Federal framework of regulation.
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2~8
Mr. MORTON. Mr. Chairman, before you adjourn the hearing~
I wonder if Mr. Stults would provide an additional statement analyzing
the overlap among the agencies involved-the Small Business Ad-
ministration, the Internal Revenue Service, the SEC, and any other
regulatory agency, so we get this from the broad general aspects down
to specifics, not from the Government's point of view, but from your
point of view.
Mr. STULTS. Yes, sir.
Mr. MORTON. Could we have that, Mr. Chairman?
The CHAIRMAN. It may be included in the record.
(The information to be furnished for inclusion in the record at this
point follows:)
NATIONAL ASSOCIATION OF SMALL BUSINESS INVESTMENT COMPANIES,
Washington, D.C., June 1f3, 1968.
Mr. JOE L. EVINS,
Chairman, Select Committee on Small Business, House of Representatives, Rayburn
House Office Building, Washington, D.C.
DEAR MR. CHAIRMAN: At the end of our appearance before the House Small
Business Committee on May 22, you kindly gave us permission to supplement
our testimony with additional material. Attached are several items which were
specifically discussed during our testimony.
I. The SBIC Tax Bill. I am enclosing a copy of H.R. 10410 which was intro-
duced by Mr. Pr~tman on May 29, 1967 and which is still pending before the
House Ways and Means Committee. We hope very much it will be passed during
this session. I am also enclosing a section-by-section analysis of the bill.
II. The Small Business Investment Act Amendments of 1967. I have summarized
the most important features of last year's legislation.
III. NASBIC's Application to the Securities and Exchange Commission.
During the hearings, Mr. Conte asked a question regarding our application to
the SEC to have publicly-owned SBICs exempted from provisions of the Invest-
ment Company Act of 1940. Our General Counsel, Charles M. Noone, is preparing
a memorandum On various overlapping regulatory authorities which will cover
this point. Mr. Noone's memorandum will be sent to you in the next day or two.
He will also send you a copy of our formal application to the Commission. I
would like to point out, however, that we are not attempting to curtail stock-
holder protection in any way; we are only attempting to have one agency, rather
than two, regulate SBICs in this field.
Thank you again for your continuing support for our industry and for the
small businessQs we are serving.
Sincerely,
WALTER B. STULTS,
Executive Director.
[H.R. 1?410, 90th Co~ig,, first' sess.]
A BILL To amend the Internal Revenue Code of 1954 with respect to the income tax
treatment of small business investment companies
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress as8embled, That this Act may be cited as the "Small Business
Investment Company Tax Amendments of 1967".
Sne. 2.' (a) Section 166 of the Internal Revenue Code of 1954 (relating to bad
debts) is amended by redesignating subsection (h) as (i), and by inserting after
subsection (g) the following new subsectio~n:
"(h) SPECIAL RULE FOR SMALL BUsINESS INVESTMENT C0MpANIE5.-Notwith-
standing section 165(g)(1) and subsection (e) of this section, subsections (a), (b),
and (c) of this section shall apply, in the case of a taxpayer which is a small
business investment company operating under the Small Business Investment
Act of 1958, as amended, to a debt of a small business concern which is evidenced
by a security as defined in section 165(g) (2) (0).
(b) Section 165(j) (4) of the Internal Revenue Code of 1954 (relating to losses) is
amended by striking out "section 1243." and inserting in lieu thereof "sections
166(h) and 1243." 5
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2(19
SEc. 3. Section 542(c)(8) of the Internal Revenue Code of 1954 (relating to
~exemption of small business investment companies from the definition of a personal
holding company) is amended to read as follows
"(8) A small business investment company which is licensed by the Small
Business Administration and operating under the Small Business Investment
Act of 1958, as amended, and which is actively engaged in the business of
providing funds to small business concerns under that Act. This paragraph
shall not apply if the small business investment company fails to meet
restrictions on control of small business concerns by small business investment
companies or on conflicts of interest involving the small business jnvestment
company, its shareholders and small business concerns financed by the small
business investment company, set forth in regulations jointly promulgated
by the Admjnistrator of the Small Bnsiness Administration and the Secretary
or his delegate,"
SEC. 4. Section 851 of the Internal Revenue Code (relating to the definition
of regulated investment company) is amended by inserting after subsection (e)
the following new subsection:
"(f) SPECIAL RULE FOR Si~w4L BUSINESS INVESTMENT CoMPANIEs.-
"(1) GENERAL RULE.-NOtwithstafldilig subsection (b) (4) of this section
a small business investment company operating under the Small Business
Investment Act of 1958, as amended, may be considered a regulated invest-
ment company. for any taxable year if, at the close of the taxable year-
"(A) at least 50 percent of the value of its total assets is represented
by-
"(i) cash and cash it ems (including receivables), Government
securities and securities of other regulated investment companies,
and
"(ii) other securities for purpose of this calculation limited in
respect of any one issuer to an amount uot greater in value than
20 percent of the amount of combined paid-in capital and paid-in
surplus of the small business investment company and to not more
than 50 percent of the outstanding voting securities of such issuer,
* and
"(B) not more than 25 percent of the value of its total assets is invested
in the securities (other than Government securities or the securities of
other regulated investment companies) of any one issuer, or of two. or
more issuers which the taxpayer controls and which are determined,
under regulations prescribed by the Secretary or his delegate, to be
engaged in the same or similar trades or businesses or related trades or
businesses.
~`(2) TEN-YEAR LIMXTMNON.-
"(A) Securities of an issuer in which the small business investment
company has continuously held any security of such issuer (or of any
predecessor company of such issuer as determined under regulations
prescribed by the Secretary or his delegate) for 10 or more years may
not be taken into account for the purpose of subparagraph (A) (ii) of
paragraph (1) unless such securities are limited in respect of any such
issuer to an amount not greater in value than 5 percent of the value of
the total assets of the taxpayer and to not more than 10 percent of the
outstanding voting securities of such issuer.
"(B) Section 851(d) shall not apply in determining whether a small
business investment company qualifies as a regulated investment
company for anytaxable year if at the close of such year it owns securities
of an issuer in which such small business investment company has
continuously held any security of such issuer (or any predecessor of
such issuer as determined under regulations prescribed by th.e Secretary
or his delegate) for 10 or ~more years and such small business investment
company would not have qualified as ~a regulated investment company
for any prior taxable year unless securities of si~ch issuer were taken
into account under `subparagraph .(A) (ii) of this section.
~` (3) APPLICABLE EtILE5.-For purposes of this subsection-
"(A) Section `851(c) shall apply except that in the case of securities
of an issuer in which the small business investment company has not
continuously held any security of such issuer (or of any predecessor
company of such issuer as determined under regulations prescribed
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250'
by the Secretary or his delegate) for 10 or more years, the term `controls'
in subsection (c) (2) means the ownership of more than 50 percent of the
total combined voting power of all classes of stock entitled to vote.
"(B) Except as provided in mbsection (f) (2) (B), section 851(d) shall
apply except that the term `quarter' shall mean `taxable year' ."
SEC. 5. Section 1242 of the Internal Revenue Code of 1954 (relating to losses
on small business investment company stock) is amended by inserting "(a)
GENERAL RULE.-" before "If-", and by striking "shall be treated" in the first
sentence and inserting in lieu thereof "shall, to the extent provided in this section,
be treated", and by adding at the end thereof the following new subsections:
"(b) MAXIMUM AMOUNT FOR ANY TAXABLE YEAR-For any taxable year,
the aggregate amount of the loss on stock in a small business investment com-
pany which was acquired by the taxpayer after May 29, 1967, and which is
treated by the taxpayer by reason of this section as a loss from the sale or ex-
change of property which is not a capital asset shall not exceed-
"(1) $25,000, or
"(2) $50,000 in the case of a husband and wife filing a joint return for such
year under section 6013.
"(c~ CARRYOVER OF LOSS ON SBIC STOCK-The amount of loss on stock in a
small business investment company which is not deductible because it exceeds
the limitations provided in subsection (h) shall be carried to the succeeding
taxable year. In the sueceding taxable year, the amount of loss carried to such
year shall reduce-
"(1) the excess of the net short-term capital gain over the net long-term
capital loss, and, to the extent the amount of loss carried to such year is
greater than such excess,
"(2) the excess of the net long-term capital gain over the net shorl-terni
capital loss.
The unused amount of loss carried to such year shall he considered as incurred on
stock in a small business investment company in such year."
SEe. 6. Section 1243 of the Internal Revenue Code of 1954 (relating to losses of
small business investment Companies) is amended to read as follows:
"SEC. 1243. GAIN OR LOSS OF SMALL BUSINESS INVESTMENT COMPANY.
"(a) LossEs FRo~1 EQUiTY SECUR1TJE5.-In the ease of a small business invest-
ment company operating under the Small Business Investment Act of 1958, as
amended, if, for a taxable year-
"(1) losses from sales or exchanges of equity securities acquired pursuant
to the Small Business Investment Act of 1958, as amended, and in accordance
with regulations of the Small Business Administration prescribed under such
Act, exceed gains from the sales or exchanges of other such equity securities,
and
"(2) such losses would (but for this section) he losses from the sales or ex-
changes of capital assets, then the excess of such losses over such gains shall,
to the extent provided in this section, be treated as losses from the sales or
exchanges of property which are not capital assets.
"(b) MAXiMUM AMOUNT FOR ANY TAXABLE YEAR.-
"(1) IN GENERAL.-For any taxable year, the aggregate amount treated by
a small business investment company by reason of subsection (a) as losses
from the sales or exchangers of property which are not capital assets shall
not exceed $100,000.
"(2) STOCK REQUiRED BY ~ONVERT1NG CERTAiN DEBENTURES.-If a loss
incurred on or before March 31, 1972, is on stock received pursuant to the
conversion privilege of a debenture which was acquired by ~he taxpayer
(pursuant to section 304 of the Small Business Investment Act of 1958)
before May 29, 1967, then the amount of such loss, or the excess of losses
from sales or exchanges of equity securities over gains from sales or exchanges
of other such equity securities if less, which exceeds the limitation of para-
graph (1) shall be treated as a loss from the sale or exchange of property
which is not a capital asset during the taxable year.
"(c) CARRYOVER OF Loss FROM EQUITY SEcuRITIE5.-The amount of loss on
equity securities which is not deductible for a taxable year under this section
because of the limitation of subsection (h) shall be treated as a loss from a sale
or exchange of equity securities held for not more than 6 months in the succeed-
ing year.
"(dy SPECIAL RULES FOR DETERMINING BASIS OF STOCK.-FOr purposes of
determining the amount of gain or loss (if any) from the sale or exchange by a.
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small business investment company of stock ac4uired by such company pursuant
to the Small Business Investment Act of 1958, as amended, and in accordance
with regulations of the Small Business Administration prescribed under such Act~
the basis of such stock shall be reduced (but not below zero) by an amount equal.
to the amount of any distribution received by such company with respect to such
stock on or after the date of the enactment of this subsection, to the extent that,
any such distribution is made by the distributing corporation out of its earnings
and profits accumulated prior to the date of the acquisition of such stock by the
small business investment company.
"(e) GAIN OR Loss FROM DEBT.-
"(1) GENERAL RULE.-A debt acquired pursuant to the Small Business.
Investment Act of 1958, as amended, and in accordance with the regulations.
of the Small Business Administration prescribed under such Act, shall not.
be treated as a capital asset, whether or not it is evidenced by a security de-.
fined in section 165(g) (2) (C)
"(2) SPECIAL RULE FOil CONVERTIBLE DEBENTURES.-
"(A) DETERMINATION OF cosT.-For purposes of this section and
sectioh 16(h), in determining the cost of a convertible debenture, amounts.
paid to acquire the debenture shall be allocated, first to the debt to the
extent of the redemption price at maturity, and thereafter to the conver-
sion privilege. In the sale or exchange of a convertible debenture, amounts.
received in excess of the redemption ~price at maturity shall be treated
as received in exchange for the conversion privilege.
"(B) COMPUTATION OF RESERVE FOR BAD DEBTS.-If the taxpayer~
eRercises the conversion privilege of a debenture during the taxable year,
the amount by which the reserve for bad debts which is allowable to the
taxpayerunder subsections (c) and (h) of section 166 is reduced by reason
of such exercise shall be included in the taxpayer's gross income for such.
taxable year, but only to the extent that the actual reserve for bad debts
at the end of the taxable year exceeds the allowable reserve for bad debta
at the end of such taxable year.
"(f) DEFINITION OF EQUITY SECURITIES.-FOI' purposes of this section, the
term `equity securities' means-
"(1) stock of any class of type;
"(2) any option or conversion or exchange privilege issued and/or acquired
in connection with the purchase of any stock, convertible debenture, or debt,
instrument; or
"(3) any combination of the foregoing."
SEC. 7. (a) The ameudments made by sections 2, 4, and 6 shall apply to~
taxabh~ years beginning on or after April 1, 1968.
(b) The amendments made by section 3 shall apply to taxable years beginning
on or after the date on which regulations contemplated by section 3 are
promulgated.
(~) The amendments made by section 5 shall apply to taxable years ending~
after the date of the enactment of this Act.
I. SUMMARY OF ll.R. 10410, SBIC TAX BILL
SECTION-BY-SECTION ANALYSIS OF TIlE BILL
The bill would amend the Internal Revenue Code with respect to the tax
treatment of small business investment companies (SBICs), in order to aid such
companies in carrying out the purposes of the Small Business Investment Act.
of 19~8. Experience under the SEIC program has shown that these tax amendments.
are necessary to ,correct certain problems and deficiencies ~*rhich have become
apparent in present law. The bill is thus an important element in the legislative
program which has been developed to improve the industry through providing~
for larger and more effective SBICs, attracting investment in them, ~nd encour-
aging them to engage in more equity-type financing of small concerns.
BACKGROUND OF THE LEGISLATIVE PROGRAM
The central purpose of the Small Business Investment Act is, by means of
private SBICs, to assist small concerns in obtaining high risk venture capital
not readily available from normal financing sources. Congress found clear evidence
of the need for such an institution when it established the program in 195~, and.
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252
we believe there is an even greater need today. W~iile the SBIC program has
assisted many small business concerns since its creation, the program has yet to
fulfill the potential envisaged for it by the Congress..
Studies of the industry have clearly demonstrated that larger SBICs are
essential; that increased profitability is necessary to attract more private capital
to the program; and that it would be desirable for SB~Cs to give greater emphasis
to equity-type financing of small concerns.
Analysis of results under the program to date indicates that it is extremely
difficult for a small SBIC to operate both properly kind profitably. A dispropor-
tionate number of the violations of SBA regulations have been perpetrated by
smaller SBICs. At the same time, the inability to g4~nerate sufficient revenue to
support a professional. full-time staff has made it viFtually impossible for many
of the smaller SBICs either to make the kind of cpmprehensive investigations
prior to investment which are necessary for stable an~l profitable operations, or to
provide continuing advisory services to portfolio con~erns. Statistical data on the
industry shows that, while the largest SBICs reporj~ed a 3.3 percent return on
invested capital, the smallest size category reported a, 2.3 percent loss on invested
capital. We have concluded that profitability of SBICs is closely related to
size; up to a level much larger than the average SJE~IC in today's industry, the
larger the concern, the greater are the earnings on the dollars invested. We
believe that at least $1,000,000 private capital is needed for successful operation.
It is essential that additional funds be attracted frotu the private sector into the
SBIC program. While the proportion of Federal injection into the program has
been somewhat less than that originally anticipated ($260,000,000 in Federal
funds, compared to $475,000,000 in private capital)~ there is clearly a need for
additional private investment, and there is reason to kelieve that those additional
funds will not be forthcoming without major changes in the program. There have
been very few public offerings of SBIC stock in the ~ast several years, and most
SBICs have considerable difficulty in attracting prh~ate loan or equity funds to
increase the size of their operation. In order to attract increased investment,
it is necessary not only to make the SBIC a more profitable operation, but to
increase the leverage which is available to the SBIC itself. For the first time since
the inception of the program, the industry as a whole showed a profit during the
last reporting year. However, that profit is not adequate to make the SBIC an
attractive investment, compared to alternative uses ~f investors' funds.
One of the most attractive forms of SBIC investment, from the point of view
of the small business concern receiving the funds, is provision of equity capital.
Yet, for a variety of reasons, SBICs have not engaged sufficiently vigorously in
this form of investment: some 50 percent of SBIC investments are in the form of
straight loans, about 33 percent in convertible debentures and loans coupled with
options or warrants, and only about 17 percent in ~tock-purchase transactions.
Our study indicates that the most profitable operations can be expected from
SBICs which place at least 65 percent of their fund~ in investments other than
straight loans, i.e., in equity or loans with equity features. To carry out ade-
quately the purposes of the program, it is therefore essential that this form of
investment be encouraged to the maximum extent feasible.
In order to achieve these aims of increased size, attracting more private capital
and encouraging equity investments, legislation to amend the Small Business
Investment Act is proposed concurrently, in a bill which would:
1. Establish a minimum SBIC private capital investment of $1 million;
2. Provide for Government loans on a two to one ratio to private capital,
to a maximum of $7~i million; and
3. Provide additional leverage up to $234 miilion to larger SBICs, as an
incentive for greater investment in equity typ~ financings.
This program legislation and the tax amendments If orm an integrated plan for
remedying the major problems which have hampere4 the SBIC industry. Enact-
ment of both bills is therefore vital to the future effectiveness of this promising
Congressional vehicle for helping to supply the growth capital needs of small
concerns.
TYPES OF FINANCiNG BY SBICS
A primary purpose of these tax proposals is to amend certain provisions of the
Internal Revenue Code which operate to encourage SBICs to make straight
loans rather than equity-type investments. In order to understand the effects of
these provisions, it is helpful first to survey the metbøds which SBICs employ to
provide funds to small concerns.
There are three basic financing techniques used by SBICs: (1) straight loans;
(2) direct purchases of stock; and (3) debt transactions with equity features,
including convertible debentures and stock purchase options or warrants.
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253
Straight loans must have a maturity of at least five years. While they may be
subordinated in some instances, typically, they are secured long term installment
notes paying relatively high interest rates. They provide no equity-type capital
for the small business concern.
Direct purchases of stock in small companies are generally more advantageous
to tb,e small concerns. Stock purchases are nonamortizable and non-interest bear-
ing. These features are important to many newly organized small business con-
cerns that cannot make principal and interest payments, as well as to established
concerns which need sizëable funds for new product development, expansion and
for other large scale improvements. Large concerns can generally acquire funds
through stock issues. Small concerns, however, are characteristically unable to
obtain funds through the public securities market, typically because they are either
too small or unseasoned. Equity investments by SBICs also serve to improve the
balance sheet position of small concerns, enabling such concerns to obtain addi-
tional credit and debt funds through customary lending channels.
Debt transactions with equity features provide for repayment with interest
by the small business concern; but, more important, carry rights to convert debt
into equity or to purchase capital stock at a pre-determined price, at the option
of the SBIC. Such financing can significantly aid the small business concern. The
interest rate on debt with equity features is often less than on straight notes;
the rate of amortization is likely to be less demanding; and additional equity
funds may be provided to the small firm through the exercise of a stock purchase
option.
TAX PROPOSALS
Section 1. Title of bill
This section provides th.at, when the bill is enacted, it may be cited as the
"Small Business Investment Company Tax Amendments of 1967."
Section 2. Bad debt and reserve for loss treatment
The Internal Revenue Code allows a loss deduction for debts which become
wholly or partially worthless during any taxable year; or, in lieu thereof, the tax-
payer may elect to set up a bad debt reserve. The Internal Revenue Service has
allowed SBICs to establish bad debt reserves based upon 10 percent of their
outstanding loans. The 10 percent allowance is to apply for a period of 10 years
(dating back to 1959), after which an SBIC's own loss experience will be used to
determine the reasonableness of further additions to its reserves. The treatment
does not extend to debt instruments issued with interest coupons or in registered
form.
The bill would allow SBICs an ordinary loss deduction with rcspect to debts
iss~ied with interest coupons or in registered form which become wholly or partially
worthless; or, in lieu thereof, the SBIC would be permitted to make appropriate
additions to reserves for losses. The amendment would provide an added incentive
to SBICs to enter into all forms of debt financing, including investments providing
for longer terms, subordination or other equity type features.
Inasmuch as the 51310 program will be undergoing substantial changes in the
event of passage of the remainder of its legislative program, SBA has requested
the Internal Revenue Service to (1) extend the ten year period for ten percent
reserve allowances; and (2) broaden the base for reserve treatment to include
those forms of debt instruments which would qualify for loss reserve treatment
under the new legislation.
Section 3. Personal holding company tax exemption
Under existing law, the privately owned SBIC may well fall within the Code
definition of a "personal holding company" and be required to pay the penalty tax
imposed on such companies. The 86th Congress added what is now subsection
(c) (8) to Section 542 of the Code to exempt, with certain restrictions, SBICs from
the personal holding company tax. These restrictions were believed to be neces-
sary to prevent unwarranted exemption from the personal holding company tax
in cases where the SBIC was being utilized as an "incorporated pocketbook" to
finance the business ventures of its shareholders and not to serve the purposes of
the small business investment program. `
As written, subsection (c) (8) denies the exemption to an SBIC if the shareholder
of an SBIC also owns a 5 percent or more interest in its portfolio company, no
matter how insignificant his interest in the SBIC may be. Additionally, the 5
percent interest in the portfolio company may be "directly or indirectly" owned.
95-193-68----17
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While there appears to be some uncertainty, this prc4vision could be interpreted to
mean that a shareholder of an SBIC owns his prorat~ share of the SBIC's interest
in a portfolio company. As a practical matter, the interpretation would destroy
the exemption for those closely held SBIC's that m~ke equity financings. Conse-
quently, the present restrictions have an inhibiting~effect upon equity financings
by closely held companies and clarification of this problem is desirable.
SBA has promulgated regulations designed to pi~event SBIC control of small
business concerns and conflicts of interest between SBICs, its shareholders and
small business concerns. The bill is designed to coi4orm the treatment of SBICs
for tax and non-tax purposes, as well as to avoid th~ undesirable inhibition which
existing law may impose on the activity of closely held SBICs. Under the bill,
the Department of the Treasury and SBA will proifiulgate mutually agreed upon
regulations. It is expected that these regulations wi~l closely follow SBA's present
regulatory policy on self-dealing and ownership lin~itations, and any SBIC com-
plying with such regulations will be exempt from t~e personal holding company
provisions.
Section 4. Regulated investment companies
Publicly owned SBICs are required to register unkler the Investment Company
Act of 1940. As with other companies so registered, the SBICs can qualify for the
special income "pass-through" provisions of the Code, generally permitting taxa-
tion of SBIC earnings at the shareholder's level only, if they meet the requirements
of Subchapter M. Because of the diversification reqttirements of that Subchapter,
it is estimated that only 4 of the 40 otherwise eligible SBICs have been able to
qualify for "pass-through" provisions.
At present, to qualify for Subchapter M treatmeflt, an SBIC must show at the
end of each quarter of its taxable year that it has at least 50 percent of its assets
in (1) cash or Government securities, or (2) in otl~er securities representing (a)
not more than 5 percent of the assets of the invest~nent company, nor (b) more
than 10 percent of the outstanding voting stock o~ the portfolio company. The
present law also limits to 25 percent of its total assets the amount that any single
SBIC can invest in securities of two or more small business concerns which the
taxpayer controls and which are in the same or similar trade or business.
The diversification tests were aimed at mutual funds, to insure that such
companies do not unduly concentrate their assets in any one company or con-
trolled group of companies, nor become operating ~ompanies through the use of
subsidiaries. On the other hand, SBIC's must be enóouraged to invest in new and
frequently untried or high-risk situations.
The diversification tests create difficulties for SB~Cs for the following reasons:
The SBIC must be able to invest in stock of small business concerns, a form of
investment which incurs risk under present law sir~ce it raises the possibility of
disqualification from pass-through privileges. The SBIC must be able to own a
sufficient portion of such stock of a particular concern to exercise some degree of
influence over the management of the concern. The ~BIC must be able to invest a
sufficient portion of its own assets into a small concern to warrant the pre-invest-
ment investigation necessary, particularly since th~ SBIO typically has a much
smaller pool of resources than does a mutual fund. 4nd the SBIC must be free to
develop a degree of specialization in a particular in~ustry if it desires to do so.
Under the bill, the test would be applied only ai~ the end of the taxable year;
the 10 percent test would, in the case of SBICs, be increased to 50 percent; and
the 5 percent of total assets test would be changed to 20% of the total of paid-in
capital and paid-in surplus of the SBIC. The latter Ohange conforms to SBA rules
on concentration of assets in any one company; it will also prevent resort to
artificial borrowing for the sole purpose of enabli~ig the company to meet the
test by increasing assets. In order that SBICs may~ continue to build up a degree
of specialization in the same or similar industries, tl3e bill provides that the SBIC
will not be deemed to have control over the sma~l business concern unless its
ownership consists of more than 50 percent of the total combined voting power
of all classes of stock entitled to vote.
The Small Business Administration has promulgated rules generally governing
the activities of SBICs in these areas. The bill would thus seek to conform the
tax treatment of SBICs with the non-tax treatm~nt wherever appropriate. In
keeping with the general purpose of the Small Business Investment Act to en-
courage SBICs to maintain sources of funds ready fdr investment in new ventures,
availability of the liberalized tests would be curtailed to the extent that the SBIC
has continuously held any security of a particular portfolio concern for a period of
ten or more years.
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2~5
Recognizing the unique nature of SBICs and their investments by relaxing the
diversification test applicable to them under Subchapter M would have the effect
of encouraging the flow of private capital into the program. The present inability
to pass profits directly to stockholders dampens investor interest in the SBIC
program and severely hampers SBA's efforts to encourage equity financing by
SBICs.
Section 6. Ordinary losses to SBIC shareholders
Congress enacted in 1958 as part of the SBIC legislation, Section 1242 of the
Code which provides that any loss on SBIC stock shall be treated by a shareholder
as an ordinary loss rather than a capital loss. As part of the overall SBIC tax
revision, the Treasury Department desires that monetary limits be placed on this
provision. It will thus generally conform with Section 1244 of the Code, which
provides for ordinary deductions by individuals for losses on direct investments in
small business stock as defined in that Section.
The Treasury Department and SBA have agreed upon the following proposals:
1. The amount which can be treated as an ordinary loss in any taxable year
would be limited to $25,000 per taxpayer, or $50,000 in the case of a joint
return.
2. Any amount in excess of such limitations may be carried forward as a
capital loss to an unlimited number of successive years; and, to the extent not
so utilized in each such year, may (within monetary limits as in the year of
loss) be treated as an ordinary loss for any taxable year.
3. The limitations will not, however, apply to losses incurred on SBIC
stock which was acquired by the taxpayer prior to the date of the introduction
of this legislation.
Section 6. Gains and losses on SBIC investments
A major incentive to stimulate private investments in SBICs was the enactment
in 1958 of Code section 1243. This section permits SBICs to treat its losses on
convertible debentures of portfolio concerns and the stock into which such deben-
tures are converted (the only equity investment permitted SBICs at that time) as
ordinary losses. In 1960, Congress amended section 304 of the SBI Act to permit
SBICs to make all types of equity investments to small business companies. Sec-
tion 1243 was never amended to cover the broader range of equity investments.
Section 6 of the bill would extend ordinary loss treatment to losses incurred by
SBICs on all types of investments in small business concerns. Debts owed by
small business concerns to small business investment companies would be treated
as an inventory asset. Thus, losses on any sale or exchange of such assets woWd be
deductible from ordinary income without limitation. Gains on debt would be
treated as ordinary income, but this would not represent any substantial change
from present law which generally treats such gains as discounted interest.
To the extent that a small business investment company incurs a net loss from
sales or exchanges of equity securities, it would be entitled to deduct the amount
of such a loss from its ordinary income subject to limitations which are in accord
with Treasury Department policies. The amount for the deduction in any taxable
year would be limited to $100,000, and the amount of any deductible loss in excess
of this limitation would be carried to a subsequent year and treated as if it had
been incurred on an equity security in that year. The term "equity securities"
would be defined to mean stock of any class or type; any option or conversion or
exchange privilege issued and/or acquired in connection with the purchase of
any stock, convertible debenture or debt instrument; or any combination of the
foregoing.
To protect the loss position of SBICs which have conversion privileges (or
stock acquired on the exercise of such a conversion privilege) in connection with
debentures acquired before the introduction of this proposal, a special rule would
permit deduction of the full amount of a loss on such stock acquired by exercising
the conversion privilege of such a debenture in the year in which the loss is in-
curred if the loss is incurred on or before March 31, 1972.
*By limiting tax advantages to other forms of SBIC financing, Section 1243
presently inhibits SBICs from making direct purchases of stock in small com-
panies. The amendment will remove this disparity and stimulate increased stock
investments.
Section 7. Effective dates
The bill provides that the amendments of Section 5 (ordinary losses of SBIO
shareholders) shall apply to taxable years ending after the date of enactment;
the amendments of section 3 (personal holding company tax exemption) shall
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apply to taxable years beginning on or after the dat~ on which the joint regula-
tions under the section are promulgated by SBA an4 the Treasury Department;
and the amendments of sections 2 and 6 (treatment if SBIC investments) and of
section 4 (regulated investment company provisions) shall apply to SBIC taxable
years beginning on or after April 1, 1968.
II. SUMMARY: SMALL BUSINESS INVESTMENT Ac~r AMENDMENTS OF 1967
(Public Law 90-104 marked a redesign of the SBIC program established by the
Small Business Investment Act of 1958)
1. SBA authorized to lend to SBIC's on better terms.
The 1967 Amendments allow SBA to make l5-~ear loans to SBIC's on a
subordinated basis at a rate of interest which will at l~ast cover the cost of money
to the Treasury. The length of the loan, plus its subordination, will permit many
SBICs to obtain more resources by borrowing also fr~m private sources.
2. SBA may lend more to larger SBICs
Prior to 1967, the program discriminated again~t medium size and larger
SBICs, since full leverage from the government was ahvailable only up to $700,000
in private capital. The new version permits the 2-to-i borrowing from SBA for
SBICs with up to $3.75-million in private capital.
3. SBA may give additional incentives to equity-oriente~l SBICs
The new law allows SBA to make further loans to SBICs which place at least
65% of all their funds in "venture capital" financings. Such investments are
Usually riskier than straight loans, but meet an area of special need by American
small business.
4. Banks may invest more of their capital in SBICs
The new law allows commercial banks to put u~ to 5% of their capital in
SBICs-as opposed to the previous limit of 2%. At the same time, no bank
may henceforth own more than 49% of the stock of ~n SBIC (grandfather rights
are given to present licensees).
5. SBA given the right to appoint an SBIC Advisory Council
This has been done and should give continuity to the program.
6. SBA must examine every SBIC at least once each year
7. SBA, Treasury, SEC, and the Bureau of the Bud gei~
They are all directed to report to Congress on areas of small business concern
within their fields of competence.
NATIONAL ASSOCIATION OF SMALL BUSINESS I~VESTMENT COMPANIES
WASHINGTON, D.C., June 13, 1968.
Mr. JoE L. EvINS,
Chairman, Select Committee on Small Business,
House of Representatives, Rayburn House Office Building, Washington, D.C.
DEAR MR. CHAIRMAN: In his letter of June i2~ Walter Stults, Executive
Director of NASBIC, stated that I would be sending you a copy of the Associa-
tion's application to the Securities and Exchange Co~nmission for exemptions for
SBICs from the Investment Company Act of 1940. A copy of that application is
enclosed.
During the hearings before your Committee on ~ay 22, both Mr. Conte and
Mr. Morton requested additional information from ~he NASBIC representatives
with respect to overlap between the Small Business 4dministration, the Internal
Revenue Service and SEC. The enclosed application to SEC will highlight some of
the principal areas of overlaps between SEC and SBA. First and foremost, both
Agencies regulate SBICs registered under the Investment Company Act of 1940
in a number of areas. The two Agencies for example have differing reporting,
fidelity bond and safekeeping requirements.
More onerous than these areas are those relating to stock options and affiliated
transactions. While SBA quite properly permits prhtately owned SBICs to issue
qualified stock options to officers and employees of SBICs, the SEC staff takes the
position that the provisions of Sections 18 and 23 of t~ie Investment Company Act
of 1940 will not permit the issuance of stock options by publicly owned SBICs to
their personnel. This is a particularly critical problei~n for our industry where the
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need for attracting and holding able executives is so important to the future of the
program. By reason of the inability of publicly owned SBICs to issue qualified
stock options, the industry has already seen several able executives leave the
SBIC program to go with other corporations that can legally issue stock options.
Section 17 of the Investment Company Act of 1940 empowers SEC to regulate
affiliated transactions. Section 312 of the Small Business Investment Act of 1958
empowers SBA to regulate conflicts-of-interest. The two areas are essentially
identical, and yet SEC insists on its right to police publicly owned companies
while SBA's own regulations in this area are, in our opinion, entirely adequate to
accomplish the purposes of both Agencies under their statutory authorities.
As you will note, the thrust of our application filed March 15, 1968 with SEC
would transfer to SBA regulatory jurisdiction those provisions of the Investment
Company Act of 1940 deemed applicable to SBICs and would thereafter exempt
SBICs from the balance of the provisions of the Investment Company Act of
1940.
The overriding reason for the filing of the application was the urgent need of the
SBIC industry to resolve the difficulties arising from the overlapping and some-
times conflicting rules of the two Agencies. We deem it essential to the intelligent
management of an SBIC that it be answerable insofar as possible to one Agency,
and in our view SBA, the Agency charged with the responsibility for licensing and
generally regulating SBICs, is the Agency best qualified to assume full responsi-
bility in this area.
We should like to stress that our application relates only to the Investment
Company Act of 1940. It seeks no exemptions from the other federal securities
laws. Specifically, we have no objection to the full disclosure requirements of the
Securities Act of 1933 nor to the reporting requirements of the Securities Exchange
Act of 1934 as they apply to SBICs.
The industry also seeks resolution of overlapping and contradictory regulations
and rules in the tax area. Specifically, there are significant differences in the
accounting rules applied to SBICs by SBA, the Internal Revenue Service and the
SEC. Publicly owned companies are virtually obliged to keep three separate sets
of books in order to report accurately to each of these three Agencies. It is our
understanding that the National SBIC Advisory Council is directing its attention
to this particular problem, and we are hopeful of obtaining some relief.
Another vexing problem in the tax area relates to the reserve for bad debts. By
Revenue Ruling 64-48, IRS authorized SBICs to establish bad debt reservea
equal to ten percent of outstanding loans. By its terms, Revenue Ruling 64-4S
"applies for a period of ten years beginning with 1959." The Ruling then went on
to state:
"When the ten-year period expires an SBIC's own loss experience will be used tc~
determine the reasonableness of further additions to its reserves. After 1968 a new
SBIC, or one that has not been in existence a sufficient number of years to provide
adequate loss experience data for establishing reasonable bad debt reserves, will
be permitted to use an average loss experience factor computed on ~n industry..
wide basis until it has sufficient loss experience of its own."
Despite the foregoing language, neither IRS nor any other agency has yet
developed "an average loss experience factor computed on an industry-wide
basis . . ." Meanwhile, IRS has informed NASBIC that in its opinion, Revenue
Ruling 64-48 will not be available to SBICs for tax years beginning in 1968.
This leaves the industry in the position of riot knowing what the IRS position
will be hereafter with respect to SBIC bad debt reserves. A questionnaire is now
in preparation to go to all Licensees to develop statisitcal data with reference to
realized losses for all tax years from 1960 through 1968.
Meanwhile, NASBIC has been urging IRS to make permanent Revenue Ruling
64-48 or at least to extend it for a sufficient number of years to permit the industry
to develop statistics relating to actual loss experience. IRS and the Treasury
Department have indicated that they will not consider any extension or modifi-
cation of Revenue Ruling 64-48 unless and until they receive statistical data on
which to base a judgment with respect to such extension or modification.
Here again, the industry is hopeful that the new Advisory Council will be of
some assistance in resolving this particular problem.
Another long pending problem in the tax area relates to the tax treatment of
options received by lenders, including SBICs. IRS published proposed regula-
tions on this subject in 1963, and we have been assured repeatedly that the final
regulations would be forthcoming shortly. They have not been published as of
this, date, and the whole question of the taz~ treatment of options and warrants
received by SBICs thus remains a very troublesome area for the industry.
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We shall be pleased to supply such additional information as you may desire
with respect to these and other matters relating to ~he SBIC industry.
Sincerely yours,
CHARLES M. NOONE, General Counsel.
APPLICATION FOR EXEMPTION FROM PROVISIONS or; THE INVESTMENT COMPANY
Acr OF 1940 OF NATIONAL ASSOCIATION OF SMALL BUSINESS INVESTMENT
COMPANIES
APPLICATION
Applicant
The National Association of Small Busine~s Investment Companies
("NASBIC") is a trade association the active menlbership of which consists of
30 small business investment companies ("SBICs") ~icensed by the Small Busi-
ness Administration ("SBA") pursuant to the provisions of the Small Business
Investment Act of 1t~58, as amended ("1958 Act").
Of the 230 active members of NASBIC, 29 are r~gistered as closed-end man-
agement investment companies under the Investnient Company Act of 1940
("1940 Act").
While the 230 SBICs belonging to NASBIC represent only half of the 462
SBICs whose licenses remain outstanding, it is e~timated that the assets of
NASBIC member companies account for 80% of th~ assets currently committed
to the SBIC program.
Purpose of Application
The purpose of this Application is to secure an exe~nption for SBICs from those
provisions of the 1940 Act not applicable to SBICs and to transfer to SBA the
administration of those provisions of the 1940 Act deemed applicable to SBICs.
The Application is submitted pursuant to the provisions of Section 6(c) of the
1940 Act on behalf of member companies of NASBIC registered under the 1940
Act.
Statutory Basis For Requested Exemption
Section 6(c) of the 1940 Act provides as follows:
"The Commission, by rules and regulations upon its own motion, or by order
upon application, may conditionally or unconditionally exempt any person,
security, or transaction, or any class or classes of p~rsons, securities, or transac-
tions, from any provision or provisions of this title or of any rule or regulation
thereunder, if and to the extent that such exe~nptior~ is necessary or appropriate
in the public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provision~ of this title."
£tatement of Grounds for Application
We submit that the requested exemption is "necessary" and "appropriate in
the public interest", as required by Section 6(c), for the following reasons:
1. It is recognized that the thrust of the 1940 Act is investor protection. The
thrust of the 1958 Act, as set forth in Section 102 of that Act (15 U.S.C. § 661
(1964)), is the establishment of "a program to stimu~ate and supplement the flow
of private equity capital and long-term loan funds which small business concerns
need for the sound financing of their business operations and for their growth,
expansion, and modernization * * *~"
The administration of the 1940 Act by the Commission and the administration
of the 1958 Act by SBA has resulted in conflicting and dual regulation which in
our view impedes the ability of SBICs to accomplish their statutory mission.
We submit therefore that the investor protection gbal of the 1940 Act and the
financing mission of SBICs under the 1958 Act must be accommodated in such a
fashion as to eliminate the present system of dual çegulation. This can best be
accomplished by transferring to SBA, the agency with the primary responsibility
for the administration of the SBIC program, resjlonsibility for administering
those provisions of the 1940 Act deemed applicable to SBICs, thereafter exempting
SBICs from SEC regulation under the 1940 Act so h~ng as and to the extent that
they comply with applicable SBA regulations. We e*plain below why we believe
this can be done without compromising the Con~imission's responsibility for
investor protection.
2. In the calendar year 1967, SBICs accounting fo~ approximately one hundred
million dollars of paid-in capital and surplus, nearly one-third of the total paid-in
capital and surplus of the entire industry, announce~1 their intention to leave the
SBIC program. While this mass exodus can be attrilputed to a variety of factors,
PAGENO="0263"
25~'
it is clear to NASBIC that a dominant factor was and is the great difficulty of
attempting to operate an SBIC subject to dual regulation by SEC and SBA.
Such dual regulation inhibits the proper operation of an SBIC, and the continued
failure to eliminate the dual regulation could well bring an end to the SBIO
program. Such an end would benefit no one. The small business concerns of the
nation who are the intended beneficiaries of the 1958 Act would clearly be the
losers. The responsible regulatory agencies clearly have a duty to reverse the
recent trend toward contraction of the SBIC program and to encourage its
growth.
3. By virtue of Section 308(g)(2) of the 1958 Act as enacted in 1967 (Public
Law 104, 90th Cong., 1st Sess. (Oct. 11, 1967)), SBA is now required to submit
to the Congress in its annual report "full and detailed accounts" relating to
certain matters including the following:
"(H) A report from the Securities and Exchange Q~mmission enumerating
actions undertaken by that agency to simplify and minimize the regulatory
requirements governing small business investment companies under the Federal
securities laws and to eliminate overlapping regulation and jurisdiction as be-
tween the Securities and Exchange Commission, the Administration, and other
agencies of the executive branch."
The granting of the exemptions from the 1940 Act requested herein would be
responsive to the foregoing statutory directive.
We likewise submit that the requested exemption would be "consistent with
the protection of investors and the purposes fairly intended by the policy and
provisions of this title", as required by Section 6(c) of the 1940 Act, for the
following reasons:
1. As proposed hereinafter, we submit that the "protection of investors" in
SBICs is already subject to administration by SBA. Implicit in SBA's statutory
authority to license and regulate SBICs is its authority to ensure the protection
of investors in SBICs. In addition, SBA Reg. 107.1004 (33 Fed. Reg. 334 (1968))
specifically provides, "Self-dealing to the prejudice of a small business concern,
or of a Licensee or its shareholders, or of SBA, is prohibited." (emphasis added).
To the extent the Commission feels SBA regulations need modification to
ensure additional protection for investors in SBICs, Section 6(c) of the 1940 Act
vests in the Commission adequate authority to support its cooperation with
SBA to that end.
2. SBICs are the only Federally licensed and regulated entities subject to
regulation under the 1940 Act. Indeed, Section 3(c) of that Act specifically exempts
from its operations a number of financial institutions not dissimilar from SBICs.
For example, Section 3(c)(3) exempts "Any bank or insurance company; any
saving and loan association, building and loan association, cooperative bank,
homestead association, or similar institution . . .", and Section 3(c) (5) exempts
"Any persons substantially all of whose business is confined to making sn~iall
loans, industrial banking, or similar businesses." (emphasis added).
We submit that had SBICs been in being when the legislation leading to the
enactment of the 1940 Act was in Congress, SBICs would likewise have been
expressly exempted from the provisions of the 1940 Act.
In short, it is our position that the regulation of SBICs under the 1940 Act
was not and is not now one of the "purposes fairly intended by the policy and
provisions of this title" as specified in Section 6(c) of the 1940 Act, and that
certainly it was never intended that SBICs be subject to dual regulation by the
Commission and SBA.
Applicability of 1940 Act to SBICs
The 1940 Act contains 53 sections. It deals with five types of investment com-
panies and contains sections intended to regulate each of such types. For pur-
poses of the 1940 Act, an SBIC falls within the type of company designated as
a "closed-end management investment company." Relatively few sections of the
Act are applicable to this type of company, and thus the vast majority of the
sections of the 1940 Act have no applicability whatever to SBICs. Where sec-
tions of the 1940 Act are applicable to SBICs, as hereinafter noted, SBA has
promulgated regulations which in our view are either ~ufficient in their present
form or adaptable to meet 1940 Act requirements.
As previously noted, the thrust of the 1940 Act is investor protection. The
companies which the 1940 Act ivas intended to regulate are mutual funds which
invest almost exclusively in outstanding securities of well-known companies. As
a group, mutual funds have contributed little new capital to industry. Their
purpose is solel~ to provide an investment medium in outstanding securities for
PAGENO="0264"
260
relatively small investors. In contrast, SBICs are required by law to make direct
investments in small business concerns. They perform largely the functions of
investment bankers, the difference being largely the fact that they retain the
securities underwritten by them for longer periods than the usual investment
banker. The 1940 Act was not enacted to deal with the operations of investment
banking firms. As previously noted, Sections 3(c) (2) and (5) of the 1940 Act
specifically exempt companies whose business is of a character aproaching that
of SBICs.
A detailed analysis of the 1940 A~c't makes it clear that a substantial number of
the sections have no regulatory fiEffpact upon SBICs. Sections 1, 2 and 3, dealing
respectively with Findings and Declaration of Policy, General Definitions and
Definition of Investment Company, are not needed for regulation of SBICs.
Sections 4 and 5, titled respectively Classification of Investment Companies and
Subclassification of Management Companies, are inapplicable. The 1958 Act and
SBA's regulations thereunder specify very precisely the requirements with
respect to the organization, operation, authorities and limitations of SBICs.
Section 6 of the 1940 Act, titled Exemptions, is likewise irrelevant for purposes
of the 1958 Act.
Section 7 of the 1940 Act, dealing with Transactions by Unregistered Invest-
ment Companies, has no bearing upon an SBIC, the 1958 Act and SBA's regula-
tions again specifically limiting the organization and operation of SBICs.
Section 8 of the 1940 Act, relating to Registration of Investment Companies,
requires every company subject to the Act to file a registration statement reciting
its proposed investment policy. While we have no objection to such registration
by SBICs, and indeed would continue this requirement to accommodate SBICs
electing to be taxed as regulated investment companies under Section 851 of the
Internal Revenue Code of 1954, it should be noted that SBA regulations require
each SBIC to set forth in its Proposal (SBA Form 414, Part I, Item 11(a)) a
precise and detailed statement of its investment policy.
Section 9 of the 1940 Act, titled Ineligibility of Certain Affiliated Persons and
Underwriters, makes it unlawful for persons who have been convicted of a crime
involving securities or has been enjoined by a court for a similar offense within
a 10-year period to serve as affiliated persons of an investment company unless
exempted by the Commission. Comparable and even more stringent restrictions
on such persons serving in SBICs are now contained in Section 314(c) of the
1958 Act (15 U.S.C. § 687f (Supp. II, 1965-66)). In addition, pursuant to its
licensing authority, SBA now conducts extensive investigations and personal
interviews with the proposed management of all new SBICs. Thus, it is our view
that Section 9 of the 1940 Act is not necessary for the regulation of SBICs.
Section 10 of the 1940 Act inhibits certain affiliations of directors of an invest-
ment company with brokers, investment advisors or investment bankers. These
strictures have a degree of merit in the case of the usual investment company
engaged solely in the purchase of outstanding securities and are clearly intended
to reduce business biase~s in the administration of the investment company.
In our view, they are not applicable to SBICs which ordinarily have no brokerage
business to distribute. Indeed, the presence of bankers and investment bankers
on the board of directors of an SBIC is highly desirable and therefore should be
encouraged rather than discouraged.
Sections 11 and 12 of the 1940 Act, titled respectively Offers of Exchange and
Functions and Activities of Investment Companies, deal with matters which are
of no regulatory importance insofar as SBICs are concerned.
Section 13 of the 1940 Act, providing that the investment policies established
in the registration statement cannot be changed except by a vote of the majority
of the company's shareholders, corresponds to SBA Reg. 107.1105(a) (33 Fed.
Reg. 336 (1968)) which provides among other things that any change in an
SBIC's investment policy must be reported to SBA within thirty days and that
any such change "shall be subject to SBA post-approval as a condition for the
continuance of the license." Thus, it would be our vie~w that Section 13 of the
1940 Act is not necessary to the proper regulation of SBICs.
Section 14 of the 1940 Act, relating to Size of Investment Companies, finds its
counterpart in Section 301(b) (15 U.S.C. § 681 (1964)) of the 1958 Act which
vests in SBA the authority to approve "the amount and classes of its shares of
capital stock" which an 5BIC might issue. By Reg. 107.1105(a) (33 Fed. Reg. 336
(1968)), relating to post-licensing chai~ges in an SBIC's activities, SBA also
reserves the right to pass on any "increase in capitalization". Accordingly, See-
tion 14 of the 1940 Act does not appear to be necessary to the administration of
the SBIC program.
PAGENO="0265"
261
Section 15 of the 1940 Act, dealing with investment advisory contracts, finds
its counterpart in SBA Reg. 107.809(a) (33 Fed. Reg. 332 (1988)), wherein SBA
requires the filing of any contract entered into by the Lice asee for investment
advisory services and, where the SBIC is indebted to SBA, "reserves the right to
approve the compensation of the investment adviser". The provisions in Section
15 of the 1940 Act dealing with underwriting contracts are in any event inappli-
cable to SBICs.
The thrust of Section 16 of the 1940 Act, governing changes in a company's
board of directors, is implicit in SBA's statutory authority to license SBICs,
incident to which it conducts investigations relating to the character and qua1ifica~
tions of proposed directors, and in its Reg. 107.1105(a) (33 Fed. Reg. 336 (1968))
requiring notification of changes in directors, specifying that such "changes shall
be subject to SBA post-approval as a condition for the continuance of the license."
Thus, Section 16 of the 1940 Act does not appear necessary to the proper regulation
of SBICs.
Section 17 of the 1940 Act, relating to Transactions of Certain Affiliated Persons
and Underwriters presents particularly troublesome problems for SBICs registered
under the 1940 Act. SBA's Reg. 107.3 (33 Fed. Reg. 327-28 (1968)), defining
"Associate of a Licensee", when taken together with its Reg. 107.1004 (33 Fed.
Reg. 334 (1968)), relating to Conflicts of Interest, deals adequately, in our view,
with the matters encompassed within Section 17 of the 1940 Act. While the SBA
regulations in this area are stringent, they are at least clear and susceptible of appli-
cation to SBICs. The very nature of the operations of SBICs, involving as they do
intimate and continuing association with their portfolio companies, constantly
present the risk of inadvertently falling within the purview of Section 17 of the
1940 Act and the Commission's rules promulgated thereunder.
The Commission's Investment Company Act Release No. 5128 issued October
13, 1967 invited comments on the proposed revision of Rule 17d-1 under the 1940
Act. Attached hereto (Exhibit A) for incorporation herein by reference is the letter
of November 21, 1967 from the President of NASBIC to the Commission com-
menting on the proposed revision. For the reasons outlined in said letter of
November 21, 1967, we renew herewith our application for exemption for SBICs
from the application of Section 17 of the 1940 Act.
Section 18 of the 1940 Act, titled Capital Structure, is generally speaking inap-
plicable to SBICs. In fact, Section 18(a)(1) is specifically made inapplicable
to SBICs by Section 307(c) of the 1958 Act.
Section 18(a) (2) of the 1940 Act, dealing with permissible issues of preferred
stock, finds its counterpart in SBA Reg. 107.1401 (33 Fed. Reg. 337(1968)) which
provides that where the capitalization of an SBIC is to consist of more than one
class of stock, "the .voting rights and other rights and remedies may not be inequi-
table or discriminatory, and may not unduly concentrate control or management
of the Licensee through pyramiding, inequitable methods, or inequitable distribu-
tion." The same regulation further requires "Full disclosure of all voting rights
and other rights and remedies of all classes of stock" to all shareholders prior to
their purchase of stock.
Section 18(d) of the 1940 Act has been construed by the Commission to pro-
hibit the issuance of stock options by registered investment companies. SBA Reg.
107.805 (33 Fed. Reg. 332 (1968)) specifically permits an SBIC to issue stock
options to management and employees. We submit that SBICs now subject to
the 1940 Act should likewise be permitted to issue stock options.
The success of the SBIC program will undoubtedly stand or fall on the capa-
bilities of the management of the SBICs. With the present stress on more venture
capital financing by SBICs and their continuing need to "plow back" earnings
into additional investments and loans, the likelihood of SBICs having sufficient
income to warrant salaries necessary to attract and hold qualified talents is not
promising. Even if such income were available to pay higher salaries, the income
tax applicable to such salaries would make them unattractive to the type of person
ideally qualified to serve in an executive capacity with a venture capital institution
such as an 51310.
Stock options do serve as an attractive inducement to qualified managerial
talent. This is attested to by the fact that the vast majority of companies traded
on the national securities exchanges employ stock options extensively in com-
pensating their executives.
Just within the past six months, two of the best executives in the SBIC industry,
both employed by companies registered under the 1940 Act, left their SBICs to
accept emplOyment with other companies offering them stock options. In both
instances, the executives made it clear that the availability of stock options out-
side the SBIC program was the deciding factor in their leaving their companies.
PAGENO="0266"
262
This program, hard pressed at best to find persons possessing the unique talents
necessary to the successful operation of an SBIC, can ill afford to lose proven
managerial talent to other industries simply by virtue of its inability to utilize
stock options in compensating the people responsible for ensuring the success of
their companies.
On February 20, 1962, NASBIC submitted a Proposed Rule 18d-1 to permit
the issuance of "restricted stock options". Attached hereto (Exhibit B) is the text
of the Proposed Rule 18d-1 as previously filed with the Commission. We request
herewith that the Commission now exempt SBICs from those provisions of the
1940 Act which the Commission regards as prohibiting the issuance of stock
options, or, in the alternative, that the Commission reconsider the Proposed Rule
18d-1 as submitted by NASBIC under date of February 20, 1962.
Sections 19 and 20 of the 1940 Act, relating respectively to Dividends and
Proxies, could, if deemed necessary by the Commission, be incorporated in suitable
SBA regulations.
The restrictions of Section 21 of the 1940 Act, relating to Loans, are now, in
our view, adequately covered by SBA Reg. 107.1004 (33 Fed. Reg. 334 (1968))
relating to conflicts of interest and thus the need for applying Section 21 of the
1940 Act to SBICs is obviated.
Section 22 of the 1940 Act, titled Distribution, Redemption, and Repurchase
of Redeemable Securities, deals with matters which are of no regulatory im-
portance insofar as SBICs are concerned.
Section 23 of the 1940 Act, titled Distribution and Repurchase of Securities:
Closed-End Companies, forbids such a company to issue any of its securities for
services. With respect to the implied prohibition against stock options in this
section, we incorporate herewith by reference our previous comments relating to
Section 18 of the 1940 Act.
The same section also regulates the manner in which closed-end companies
may repurchase their shares. SBA provides controls in this area under its Reg.
107.902 (33 Fed. Reg. 333 (1968)) governing voluntary capital decreases, and thus
again, in our view, Section 23 of the 1940 Act need not be applied to SBICs.
Section 24 of the 1940 Act relates to the Registration of Securities Under
Securities Act of 1933. We do not propose to exempt SBICs from the requirements
of the Securities Act of 1933 and are of the view that the provisions of this section
otherwise applicable to SBICs are now adequately treated under the 1958 Act
and SBA's regulations thereunder.
Section 25 of the 1940 Act, relating to Plans of Reorganization covers the same
matters now subject to stringent regulation by SBA under its lteg. 107.701 (~3
Fed. Reg. 331(1968)) relating to changes in ownership or control of an SBIC.
Accordingly, we see no need for the duplicative application of Section 25 of the
1940 Act to SBICs.
Sections 26, 27, 28 and 29, relating respectively to Unit Investment Trusts,
Periodic Payment Plans, Face-Amount Certificate Companies and Bankruptcy of
Face-Amount Certificate Companies, all deal with matters which are of no regula-
tory importance insofar as SBICs are concerned.
Sections 30, 31 and 32 of the 1940 Act, relating respectively to Periodic and
Other Reports, Accounts and Records and Accountants and Auditors, are all
extensively covered by Section 310 of the 1958 Act (15 U.S.C. § 687b (Supp. II,
1965-66)) and by SBA Regs. 107.1101 and 107.1102 (33 Fed. Reg. 335-36 (1968)).
Thus, in our view, the application of Sections 30, 31 and 32 of the 1940 Act to
SBICs is not necessary.
Section 33 of the 1940 Act, titled Settlement of Civil Actions, requires certain
reports relative to litigation, a subject expressly and adequately covered under
SBA Reg. 107. 1102(g) (33 Fed. Reg. 335-35 (1968)). Accordingly, the application
of Section 33 of the 1940 Act to SBICs would appear to be unnecessary.
Sections 34, 35, 36 and 37 of the 1940 Act, relating respectively to Destruction
and Falsification of Reports and Records, Unlawful Representations and Names,
Injunctions Against Gross Abuse and Larceny and Embezzlement, are now
adequately covered, in our view, by Sections 313, 314, 315 and 316 of the 1958
Act, all by virtue of the Small Business Investment Act Amendments of 1966 (80
Stat. 1359-65 (1966)) 15 U.S.C. §~ 687e-h (Supp. II, 1965-66)). Accordingly, the
application of the cited sections of the 1940 Act to SBICs is clearly unnecessary.
Sections 38, 39, 40 and 41 of the 1940 Act, relating respectively to (i) Rules,
Regulations, and Orders; General Powers of Commission; (ii) Rules and Regu-
lations; Procedure for Issuance; (iii) Orders; Procedure for Issuance; and (iv)
Hearings by Commission, all basically relating to internal procedural matters
PAGENO="0267"
26~3~
relative to the administration of the 1940 Act, would no longer be applicable to
SBICs under our proposal.
Sections 42, 43 and 44 of the 1940 Act, relating respectively to Enforcement of
Title, Court Review of Orders and Jurisdiction of Offenses and Suits, find their
counterparts in Sections 315 and 316 of the 1958 Act as amended by Public Law
89-779 (15 U.S.C. §~ 687 g and h (Supp. [I, 1965-66)). Accordingly, the appli-
cation of the cited sections of the 1940 Act to SBICs would not appear to be neces-
sary.
The balance of the 1940 Act, namely Sections 45 through 53, being largely of a
housekeeping and procedural nature, would likewise appear not to be applicable
to SBICs in light of SBA's existing statutory authority and regulations governing
the same matters.
With respect to Section 47(b) of the 1940 Act, however, specific comment is in
order. In light of SBA's enlarged regulatory authority pursuant to the Small
Business Investment Act Amendments of 1966 (80 Stat. 1359-65 (1966)), the
application of this section of the 1940 Act to SBICs would not appear to be neces-
sary or desirable.
Conclusion and Recommendation
As noted at the outset, it is our view that the attainment of the Congressional
goals laid down for the SBIC program in the 1958 Act can best be accomplished
by eliminating any and all regulatory obstacles in the path to those goals. On the
basis of nearly ten years of close study of the SBIU program, the officers and
Executive Committee of NASBIC and member companies registered under the
Investment Company Act of 1940 are of the common view that the dual regulation
by the Commission and SBA over the SBIC program constitutes a substantial
obstacle to the proper functioning of the program.
SBA has the primary responsibility under the 1958 Act to license and regulate
SBICs. By virtue of Congressional action in every Congress since the enactment
of the 1958 Act, and in particular the enactment of the Small Business Invest-
ment Act Amendments of 1966, SBA now has adequate statutory tools to permit
its regulation of the SBIC program in the interests of small business concerns,
SBICs and their investors. In addition, the personnel of the Investment Division
of SBA, where the administration of the SBIC program is centered, now includes
many personnel who formerly served with the Commission and thus are con-~
versant with its policies and goals.
It is our further view that Section 6(c) of the 1940 Act vests in the Commission
adequate statutory authority to grant exemptions to the extent necessary to~
permit the proper accommodation of the goals of the 1958 Act as well as those
of the 1940 Act.
Accordingly, NASBIC recommends that the Commission delegate to SBA
the authority to regulate SBICs now subject to registration under the Invest-
ment Company Act of 1940 in those areas where present irovisions of the 1940
Act are deemed to be applicable to SBICs and that the Commission thereafter
exempt SBICs from the application of the 1940 Act to the extent that SBA
regulations deal with the applicable provisions of the 1940 Act in a satisfactory
manner.
Consent to Use of this Document in Evidence
Pursuant to Rule 0-2(f), NASBIC hereby offers this application and all exhibits
hereto and all Amendments hereof hereafter made, in evidence at any hearing
with respect to the action herein sought, and requests that the original, a duplicate
original, or a photocopy of this Application and any and all Amendments thereto,
whether executed hereafter or concurrently herewith, be offered in evidence on
behalf of NASBIC and be received in evidence as an exhibit of NASBIC in any
such proceeding before the Securities and Exchange Commission, or any officer
thereof or any trial examiner designated thereby, and that the verification of this
Application and any Amendment hereof be considered as if the person signing such
verification had personally appeared and testified orally under oath, duly adminis-
tered, in aiiy such proceeding to the statements contaIned in such verification.
Exhibits
A. Copy of letter to the Commission dated November 21, 1967 relating to
proposed revision of Rule 17d-1 under the Investment Company Act of 1940.
B. Copy of Proposed Rule 18d-1 under the Investment Company Act of 1940
as submitted to the Commission by NASBIC under date of February 20, 1962.
PAGENO="0268"
2~34
$ignature
NASBIC has duly caused this Application to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington, District of
Columbia, on the 15th day of March, 1968.
NATIONAL ASSOCIATION OF SMALL
BUSINESS INVESTMENT COMPANIES
By ELLIOTT DAVIS.
Verification
DISTRICT OF COLUMBIA, SS:
The undersigned, being duly sworn, deposes and says that he has duly executed
the attached Application dated March 15, 1968, for and on behalf of the National
Association of Small Business Investment Companies, that he is the President of
said Association, and that all action by the Executive Committee and other
bodies necessary to authorize deponent to execute and file such Application has
been taken. Deponent further says that he is familiar with said Application and
the contents thereof, and that the facts therein set forth are true to the best of
his knowledge, information and belief.
ELLIOTT DAvis.
Subscribed and sworn to before me, a Notary Public, this 15th day of March,
1968.
Bzn~n D. HUNDT, Notary Public.
My commission expires January 14, 1973.
EXHIBIT A
NATIONAL ASSOCIATION OF SMALL BUsINESS INVESTMENT COMPANIES,
Washington, D.C., November 21, 1967.
SECURITIES AND EXCHANGE COMMISSION,
Washington, D.C.
GENTLEMEN: The following comments are in response to the invitation contained
in Investment Company Act Release No. 5128 issued October 13, 1967.
Subparagraph (d) of the proposed Rule 17d-1 would exempt from its applica-
tion certain transactions but would then exclude from this exemption any situa-
tion wher.~ the investment company "controls" the portfolio concern.
Investment Company Act Release No. 3968 called attention to the fact that
provisions of agreements between investment companies and portfolio companies
and their affiliated persons might result in the investment company being regarded
as in control of the portfolio concern.
By the very nature of their operations, small business investment companies
generally enter into very carefully drawn agreements designed to protect their
investments in portfolio concerns. The proposed Rule 17d-1, coupled with the
Commission's rules and interpretations relating to "control", the admonitions
-contained in Investment Company Act Release No. 3968, and the ever-present
potential liabilities arising under Section 47 of the 1940 Act, would require a small
business investment company to apply for so many more orders of the Commission
-that compliance would become a major burden for both the industry and the
Commission.
The Small Business Administration has promulgated a regulation to govern
small business investment companies iii situations giving rise to possible conflicts
of interest (Section 107.716, Code of Federal Regulations). That regulation was
promulgated pursuant to a specific statutory direction enacted in 1964 and now
contained in Section 312 of the Small Business Investment Act of 1958, as
amended.
In our view, the proposed Rule 17d-1 does not take into account the operating
needs of our industry, the need for certainty, and the need to avoid overlapping
regulations. We believe that the SBA rule is sufficient for all purposes related to
your jurisdiction as well as that of SBA.
Accordingly, we recommend that a small business investment company registered
under the Investment Company Act of 1940 be exempted not only from the
proposed Rule 17d-1 but from the application of all of Section 17 of the 1940
Act and all Commission rules promulgated thereunder, provided such small
business investment company is in compliance with SBA Reg. 107.716.
Representatives of this Association appeared yesterday before the full Com-
mission to request a careful review of areas in which SEC and SBA rules and
PAGENO="0269"
265
regulations overlap and result in dual regulation of our industry to the detriment
of our program and the benefit of no one.
The proposed rule presents an excellent example of the very type of situation
we referred to yesterday, and we therefore urge you to accept our suggestion as
a first step in the direction of eliminating unnecessary dual regulation between
SEC and SBA with respect to our industry.
Sincerely yours,
MILTON D. STEWART, President.
EXIIIBIT B
PROPOSED RULE 18(D)1 UNDER THE INVESTMENT COMPANY ACT OF 1940
Notwithstanding the provisions of Section 18(d) and Section 23(a) of the
Investment Company Act of 1940, a small business investment company licensed
as such by the Small Business Administration pursuant to the authority granted
such Administration by the Small Business Investment Act of 1958, as amended,
and registered with the Commission, pursuant to the Investment Company Act
of 1940, may adopt a plan to grant and may grant stock options to its officers
and employees and issue stock upon exercise of such options on the following
terms and conditions:
1. Options may be issued only to officers and employees of the small business
investment company and the right to exercise such option shall continue only
so long as such officer or employee is actually employed by the company or not
later than three months after the date he ceases to be an employee, except that
such option may be exercised upon his death by his estate or legal representative
within three months after such death.
2. No one person shall receive options in excess of 40% of the total options
permitted to be issued under the plan, provided however that in eases of persons
whose annual cash compensation equals or exceeds $50,000. The aggregate exercise
price of the options at the time of their grant shall not exceed 200% of such annual
cash compensation.
3. The total number of shares to be issued under the terms of the plan shall
not exceed at any one time an amount greater than 5% of the then outstanding
shares of the class of the securities which is the subject of the option.
4. The exercise price of the options shall be at least equal to the fair market
value of the shares which are the subject of the option on the date of the granting
of such option, or on the date any reduction is made in the exercise price because
of a decline in the average market price of the underlying security as described
and permitted in Section 421 of the Internal Revenue Code as it now exists or is
hereafter amended, provided, however, that in the case of any person who owns
securities possessing more than 10% of the total combined voting power of all
classes of securities of the company, the option price shall be at least 110% of the
fair market value of the securities subj ect to the option on the date of grant of
such option and by it~ terms such option is not exercisable after the expiration
of five years from the date such an option is granted. For the purposes of this
paragraph, an individual shall be considered as owning (i) the securities owned
directly or indirectly by or for his brothers and sisters (whether by the whole or
half blood), spouses, ancestors and lineal descendants, and (ii) stock owned
directly or indirectly by or for a corporation, partnership, estate or trust shall be
considered as being owned proportionately by or for its shareholders, partners or
beneficiaries.
5. The stock option plan shall be duly approved by the holders of a majority of
the securities of the small business investment company, present or represented,
entitled to vote at a meeting for which proxies are solicited substantially in
accordance with the rules and regulations, if any, then in efl~ect under Section
20(a) of the Investment Company Act of 1940 or by the written consent of the
majority of the holders of the securities of such company entitled to vote solicited
substantially in accordance with such rules and regulations in each case, whether
or not such rules and regulations are applicable to such solicitation.
6. The options to be issued under the plan shall be "restricted stock options"
as that term is defined in Section 421 of the Internal Revenue Code as it now
exists or as hereafter amended except that such options shall not be exercisable
for at least one year after their issuance.
The CHAIRMAN. Yes, we thank you both for coming and giving
US the benefit of your judgment and experience and wisdom on this
matter. And you have permission to extend your remarks.
PAGENO="0270"
26\6
And, Mr. Stults, if you want to add another representative or two
of your industry, th.eir statements may be included.
Mr. STULTS. Thank you very much.
The CHAIRMAN. And you may extend your remarks.
Mr. Mitchell has a question. The time is up.
Mr. MITCHELL. I have some submissions for tire record.
I did have one question, if I may.
The Small Business Administration submitted with its statement
a copy of your ethics and trade practice rules. Let me ask this question:
Has your organization, NASBIC, ever disciplined a member for any
reason?
Mr. STULTS. Yes, sir.
Mr. MITCHELL. Does it happen often?
Mr. STULTS. We have had two cases. In one of them, we expelled
tire member, and the other we disciplined arid suspended his member-
ship for a period.
Mr. MITCHELL. Have you ever referred ally matter, policing
matter to SBA of a member of yours, called it to their attention?
Mr. DAVIS. I personally have, one.
Mr. MITCHELL. That answers the question.
Mr. DAVIS. Mr. Chairman, could I make just two factual remarks?
The CHAIRMAN. Yes, sir.
Mr. DAVIS. In the comments that were Inade today there were
two very brief comments that I would like to make in reference to my
company. In a short analysis our company, with $1,400,000 in long-
term Government funds, will have created out of four of its portfolio
companies and our SBIC a tax liability for this year of $704,000,
which is a 50-percent return on the C ovelnlflent funds that we have
borrowed. Now, I have to say to you that I used to think that 1 was
uniqi.ie. But I have discovered that there are other people that are
doing even better than we are. So I poim.rt to one-
The CHAIRMAN. That is a very impressive statement.
Mr. DAVIS. I think that is important in terms of a $44 million
loss that someone has estimated.
The other item is with reference to tI.ie cost to the Government to
create one job. We have created 604 jobs, for every thousand dollars
that our SBIC has put in we have created one job, for every 2,000
the SBA has put in, one job, for a total between us, it has taken $3,000
to create one job.
The CI-IAIRMAN. Those are very impressive statei.nents. And we
thank you, and Mr. Stults. You can give us some staten.~ent and
more information.
Mr. MITCHELL. Mr. Chairman, I would like to place in the record
at this time the statement of Mr. Groga.ii Lord, Chairman of tire
National SBIC Advisory Council.
The CHAIRMAN. Without objection it will be included.
(The prepared statement of Mr. Lord referred to for inclusion in
the record follows:)
STATEMENT OF GROGAN LORD, CHAIRMAN, NATIONAL SBIC ADVISORY COMMITTEE
Mr. Chairman and Members of the Committee, I appreciate your invitation to
tell you something about the National SBIC Advisory Council. I am honored to
serve as Chairman of that Council. I am also President of Texas Capital Corpora-
tion, a publicly-owned SBIC with headquarters in Georgetown, Texas. During
PAGENO="0271"
267
1966, I served as President of the National Association of Small Business Invest-
ment Companies.
First of all, let me say that the iudustry is deeply grateful to Congress for
authorizing the establishment of the Advisory Council by passing the Small
Business Act Amendments last I~all. We realize that the House Small Business
Committee has long supported our undertaking and that it has lent its weight to
improving the SBIC program. We appreciate your backing and trust that our
record of accomplishments will prove that your confidence is not misplaced.
As background information for the fundamental reason why the SBIC Advisory
Council is so important, I must remind you that our industry is closely tied to the
Small Business Administration and that SBA has undergone an inordinate number
of changes in top command over the past ten years. Since the passage of the Small
Business Investment Act in 1958, we have had Administrators Barnes, McCallum,
Home, Foley, Boutin, and Moot, in addition to Acting Administrator Davis who
served for nine months. Running the Investment Division, we have had Deputy,
or Associate Administrators Read, Fine, Parris, Kelley, Greenberg, and Brown,
in addition to several acting chiefs who served interim appointments.
No, don't get me wrong. All of these were excellent men with whom our industry
worked closely. On the other hand, each of these men had his own ideas about
how the SBIC program should be administered, how it should be regulated, how
it should be encouraged. The regulations under which we must operate have been
changed to reflect these changes in SBA command: the policies and philosophies
of these men have further shaped the regulations themselves.
As long-term investors and lenders in a program marked by a close partnership
with the Federal Government, we have all too often felt like yo-yo's at the end of
SBA's string.
We in the industry believe that we must have greater continuity in the ground
rules under which SBIC's operate. We feel that the establishment of this Advisory
Council gives hope that we can achieve a greater measure of continuity and
certainty in these regulations and policies.
May I tell you a little about the Council itself:
Administrator Robert Moot named the group early in January with eight
representatives of the industry and two outside experts-Professor Frank L.
Tucker of the Harvard Graduate School of Business Administration and Stanley
M. Rubel, financial consultant and publisher of the SBIC Evaluation Service.
The industry men represent all types and sizes of SEIC's-publicly owned,
bank-owned, privately-owned, and real-estate oriented. In addition to myself,
there are: Louis L. Allen, Chase Manhattan Capital Corporation, New York;
John A. Arndt, First American Investment Corporation, Atlanta; Robert L.
Banner, Capital Investments, Inc., Milwaukee; John M. Bryan, Bryan Capital,
Inc., San Francisco; Frank G. Chambers, Continental Capital Corporation, San
Francisco; Elliott Davis, Alliance Business Investment Company, Tulsa; and
Milton D. Stewart, SBIC of New York, Inc.
We held our first meeting in Washington on March 4 with almost all the top
SBA officials in attendance. At that time, we established the following three
committees:
1. Private Coverage Committee.--To increase geographic coverage of the program.
Mr. Davis is Chairman of this Committee.
2. Private Capital Committee.-To attract more sources of private capital and
loan funds to the industry and improve SBIC profitability. Professor Tucker is
Chairman of this Committee.
3. Government Agencies Committee.-To deal with regulations and procedures
of SBA, SEC, and IRS, and SBICs' relationship to governmental objectives and
programs. Mr. Stewart is Chairman.
Incidentally, Congressman Wright Patman, former Chairman of your Com-
mittee, spoke at luncheon during the first meeting of the Advisory Committee
and gave a most challenging talk.
The second meeting of the Advisory Council was held in Dallas on May 3 and
again the members of the group and top officials in the Investment Division
engaged in a completely candid and constructive discussion of the SBIC program's
potentials and its problems. We have charted out a course of action which should
prove tremendously valuable both to the Government and to the industry-
which is as it should be, since we are in a partnership enterprise.
Mr~ Chairman, that about concludes my statement. I have spoken of the reasons
why a sense of continuity is so necessary; I have covered the establishment of the
SBIC Industry Advisory Council; and I have told you of the initial undertakings
of the Council.
PAGENO="0272"
2~
My final word is this: we have made some progress in the continuity and com-
munications area, but we have by no means solved all the problems. We have
witnessed a hopeful start, but we still have a formidable obstacle course to sur-
mount. The SBIC program is still a pioneering venture with a long distance to
go before it fulfills the mandate given it by the Congress.
For all of these reasons, we shall require the continuing support of the House
Small Business Committee. You have made many contributions to the fact we're
even alive in 1968-we trust you will conclude there are sound reasons for helping
us make sure we will be a major force in bulwarking the Nation's small business
community by 1973.
Thank you very much.
Mr. MITCHELL. And at the appropriate place in the record I would
like to place in at Congressman Irwin's request a letter to him from a
small businessman, Milton S. Cohen.
The CHAIRMAN. Does it relate to the SBIC program?
Mr. MITCHELL. No; but at the appropriate place in the record on
the financial assistance programs.
The CHAIRMAN. Without objection it may be included in the appro-
priate place.
(The information referred to may be found at p. 85 of this record.)
Mr. MITCHELL. And also Congressman Tenzer advises that he
wishes to submit a statement on the loan program.
The CHAIRMAN. Without objection it may be included in the appro-
priate place in the hearing.
(The statement of Congressman Tenzer may be found at p. 132 of
this record.)
Mr. MITCHELL. That is all.
The CHAIRMAN. Gentlemen, we are impressed by your industry.
We wish you good luck. And thank you very much.
This concludes our hearings. I believe these hearings have been
fruitful and have covered the matters the committee sought to cover.
We have attempted to deal with the problems pending and cover
the entire scope of SBA's operations. It is a great agency and we
desire to be helpful in its mission to serve the small business com-
munity. It is felt that the hearings have brought forth helpful inf or-
mation and will have a corrective effect. The committee will study
the record and hopefully bring forward a helpful report.
The committee stands adjourned.
(Whereupon, at 12:35 p.m., May 22, 1966, the committee was
adjourned, to reconvene subject to the call of the Chair.)
PAGENO="0273"
ORGANIZATION AND OPERATION OF THE
SMALL BUSINESS ADMINISTRATION
(1968)
TUESDAY, OCTOBER 1, 1968
HOUSE OF REPRESENTATIVES,
SELECT COMMITTEE ON SMALL BUSINESS,
Washington, D.C.
The committee met, pursuant to call, at 10:45 a.m., in room 2359,
Rayburn House Office Building, Hon. Joe L. Evins (chairman)
presiding. "
Present: Representatives Evins, Steed, Kluczynski, Dingell, Smith,
Corman, Irwin, Addabbo, Conte, Broyhill, Horton, Morton, and
Burton.
Also present: Bryan H. Jacques, staff director and general counsel;
Myrtle Ruth Foutóh, clerk; and John J. Williams, minority counsel.
The CHAIRMAN. The committee will come to order.
We want to welcome Mr. Howard Samuels, the new SBA Admin-
istrator, Mr. Greenberg and the members of his staff.
Mr. Samuels, it is a pleasure to welcome you here today. I have a pre-
pared statement which I want to read to you.
The members of this committee appreciate this opportunity to re-
view with you the plans and policies which you are putting into effect
at the Small Business Administration.
It is recognized that the President placed you in charge of this
agency `only 2 months ago and, ordinarily, the committee would be
inclined tc~ discuss ~our policies only after you had been given more
time to `become familiar with the work of the agency, its staff, and
problems. In this case, however, the situation is different. I believe it is
safe for me to make the observation that the pace at which you move
`and act' is somewhat more swift than that of ordinary SBA Ad-
ministrators.
It must be emphasized that the Members of the House of Repre-
sentatives feel that it is essential that the small business sector of the
Nation's economy be not faced with unfair or unnecessary burdens and,
of course, I don't need `to remind you that when we speak of small
business, we are speaking of practically' all the businesses in the
country. Only 13 percent of them have earnings of over $10,000 a
year--only 14 percent have sales of over $100,000 a year-but no matter
how you measure it, the vast bulk of the millions of businesses in this
country are small. Their well-being is Of primary importance to this
committee, and I know you share this concern with us.
The members of this committee, and indeed every Member of the
entire House of Representatives, believe that the Small Business Ad-
(269)
95-193-68----18
PAGENO="0274"
270
ministration is one of the more important agencies of the Government;
they have a deep interest in seeing that congressional intent, as defined
in the Small Business Act, is carried out faithfully and effectively. I
hope, therefore, that you can understand why we are anxious to get
acquainted with you and to explore with you the philosophies and
policies which you intend to apply and pursue as the head of this im-
portant agency.
As you well know, Mr. Administrator, our country has been priv-
ileged to enjoy 8 years of steady, unprecedented economic growth and
expansion. Generally speaking, small business has benefited and shared
in this prosperity, but even so, we know that there are many problems~-
serious problems-confronting small business today that must be dealt
with if the small business community is to maintain its competitive
vitality.
Some of these problems are pretty close to home. For instance, we
know that except for guaranteed loans, the maximum amount that
SBA is able to loan to a single small business concern is $150,000,
whereas the Congress, in adopting the Small Business Act of 1958,
set this maximum at $350,000. Moreover, we know also that apparently
SBA is required to enforce some kind of a priority system because
each month it seems that one or more of the regional offices are re-
quired to reject a number of worthy loan applications simply because
sufficient funds are not available. This shortage of funds, of course,
makes it difficult for SBA to finance the establishment of new busi-
nesses in ghetto areas and to provide financial help to those small
business concerns eligible for poverty loans under the provisions of
the Economic Opportunity Act of 1964. As we know, these poverty
loans come out of SBA's revolvin.g fund. If you don't have sufficient
to take care of the regular SBA loans, how are you going to take care
of the others also?
In the face of this critical fiscal situation, it seems to me that it was
a mistake to enlarge the list of eligible borrowers so as to include
liquor dealers or other business concerns engaged primarily in the
sale of alcoholic beverages.
Let me mention some other small business problems and, of course,
I hope they are receiving your attention along with those associated
with our ghetto areas and disfavored peoples.
The lease guarantee program is new and your agency is to be com-
mended for the hard work that has been put forth to make this a valu-
able and realistic aid to small business. I think we will agree, however,
that eventually some way must be found to provide these guarantees
at a more moderate cost to the owner of a small business.
The Service Corps of Retired Executives program (SCORE) has
been especially successful and effective. Recently, howver, I rceived a
letter from one of the SCORE chapters, advising that the group
would disband unless certain improvements were authorized. I am
satisfied, of course, that you will see that. this SCORE program will
not be neglected.
The small business share of procurement by the Department of De-
fense has declined from about 22 percent in 1966 to 19 percent in
1968. The percentage of procurements set aside for small business
has declined from about 6 percent in 1965 to 4 percent in 1968. The
percentage of research and development contracts awarded to small
PAGENO="0275"
271
business by the Department of Defense is lower than it has been
at any time during the past 5 years-3.4 percent.
The small business investment companies continue to have their
troubles. Formerly, the investment of private capital in these com-
panies exceeded substantially the amount of the Government invest-
ment. Today, I understand this no longer is true.
We continue to get complaints-and many of them-from small
business concerns displaced by urban renewal and other federally
financed projects. We know that within the past few months, legisla-
tion has been passed providing more liberal moving allowances, et
cetera, but it is still true that many owners of displaced small busi-
nesses are unable to find an acceptable substitute location. They simply
go out of business.
Hundreds of small business foundries are threatened with dissolu-
tion because of their inability to purchase the expensive new equip-
ment required by the law to combat air pollution.
Many small business tool and die makers are being squeezed out
of business because Ford, Chrysler, and General Motors are establish-
ing tool and die shops within their own plants.
Small business franchisees are handicapped, harassed, and unable
to operate as independent businessmen because of the lack of mutuality
in their franchise agreements.
Small business seems to have a myriad of problems associated with
our tax laws. Subchapter "S," Corporations-those electing to be taxed
as partnerships-face numerous pitfalls in their efforts to take advan-
tage of the benefits afforded by this legislation. We need a small busi-
ness investment credit law that corresponds with the big business 7-
percent investment credit. There are some press reports to the effect
that you oppose this. A plow-back arrangement is needed to permit
small business concerns to retain and plow back a greater share of
their earnings. The present estate tax laws are harsh and inequitable
to the owners of small business concerns. These laws seem to encourage
the owners of small business to sell out to their giant competitors and
this feeds the trend toward giantism and industrial concentration that
already is plaguing the small businesscommirnity.
Reports are received that the regulations issued by the Wage and
Hour Division are so voluminous and complex that compliance can be
uchieved only with difficulty and by employing the services of a spe-
~cialist accountant or attorney; that these regulations' ~also require ex-
cessive records and bookkeeping by the small business concerns. Ade-
quate assistance and guidance, it is claimed, is not being made avail-
able by the appropriate Government agency.
I could go on-there are others-many others-and while, on the
surface, it may appear that some of these do itot fail within the purview
of the operations of the Small Business Administration, it is my un-
derstanding thatyou ha~re in your employ a dozen or more economists
who could bring these and other problems to'your attentiofl and recom-
mend remedial measures. If necessary and appropriate~ you could ask
the Congress to provide you with greater authority or enact other
`legislation that would bring about the needed assistance. I believe you
will find that section 8, especially 8(c) ,~ places a duty upon SBA to
investigate and study such matters, that is, "matters materially affect-
ing the competitive strength of small business." But you could ask the
PAGENO="0276"
272
Congress to provide you with greater authority, and you should recom-
mend legislation if needed.
Mr. Administrator, you have many tools. I believe SBA is the agency
of the Government that is expected to be expert in recognizing and
finding solutions to small business problems, whatever their nature. I
believe SBA should consider itself to be a one-stop shop where the
owner of a small business may come and obtain help and, in proper
cases, receive financial assistance that will help and encourage him to
carry on his relentless fight for survival and success.
Your qualifications to head this agency are beyond question. We
know you have been the owner of a small business concern; act&vely
managed it; competed against the giants in the industry, but still
guided that small business concern into one of the more successful
enterprises of its kind in the country. Your record of achievement is
one of which you have every right to be justly proud.
For a number of years now, it has been the policy of this committee
to hold hearings, like this one, whenever a new Administrator is placed
in charge of the agency. Here lately, it seems we are holding these
hearings too often. The short tenure of SBA Administrators makes
it difficult for the agency to maintain a continuity of purpose-to
carry out effectively the important duties and responsibilities author-
ized by the Congress.
Since the agency was established there have been nine different
Administrators, but seven of these have served during the past 8 years.
Mr. William D. Mitchell first headed the agency, but he resigned
after serving 3 months. Mr. Wendell B. Barnes followed him and here
we see the outstanding exception to the rule, for he served from Feb-
ruary 2, 1954, to November 1, 1959-a period of about 6 years.
Mr. Philip MoOallum followed him, but he served only until Jan-
nary 20,1961-about 1 year.
Mr. John E. Home was next placed in charge and he served until
August 7, 1963-a year and a half. He was succeeded by Mr. Eugene P.
Foley who headed the agency until September 9, 1965-a 2-year span.
Mr. Ross Davis, his deputy, thereafter served as Acting Administrator
until May 18, 1966, at which time Mr. Bernard L. Boutin became
Administrator, but he served only for 1 year-that is, until July 31,
1967.
Mr. RobertO. Moot, your immediate predecessor, headed the agency
until July 21, 1968, and, of course, your appointment begins with the
1st of August of this year.
Certainly, Mr. Samuels, there is no intention to place upon your
shoulders any of the responsibility for these many changes, but I know
the committee would like to have your comments and suggestions aibout
this problem as well as the other small business problems that I men-
tioned earlier.
Now, Mr. Administrator, before you give your statement, I want to
call on Mr. Conte, our acting ranking minority member.
Mr. CoN~nm. Mr. Ohairmari, I want to join with you in welcoming
Mr. Samuels before the committee here today. It is true, as you point
out, that he certainly hasn~t had the responsibility of running this
agency very long. It is very difficult, I imagine, for him to come
up here and tell us about the present policies of SBA. I am sure, how-
PAGENO="0277"
273
ever, that with his background and his ability, he will make a fine
presentation today.
The CHAIRMAN. If there is no other comment, Mr. Administrator,
we will be pleased to hear you, and you may proceed as you wish.
Mr. HORTON. Mr. Chairman.
The CHAIRMAN. Mr. Horton.
Mr. HORTON. I would like to welcome the Administrator. He has
been a friend of mine for many years. He lives not too far from my
di;strict, and I have known him and his family for a great number of
years. I have a great deal of respect for his integrity and his ability. I
might say, parenthetically, that the corporation which he and his
brother founded, Kordite, is located in Wayne County, which is in my
district.
The CHAIRMAN. I understand it is a very successful big business
today.
Mr. HORTON. lilt is very big now, but it started as a small business.
I know he knows the problems of the small businessman. I want to
welcome him before the committee.
TESTIMONY OP HOWARD J. SAMUELS, ADMINISTRATOR, SMALL
BUSINESS ADMINISTRATION; ACCOMPANIED BY HOWARD
GREENBERG, DEPtJTY ADMINISThATOR; WILLIAM T. GENETTI,
ACTING GENERAL COUNSEL; AND IRVThTG MANESS, ASSOCI-
ATE ADaVEINISTRATOR POR PROCUREMENT AND MANAGEMENT
ASSISTANCE
Mr. SAMUELS. Thank you, Mr. Chairman.
First, I would like to say to you and the members of the SBA that
I feel very strongly that the SBA is probably one of the least under-
stood by the public and most important agencies today in terms o~f
economic and social development of the country.
I want to make it clear to Congressman Conte that I `don't feel that
3 months in the job is in any way `interfering with my commitment
and my convictions about the directions in which the SBA can go and
what we can do. And I hope by the end of my testimony you will get
some indication about what I hope has been some new thrust for the
agency in terms of what I am sure the Congress of this country would
like me to do as the head of the SBA.
I thought, Mr. Chairman, that first I might answer a few of your
questions, because in answering several of your questions, it might
also allude to some of the new thrusts in the agency in terms of the
responsibilities that we have.
First of all, it is true, this agency has suffered from a large cut in
our funds, over $120 million, which means we have nothing, or very
little, in the way of direct loans to make to small businesses across the
country.
On the other hand, this in my mind gav'e us an additional reason
to follow through what the agency had begun before I became Admin-
istrator. I just testified before Senator Proxmire, and I said to him
that in reality the most important change that can be made in America
would be if the banks of this country would take over the respon-
PAGENO="0278"
274
sibility, or a much greater part of the responsibility in the develop-
ment of small businesses, minority and other, than they have in the
past. And, therefore, when I was appointed head of the SBA, recog-
nizing the limits of funds, and recognizing that the only way to get
additional capital was to work with the American Bankers Associa-
tion, my first task, the first week I was head of the SBA, was to meet
with the American Bankers Association. And we have, I think, de-
veloped a whole new relationship with the ABA, the American
Bankers Association, across the whole country.
In the last 31 days I met with the leaders of the banks with the
support of the ABA in 16 cities. The American Bankers Association
is committed to our program, which I call Project Own. They are also
committed to taking a much stronger part in loans to small businesses,
minority and others. They are also committed to a program which I
call compensatory capitalism in which the banks of America are recog-
nizing a new social need of approaching the inner cities of our country
like undeveloped nations in terms of making capital available for the
development ~f minority businesses, which is one of my tasks.
And therefore, despite the fact that we have less direct money than
we had before, the SBA in 1967 levered $650 million into the economy
of the country, either through direct loans or through bank guaran-
tees or SBIC's. Last year it was $800 million. And despite the fact that
we have $120 million less, I expect this year it will he a billion or a
billion one-hundred million dollars. And with the cooperation that I
see from the banks across the country, I am convinced that by 1970,
our agency can get and move into the small businesses of this country
both for social and economic reasons a billion and a half dollars for
the development of small business.
The CHAIRMAN. Mr. Administrator, I will have to interject to say
you are to be commended for having less appropriations and making
more loans. Somehow you are skillful to bring this about.
Mr. SAMUELS. I might say that this also conditions the question of
the $100,000 limit on direct loans, because as we move into the use
of the funds available to us-which frankly I think we need in the
support of the kind of small businesses across the country that we
want to develop-we also move, of course, to give you the answer
to why the limit is not $350,000. We are making loans of $350,000 on
bank guarantees all over the country today. So I say to you, the first
answer is that the SBA, despite the move down in our budget, ex-
pects to greatly expand its operation by the use of the private sector,
by the use of the banks of the country.
For instance, Congressman Horton, I met with the bank leadership
in Rochester when I was there this week. And I met with bank
leaders of every city in the country. And I think one of the most
enthusiastic things that I can report to you today, Mr. Chairman,
and to the members of your committee, is the willingness of the banks
of this country to take a new look at not only the support of the SBA,
not only the support of small businesses, but a new look at how they
are going to provide capital for the development of the inner city
businesses which I would like to talk to you about in a few minutes.
Now, what else have we done to make it easier for the banks to
operate with SBA? As you know, before my administration, SBA
PAGENO="0279"
275
adopted a blanket guarantee to cut out the bureaucracy and reduce the
redtape. This has been tremendously augmented in the last 3 months.
And we have put through an additional procedure this week which I
think makes it possible-and this procedure was worked out with the
ABA-for the banks of this country to deal with the SBA on a pro-
gram not much different than a commercial loan of their own.
The CHAIRMAN. How does your arrangement with the American
Bankers Association and the individual banks differ from that of
your predecessor?
Mr. SAMUELS. I came into this at a time when the banks of America
were ready for a new historic thrust of their own, at a time when the
banks of America recognized that they had to change their attitude in
terms of the inner city, in terms of social responsibilities. And I came
at a time that they were ready. And I became an SBA salesman and
operated as a salesman in meeting with the banks across the country *
and getting their cooperation. And I would be glad to send the mem-
bers of this committee a letter which Howard Laeri, the president of
ABA, sent to the 1,000 largest banks of the country, supporting the
principles of the SBA and the principles of our program for the devel-
opment of minority businesses in the country.
I think this is really revolutionary. I thing this is historic. There is
a new partnership between the banks of this country and the SBA
which I hope will be important to the development of small businesses.
I might say that this is one of the reasons why you alluded to the
question on liquor dealers, Congressman. And the reason I made this
decision was in terms of the inner city-and I am not desirous of en-
couraging investment in the liquor business-but in terms of the inner
city and in terms of the development of minority businesses in the
country. In the city of Washington, I think out of 25 liquor stores in
the inner city, 20 or 21 were owned by members of the white commu-
nity. This is a viable business. And the main reason-
The CHAIRMAN. Do you find comparable situations with respect to
other types of retail establishments in the inner city, such as grocery
stores, clothing stores, furniture stores, drugstores?
Mr. SAMUELS. I do, Mr. Chairman.
The CHAIRMAN. Why do you single out liquor stores?
Mr. SAMUELS. I think I am going to single them all out, Mr. Chair-
man. I am going to talk about the fact that in the city of Washington,
out of 28,000 businesses, only 2,000 are owned by the inner city resi~
dents. I would like to talk about that separately, if you don't mind.
The inner city businesses in this country today are not controlled by
the residents. All the other ethnic groups in our history-the Irish,
the Jews, the Italians-all tended to own the business, the retail busi-
nesses in their inner cities. This is not true of the inner cities today.
And it is a subject which I think is important to the rebuilding of the
cities of our country.
The CHAIRMAN. Do you think that making liquor loans is important
to the rebuilding of the inner cities of this country?
Mr. SAMUELS. No; I didn't say that, Mr. Chairman. I said that the
decision on liquor was made with the repeal of the 18th amendment.
It is a viable business. I drink very little myself. But on the other
hand, if I expect those viable businesses to be supported 1y a decision
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2T6
that Congress and the country made-I just included that among all
the businesses of the country.
The CHAIRMAN. It is a very signal decision. Why didn't you address
yourself to the other types of businesses within the inner city?
Mr. SAMTIELS. I think, Mr. Chairman, I will show you now the
movement toward the other businesses in the inner cities, if I might.
And that really gets to the main thrust of what my responsibilities
are as head of the SBA, the main thrust of what, the President gave
me when he asked me to head the SBA and the development of mi-
nority businesses in the country.
I first want to make a statement, however, that in the development
of minority businesses in the country the SBA i~ not giving up its
responsibilities to small businesses, white or black, or any other color.
Last year out of $800 million that we levered into the economy of the
country, less than $50 million, less than 6 percent, went into the de-
velopment of minority businesses. And this year, despite the new
thrust, and the new large amount of money, we expect to expand
actually the loans that we make and the development we have of
white businesses at the same time that we put a major emphasis on
the development of minority businesses.
Mr. ADDABB0. Mr. Samuels, may I ask you one question at this
point? You say that less than 6 percent was given to the minority
groups-
Mr. SAMTJELS. Not given, Mr. Chairman, I am talking about loans,
not gifts.
Mr. ADDABBO. You have stated in your opening statement that Con-
gress has not appropriated sufficient funds, which means that most of
this loan money came from banks working under guarantees. Isn't it
true, then, that it is the banks that have refused to give the~ minor-
ities the loans, not SBA?
Mr. SAMUELS. Well, the question of who is involved in making the
loans, and how we develop the new thrust to the SBA to the develop-
ment of minority businesses, is a topic all in itself, Congressman. I am
going to talk in a few minutes about it, because I think in terms of
your committee, Mr. Chairman, and questions I am sure you are get-
ting from your constituents, I think that is probably the most impor-
tant comment that I might make to you here.
And, Congressman, after I discuss this, I would be glad to answer
your questions about it.
Let me say, `Mr. Chairman, to the members of your committee some-
thing that I feel very deeply about. And I felt very deeply about it
long before 1 came over to SBA, because as the Under Secretary of
Commerce I not only was involved in the National Alliance of Busi-
nessmen, which was a partnership between business and Government,
of which I was one of the founding fathers, but also involved in a
task force with the Vice President of the United States, Hubert Hum-
phrey, on what do we do about the development of minority businesses,
and how to write the task force report that really is the basis of the
program that I would like to discuss with you.
I felt for a long time, and I feel more strongly about it today than
ever, that we will never rebuild the inner cities of this country without
the minorities becoming owners. And in every city that I have been
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277
in, the story is exactly the same-boarded-up stores, dilapidated stores,
Where the riots have taken place, there has been almost no rebuilding.
You know, this is logical. The whites in America are not going to
rebuild in the inner cities, they are not encouraged to make the invest-
ment. And the blacks and the other minorities in this country lack
two things-they lack capital and they lack experience. And it seems
to me that in the responsibility that you have given me, that the
President has given me, that one of the major efforts of this country
is to support the minorities who own only 1 or 2 percent of our busi-
nesses-and they are not the cream of American businesses either.
Minorities are 15 percent of the population. And a great amount of
my effort in the organization and the renewing of the goals of the
SBA has not been to neglect the white businessman that we have,
who we must continue to serve on a very aggressive basis, but to recog-
nize that we have a social responsibility and real economic opportunity
in the inner cities that nobody else in Washington has.
I say to you, Mr. Chairman, that we in the SBA, because of what
you in Congress have given us as tools, and what I see in terms of
willingness on the part of the private sector, or the banks of America
and American business, to support us, have an opportunity to develop
better understanding between white and black and with all minorities
that no other agency in Washington has, by making them part of the
free enterprise system.
The CHAIRMAN. Mr. Samuels, ~ou do have a lot of tools; we alluded
to that. And you won't find tfiis committee quarreling with your
desire to put minority groups in business. We are concerned with
this one announcement that you have made regarding the alcoholic
beverage type of business rather than stressing some other.
No. 2, you have a project called Own, in which you will make a
loan to a minority group to buy out an existing business. But as I
understand it, this comes from the SBA revolving fund, and you
would not make a loan to another person to purchase a business or
to go into business. In other words, you are showing favoritism, some
discrimination in the type of loans that you are making, as I under-
stand your policy in Project Own.
Mr. SAMnELS. First of all, we are discriminating for the disad-
vantaged, whether they are in rural America, whether they are Puerto
Ricans or whether they are blacks. We could have a program, Mr.
Chairman-
The CHAIRMAN. Can you recite for the committee the authority to
you to do that?
Mr. SAMUELS. Is Bill Genetti here?
Bill, do you have that?
The CHAIRMAN. Will you read into the record the authority under
which you can make the loan to go into business-to buy out a business
for a black man but you cannot make a loan for a white man to buy out
a business. The committee would be interested in your reading that
authority into the hearing.
Mr. GENETTI. I don't believe that is what Mr. Samuels-
The CHAIRMAN. Well, your Project Own makes loans to buy out a
business for a minority group, but your Project Own does not make a
loan for another American to buy out a business.
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278
Mr. SAMUELS. First of all, Mr. Chairman, we make loans to buy out
businesses whether it is white by black or black by white. We do recog-
nize, Mr. Chairman, that in terms of the inner city that the movement
will be to develop minority businesses and the encouragement of blacks
to move into the inner cities and become viable partners in the econ-
omy of the inner city is being encouraged by us. But this does not
mean, Mr. Chairman, that we are discriminating and saying whites
can't buy at all, it is not true, and it is a misinterpretation of Project
Own.
The CHAIRMAN. We wouldn't quarrel with you on your effort to put
minority efforts in business, but let's not discriminate in the selection
of loans.
Mr. SAMUELS. I think, Mr. Chairman, I would like to feel that we are
not. I would like to feel that the only discrimination we are making is
discrimination in terms of making capital available in the inner city
by the banks of this country because there is no capital available in
the inner city. And I would like to indicate to you how we are doing
this, and then get certainly the ideas from the Congressmen here as to
whether they think we are serving the country's interest well in what
we are doing.
I made it clear that it is my feeling that we wouldn't rebuild the
inner cities without minority ownership. I said that there were two
things lacking in the inner cities in terms of minorities being able to
own: They don't have capital, and t~ey don't have management expe-
rience. And I don't think I have to mention to the members of this
committee the basis of the history of why these things are true in
terms of the minorities of America.
Now, what we have done in Project Own is, we have really asked
the support of the bankers of America to provide us with the loans to
provide the capital. And I have to report to you, Mr. Chairman, that
what I have done many banks in this country have already started to
do on their own; that what I am doing is really taking the best ideas
of what the socially sensitive and economically sensitive banks of the
country have already begun to do.
I can take you to the program, for instance, Congressmen, that we
put together in Rochester, which was a program for the banks and
American business in Rochester to make capital available for the de-
velopment of minority businesses. I can take you to a program in Buf-
falo that I saw this week when I spoke to the bankers in Buffalo
where the banks got together to provide compensatory capital for
the inner city. I can tell you about the work that has been done by the
First Pennsylvania Bank. And I can only tell you that we have taken
the best ideas of the involvement of the banking community of the
country to make capital available to the inner city, and we put it into
a n~ana'gement plan, just as I would in my own company.
And operating through the SBA and through the ABA organiza-
tion in every city, with cooperation in every city, because this cannot be
done in Washington, I plan to provide capital to the inner city.
And I again want to report to you today that the banks of this
country have responded with enthusiasm. I am not suggesting that
we know all the answers of how to do this. But `they have responded
with enthusiasm and as we develop businesses in this country we are
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279
going to have the support of banks of this cour~try, the banking com~
munity, to provide the funds.
The CHAIRMAN. Mr. Administrator, I am going to call on our col-
league, Mr. Co'rman, who has an cthservation. He has to leave to go to
another committee.
Mr. CORMAN. I share your interest in developing entrepreneurship
in the Negro race. But I think it would be tragic if the Government
did anything to solidify racial segregation. I would hope that in de-
veloping your policies about Negro ownership you would not give
priority to only Negro ownership in central cities. It ought to be
easier for a Negro to go out to the white suburbs and start a small
business in a new shopping center than to relegate him to the de-
pressed ghetto' areas in the central city.
I recognize that it is not a single prc~blem, it is a dual problem. But
I will be watching closely to see whether SBA is a tool for segrega-
tion in the development of Negro entrepreneurship.
Thank you.
Mr. SAMTJELS. Mr. Congressman, I would like to say to you that we
are not the tool. The tool is the Nation itself. The Nation itself by its
housing practices, its practices of not approaching the problem of mi-
gration, and many others, has really formed the ghettos of the inner
cities. And if you want to look at this problem, you will see that in the
next 10 years the inner city black problem is going to grow. Actually,
today some of the greatest ecOnomic opportunities in this country,
with the growth of disposable income, are in the inner city. I think it is
a great injustice to the inr~er city that we don't have decent stores. I
think it is a great injustice to the inner city that the minority are not
part of the economy of the inner city. So I think what we are trying
to do is strengthen the economy of the inner city, And I think we are
not being very realistic, Mr. Congressman, if we don't recognize that
this must be done with more aggressive minority ownership.
Mr. CORMAN. I hope as you evolve this program-and I think you
are probably now where housing financing was 15 years ago-you will
recall what the Federal Government did in those early days of FHA
loans to perpetuate racial segregation. I assure you that I for one will
not tolerate a repeat performance of that kind of Federal activity. I
respect your concern for Negro entrepreneurship, I share that. But I
would urge you to review what FHA did to perpetuate racial segrega-
tion. We just cannot use any Federal tools for that purpose.
Mr. SAMUELS. Thank you very much, Mr. Corman.
Mr. ADDABBO. Just along that same point, Mr. Samuels, let me point
out that there was an article in the New York Times of September 1G
about a survey made in Harlem where we had close to 60 percent Negro
ownership. And going along with my colleague, we want to see all have
the opportunity to own businesses, because we feel this is the basic
foundation of every community, and roots in the community.
But again, we do not seek to destroy a white integrated into a Negro
community, because `this is what we are working for. Again, as Mr. Cor-
man says, we do not want all-black communities, nor do the minorities
seek such a thing.
Mr. SAMUELS. Mr. Congressman, first of all, I am familiar with the
American Jewish Congress report; and I think what they counted as
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280
to the number of businesses is not dollar volume. If you want to count
the barbershops and count the little corner ma-and-pa stores, you will
find fairly high participation in that particular area of Harlem. But
if you want to talk about volume of stores, volume in terms of retail
establishments, the analysis that we have is that it is probably less than
15 percent of the total dollar volume, which is really important, in
Harlem that actually goes through black-owned stores.
Mr. ADDABBO. I think we have to differentiate the little ma-and-pa
store from the large department stores. If you rely only on sales vol-
ume, you get into a different phase of small business.
Mr. SAMTJBLS. I recognize that, Congressman. And I just have to say
to you-and I am sure you have been in Harlem, and I am sure, know-
ing your own district, that you have seen some of the dilapidated con-
ditions in your own district, And one of the things we do is help re-
build them. And you will not rebuild them without some participation
by the inner city people in that rebuilding.
Mr. ADDABBO. On rebuilding we agree. But what we are speaking of,
and what you have spoken on, is the purchasing, the buying out. This is
my understanding of your statement.
Mr. SAMUELS. That is certainly one of the possibilities-
Mr. ADDABBO. We all look for the rebuilding, it is how we are going
to continue our economy.
Mr. SAMUELS. You will be surprised, Mr. Congressman, at the large
number of white merchants in the country who have come to our SBA
offices in the last month and have asked if there is any way we can
help them sell their businesses to members of the minority community.
This is a sad commentary on where our country is today, but this is the
reality of where we are today. And I think that much of what we are
doing serves not only the interests of the black community or the Puerto
Rican community, but also the interests of the white community itself.
Mr. ADDABBO. This is a proper function of SBA-be it white or
black-to come to the aid of small business in selling or buying.
Thank you, very much, Mr. Chairman.
The CHAIRMAN. I think that a lot of our members are going to want
to ask you questions.
You may continue.
Mr. SAMUBLS. Last year we made 2,000 loans to minorities in the
country. It is the feeling of our research staff that if we are going to
really develop the inner cities of the country with a reasonable pro-
portion of minority ownership-and I might say to Mr. Corman that
we do support the development of minority businesses outside of the
inner city, and we do support small business development of white
businesses who are rebuilding inside the inner city-I might say that
this is very small today, because for lots of reasons that I think America
is pretty sad about, there is no great movement of the white business-
man to rebuild inside the inner city, and there is no great economic
opportunity, unfortunately, for the black man to build businesses
in suburbia. I think this is the reality. And I am certainly glad to have
the comments of the Congressman about it.
But we made 2,000 loans last year. By changing the criteria, by
making it possible for disadvantaged to move into business with less
equity. This is a problem that maiy American bankers were involved
in long before I became head of the SBA. But with their help we
PAGENO="0285"
281
have now raised that rate in 3 months to a rate of about 4,000. The best
analysis our research group would suggest is that we are really now
only developing minority businesses in this country in terms of the
economy of the country, that if you are really goin~ to make a thrust
in this field, that you must move to about 20,000 businesses a year.
Now, how do you do this? Because making capital available is not
the only thing we need. We need management help.
And I would like to report to you that we are setting out on a pro-
gram to develop management help for minority businesses throughout
the country. I was in Chicago last night. I spoke to the Harvard Busi-
ness Club, together with the business clubs of Chicago. And there was
a programS called Talent in Chicago, in which all the business groups
are going to get together, so that every minority who moves into busi-
ness, whether it is a men's wear business, the supermarket business,
whatever it is, is going to have a buddy from the white community
who is going to help him run that program in terms of making up for
the experience gap.
As the Congressman knows very well, the city of Rochester took
some wonderful leadership in this field when American industry got
together in a development corporation in Rochester. I found the same
thing in Buffalo, and all across the country.
The CuAIEMAN. Mr. Administrator, is it the plan of the admin-
istrator or the administration to pay these management assistance
b~buddy~~ counselors?
Mr. SAMUELS. Absolutely nothing, Mr. Chairman.
The OHAIRMAN. Very good.
Mr. SAMUELS. We are getting the help of American industry out of
the commitment of American industry to this social need and eco-
nomic need in the country. And it is one of the most encouraging
things I see in the country. Last night there were 150 people at this
harvard Business School group, and I think 120 of them signed up
to be active participants in this program in Chicago-lawyers, CPA's,
sh~pping center consultants, women's wear people, advertising people,
all kinds of people.
And I think the success of our developing small businesses on a good
basis is to take this, take the SCORE program, which I think is one
~of the very creative programs of this department, and put them into
a munagerial assistance program, because we will not develop small
businesses in this country among the niinorities and have the kind of
success that I think this country can have without a tremendous input
of managerial assistance. And I want you. to know that there is a tre-
mendous amount of attention in the SBA in my department in execut-
ing this. And as I say, having cut my teeth in Government with the
* National Alliance of Businessmen, I think this can be done. And I
~don't think there is anything better for black-white understanding
in this country.
So what I would really like to summarize to you i~ that we are
going to get our funds from the banks of America, and that I hav~ met
and gone across the country with the ABA, and I am encouraged with
the support we are going to get from the ABA.
We are going to guarantee up to 90 percent of the loans, not 100 per-
cent, because I want the banks to have a little of the risk. I might say
that I don't want anybody in America to go in business with Gov-
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282
ernment money without a little of their own money in it. I don't want
the banks to make a loan without a little of the bank's risk in it. I don't
think the risk should be entirely taken by the Federal Government.
The CHAIRMAN. If I might interject again, this committee is pleased
to see you following the provisions of the act by which the SBA is
empowered to make loans. There is some press release that said that
you favored grants rather than loans, that you might be turning the
agency into a welfare agency. You have no such ideas?
Mr. SAMUELS. I not only `do not have such ideas, but I think I will
spend less Federal money in the execution of this responsibility than
we spent in the past.
The CHAIRMAN. Private enterprise, private capital, and private vol-.
untary assistance to new entrants into business?
Mr. SAMUELS. That is it, Mr. Chairman.
And I think in conclusion, I just want to make clear to all the mem-
bers of this committee that we see great responsibilities of this com-
mittee to rural America in the authorization of our section 502 corpora-
tion. And we are moving very strongly in this. And I think one of
the most important provisions which you have allowed us to have as
an agency is one which has been executed well in not all the cities of
the country. And one of the management tools that I am going to put
forward in' our SBA responsibility is to see that this section 502 cor-
poration for the economic development of rural America is more effec-
tively used. But it is moving up, and we are making more of these cor-
porations available every day. We have not given up our responsi-
bility in terms of management assistance everywhere, in fact we are
going to augment it with private help, Mr. Chairman.
And I think I can only conclude to you that I am sure that what
you are going to say is that I have bitten off a pretty big chunk here in
3 months as head of the SBA. And I have. But on the other hand,
the country needs some big chunks bitten off, the country needs some
new input. The country needs some new approaches.
I would like to feel that I am providing some creative leadership
in `solving not only some of our social problems, but in involving the
agency in new `areas, because I don't think that they can wait until
tomorrow.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Conte; yes, sir?
Mr. OONTE. The only thing I want to do is retract what I said at the
beginning. Certainly, Mr. Samuels has made a fine presentation. He's
done a fine job in the 3 months of his tenure in trying to meet some of
the problems of the ghetto. I realize that it is not very popular today
to even discuss the problem, let alone biting off the big chunk that you
have bitten off.
Mr. SAMUELS. Mr. Chairman, I had to take my phone out. I got four
threats in one weekend from one television program I did on the
development of the economy.
Mr. CONTE. I can well imagine, because there has been a change of
thinking in the country, unfortunately, in this respect. I want to take
this opportunity to commend you for tackling the problem.
Mr. SAMUELS. Thank you very much.
Mr. CONTE. You have my support.
Mr. SAMIJELS. Thank you, Mr. Congressman.
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283
The CHAIRMAN. Mr. Steed.
Mr. Smi~n. Mr. Administrator, going along with what I think you
have told us today, as I read it, it means in a nutshell that you are
saying that social and economic problems are interchangeable and
inseparable. We are now coming to a philosophy in which we realize
that if you don't keep both in view and both in balance, many of the
things we would like to see done just won't happen.
Mr. SAMUELS. I strongly support that, Mr. COngressman.
Mr. Sm~n. Now, then, what I want to do if I can is to try to enlarge
a little on what you have said. A good question: Why do we have the
inner city problem in the first place? Why is there a ghetto, and what
caused its, and what is going to be the situation if we are able to solve
the problem we now see?
I ask that because as I study this, I think we have to go back about
50 years and see what has been transpiring throughout the country.
And to me it translates itself into an economically forced migration.
The evolution and revolution in agriculture, where 50 years ago 45
percent of our population was engaged in producing the food and fiber
for the other 55 percent, has so radically changed that now we find
less than 10 percent, about 6 percent of the population required to
clothe and feed all the others. And during this evolution large num-
bers of our people were compelled to move their place of residence.
And the people who mostly had to migrate were the least prepared to
start a new life where they went to seek a chance to survive.
And that river of humanity, flowing out of the mountaintops, the
headwaters, so to `speak, from the rural or `smailtown area into, first,
the metropolises and now the megalopolises, has slowed down a bit.
Not only have we forced a shift of million's of people from one environ-
ment to another, but we also increased population at the same time.
And megalopolis has had to absorb all that.
So there has been this double impact in sardining the lives of our
people. And I believe that you are on probably the most effective
course to try to cope with this problem that this has created. But what
I am trying to say is that if we don't find some way at the same time
to stop this input of untrained and unwanted and unneeded people into
these already overcrowded areas, that all you can do is this: You cure
the ghetto today, and by the time you have done that you will find that
this migration has built you another ghetto.
So I think when you touch on section 502 loans that you here have
a program that is just as important, and, in the long run, can make a
greater contribution to solutions of these things than this program of
the inner city you are talking about.
And I want to say that I think the time has come, with all the pro-
grams we have, that there should be a more effective overall meshing
together and ~synchronizing of all these activities so that the problem
can be dealt with all up and down the stream of our citizenship.
And I have just been afraid that because of the urgency of the prob-
lem in some areas, the emphasis might be so great that the need to
carry it on simultaneously elsewhere would be overlooked.
Now. I think that we must somehow find a way to stabilize our
population. It seems to me that all these policies ought to have an
overtone of some preference for those steps that have an effect of
stabilizing-
PAGENO="0288"
284
The CHAIRMAN. Does the gentleman mean stabilizing or reversing
the trend?
Mr. STEED. First, if we could stabilize it, then some reversal of the
trend might be in view. But right now it is sort of like our soil con-
servation program; if we don't stop the waste of the soil first, we can't
begin to build it back. And this we have been able to do. In that physi-
cal sense, I think somewhere along that same general concept we can
do it with the human part of our resources.
For instance, to show you how serious this is, I saw a census report
where they estimated that 50,000 people from the State of Mississippi
alone would migrate out of rural areas this year into somebody's
metropolitan or megalopolis area. And unfortunately, while many of
these are minority groups, all of them, an overwhelming percent of
all of them, are people that are the least capable of making a success
either as employees or as business people or anything else in the areas
where they are forced to go. And this is a thing that isn't going to
solve itself unless something is done to control it.
I think there is one tool that ought to be added to what we have.
There may be many more, but there is one in which I am especially
interested. I think that both in the inner city and in this smalitown
rural place, where business and industrial development, especially new
types of development, are those that particularly lend themselves to
these two situations. Some tax incentive could be extended to those
that run the risk, who make the effort, and this would probably be one
of the easier ways to stimulate what you have been trying to do. How
do you feel about that?
Mr. SAMIJELS. Let me mention that as Under Secretary of Commerce,
Mr. Steed, I wrote considerably on the whole question of migration.
I think the lack of economic planning in this country is a national
disgrace today in terms of what needs to be `done and in terms of the
kind of economic tools, planning tools we now have with the com-
puter and other things that are available. Somehow-and I would
hope that the Congress of this country would take a look at all the
agencies that deal with economic planning-we must really take an-
other look at the way we plan our country, because the revolution on
the farm, the revolution we saw in Appalachia, are just technological
revolutions that are going to continue, unless we start to look ahead
5 and 10 years and plan the movement of people, and the movement
of industry, and utilize incentives of some kind, whether they are
tax incentives or grants is a question, and I don't think it makes a
lot of difference what you mean, whatever the most effective tool is.
But we have got to start to look ahead in this country.
The `worst thing you will find, Mr. Congressman, is that as the poor
black continues to move in and proliferate in our inner cities, industry
is moving out of our inner cities into the suburbs and smaller cities.
When I was the Under Secretary of Commerce we believed firmly
that we have got some serious new unemployment problems ahead
of us 5 and 10 years hence in the inner cities because of the changes
that are taking place.
Now, where in Government is this kind of thing being planned?
Where is it being coordinated? Where are we encouraging in our man-
power programs, for instance, the movement of people to where the
jobs are? Nowhere.
PAGENO="0289"
285
I was on the task force. with Secretary Wirtz 3 years ago looking
at the U.S. Employment Service. If there is one service in this coun-
try that needs complete revitalization in terms of planning and pro-
gram, it is this service. And I know Secretary Wirtz would agree
with me on it. All of these tools somehow were not fitting into place.
Arid I certainly don't have all the answers to it. The only tools that
I have got in the SBA I am going to try to use. Because I believe if
we don't serve social purposes we are not serving economic purposes.
And for the purpose of the development of rural America the 502
corporation you have given us is probably the most important tool
in the country.
I will assure you that we will aggressively approach this every
place we can.
The CHAIRMAN. I think this committee will be unanimous in stating
that we applaud you in saying you will be aggressive in the utilization
of the 502 program.
Mr. S~niED. Mr. Administrator, in the past the SBA in my State has
had a director who has worked hard over the years to involve bank-
ers into the program. And one of the difficulties that was encountered
was the redtape and timelag that inevitably came up. After one or
two endeavors, the banker would throw up his hands and say, he wants
no part of it. I am glad to see that you are now going to the
blanket approach, and hopefully down through all the ranks, of get-
ting bankers to understand what they can do and what you can do
to help them do to hel~ this program. This, I think, is the most vital
thing in the whole picture.
But I hope that in doing this you keep in mind businessmen can
lose their enthusiasm as quickly as it has come if interminable delays,
redtape, and harassments of this sort are going to be their experience.
Mr. SAMUELS. Congressman, I have been at two hearings this morn-
ing. Did I mention the homework we are doing in blanket guarantees
to you, that we have really cut the redtape in the SBA? And this was
started before me by Mr. Moot. And I have aggressively carried this
on. Because I firmly believe that we have got to make it businesslike
for banks to do business with us. And today banks can do business
with us under our new guarantee, blanket guarantee, in a way which
is not much different than a commercial loan as far as they are con-
cerned. And the delay is no more than 5 or 10 days in the SBA office
on a loan that they make and that we guarantee. And it may be
possible a year from today, after the banks are better trained, that
we can let them do it even on their own.
So we have simplified procedures. And I have been working with
the ABA. And Mr. Logan Hendricks of our staff, who is a very tal-
ented gentleman, and who is one of my associates, has been working
with it. And we have simplified the working with the ABA themselves.
And the ABA are now convinced that we have a procedure that is
easy for the banks of America to work with.
Mr. STEED. I am delighted to know this, because it appears to me
that this is the one danger that we must avoid in order to keep this
segment of our economy working with you. I know of instances where
delay and redtape have dampened the enthusiasm of commercial
bankers to participate with SBA programs.
95-193-68-19
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286
Mr. SAMTJELS. Mr. Chairman, I would like to get one point in the
record in relationship to the 502 corporations.
In the last 15 months, 61 percent of our 502's have been made in
towns under 10,000. We will increase the investment in 502's from
$50 million to about $75 million this year, which is about a 50-percent
increase. We are moving very aggressively, Mr. Chairman, in this.
We are not going as fast as you would like us to, but we are going
reasonably fast.
The CHAIRMAN. Mr. Broyhill, any questions?
Mr. BROYHILL. Not right now.
The CHAIRMAN. Mr. Addabbo, further questions?
Mr. ADDABBO. Yes, Mr. Chairman.
First, may I compliment you on your stand. And I know you bring
quite a bit of experience to the Agency. I am happy and proud to
say that you are a resident of our great city, and a great citizen of our
State.
You have left a comfortable spot in business because of your dedica-
tion to public service, and you are now dedicating yourself to gov-
ernment, and more important, `to people.
In reference to the new programs, is there any similarity-or what is
the difference between this program and the former SBDC program?
Mr. SAMTJELS. The SBDC program was run by the poverty group.
And the program was that the poverty group had a piece of it and
SBA had another piece of it. What we have got today is just a better
planned program, all in one algency. And I am hoping when the pov-
erty bill is passed that the money that the SBDC had will come to us.
At the present time I have no funds `to support SBDC in my `budget.
But if that impact money comes over to us, we will be able to support
some additional service, but coordinate it in a businesslike ~ay into
the management and effective `decentralization of SBA activities in
every city.
Mr. ADDABBO. In your discussions with the American Bankers Asso-
ciation, have they given you any dollar figure as to how much com-
pensatory capital they will set aside?
Mr. SAMUELS. Every `city I have been to-and I think `the ABA
as a group nationally d'idn't want to go by the expdrience of other
financial institutions by putting a big figure in-in every city I have
been in the banks have committed `themselves when fignres have been
mentioned-and there are some in my testimony to the Proxmire corn-
mi~ttee today-figures that are ample to support the kind of `business
development `that we need. The banks are not going to lack for funds
in supporting us. Our problem with the banks, Mr. Congressman,
is whethe'r they will uncle~rstand and be able to wear two hats when
making a SBA loan and a r~gu'lar loan. Because this term "com-
pensatory capitalism" is a new principle for them.
For instance, I sat with the leadership of the Bank of America,
who really gave me a speech on compensatory capitalism and their be-
lief in the fact that the banks had to loan money in an entirely differ-
ent way to the inner cities, which i's really what I have `been `trying to
sell `the banks across the country. Bu't ho'w do' they get that down
to their loan officers? And we are working on new procedures to help
the banks train for an entirely different `approach to financing.
PAGENO="0291"
287
Mr. ADDABBO. Iii other words, as of this moment, they haven't ac-
cepted this compensatory approach?
Mr. SAMIJELS. They have accepted it. There is a difference be-
tween accepting by the president and the chairman of the board and
executing by the loan officer who sits in that individual bank.
Mr. Congressman, we had the same problem in the SBA when yOu
gave us the EOL loans, and you said that we had to take a different
compensatory approach to the minoi~ities and the disadvantaged. We
had a training program to go through. Now, in the city of Buffalo the
banks have gotten together and have gotten a separate loan offic~r
to handle minority or disadvantaged loans. And they meet once a
month and look at it in an entirely different way.
And we have got a training program. That is my job as head of the
SBA, with the president of the ABA, to help train the banks of this
country to the new principles of compensatory capitalism.
Mr. ADDABBO. Did they give you any timetable, now that they have
accepted the idea, as when they would be able to have the machinery
ready to put it into operation?
Mr. SAMIJELS. The fact that every month now the participation by
the banks is going up indicates that each month we are working out
participation city by city.
Mr. ADDABBO. Have any loans been granted so far?
Mr. SAMtTELS. Hundreds and hundreds have been granted, and they
are being granted every day. I think the encouraging thing is that we
are finding ways to do this in every city of the country. New York
is an especially difficult problem, because of the large number of branch
offices. And what we have got in New York is a procedure where, if it
falls down here, we go all the way back up to the vice chairman of
one of the banks who helps us. So we are cutting through the red-
tape even in a city like New York, which has not been a great sup-
porter of this program.
Mr. ADDABBO. You call it compensatory capital. Are they receiving
any additional compensation from the Government and the SBA?
Mr. SAMIJELS. None. But what they are getting is, we are taking
90 percent of the risk. We are leaving a little risk with the banks, but
we are taking 90 percent of the risk. So this really is Government
doing what the Government should do in terms of our social and eco-
no~nic interests, and the banks doing what the banks can do better.
This is what I think is a creative way of the Government letting the
private sector do something that they can `do~better than we can.
Mr. ADDABBO. I believe that even prior to this program that on all
SBA guaranteed loans the maximum was 90 percent; am I correct?
Mr. SAMIJELS. We had some 100-percent loans under EOL's. I am
against 100-percent guaranteed loans to banks, because I think if they
aren't willing to take 10 percent of the risk we probaibly shouldn't
take the loan in the first place.
Mr. ADDABBO. The reason I am going into it at this length is, we have
found that we have, promised to minorities many times too much, and
we cannot deliver. And these programs sound great. And as I say, I
would love to see the closed businesses in my district reopen where
they can, And we had an SBA office in my district. But when they
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288
went there and took applications, that was the end of it. And you had
greater frustrations.
Mr. SAMUELS. Mr. Congressman, I said in 3 months I have doubled
the rate of minority business loans that we have made in this country.
Now, I think that is an indication that we are moving up. We have
got a long way to go. I am trying to provide some new businesslike
approaches in every city as to how to approach this problem. And
New York is a particularly complicated one. But I think you will find
that we have probably doubled in New York also in the last 3 months.
The CHAIRMAN. Further questions, Mr. Addabbo?
Mr. ADDABBO. One further question, Mr. Chairman.
We spoke of involving industry. Has industry become involved in
this in any way?
Mr. SAMUELS. Industry is becoming involved city by city. What we
have done, for instance, in your city of New York is, the Urban Coali-
tion has become our partner for the management development service
in New York. And the Urban Coalition, together with ourselves, will
be the vehicle upon which loans are made, with the Urban Coalition
organizing all the industry to provide us technicaJ assistance. There is
not one minority loan made in New York City today without a man-
agement plan. Every single one is supported somehow by one of the
managerial assistance programs which have proliferated in the city
of New York. We are just putting some management organization
to it.
Mr. ADDABBO. I understand in New York there are some adjust-
ments being made in the SBA area regional office. Does this require
additional personnel?
Mr. SAMUELS. Certainly there is in every-I make it very clear to
you, Mr. Congressman, that one thing I am going to get is, I am going
to have an effective operation. I require people that are serving me to
commit themselves to accomplishing the objectives I have set within
the program. And where I feel it is necessary-and I think this is a
prerogative that Congress will allow me-to make changes in manage-
ment in terms of accomplishing the objectives, this is what I am going
to do. I haven't been afraid to do this in my business, and I am not
afraid to do it in government.
Mr. ADDABBO. Are they better experts that you are bringing in?
Mr. SAMUELS. I would like to feel that they are.
I might say, Mr. Chairman, that New York has been one of our
poorest areas in SBA activity. New York is one of the major areas
of the country in regions. And yet it provides, for instance, one-third
of the SBA loans that the southeastern part of the country provides.
And I could go down a whole list in your particular district, which I
am sure concerns you, of the failure to service that area in a way that
it should be serviced. And I am committed to do it.
Mr. ADDABBO. That is why I am asking these questions. We have had
poor loan experience there.
Mr. SAMUELS. And that is why I have made some managerial
changes, and am importing some additional people to see that I do the
job that you want me to do in your area.
Mr. ADDABBO. My experience with the personnel has always been
quite satisfactory and I believe them to be highly qualified.
The CHAIRMAN. Mr. Horton.
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289
M~. HoRToN. Mr. Administrator, I want `to commeiid you for utiliz-
ing the private seCtor. What you are doing in this area is outstanding.
I also want to commend you and the agency for acting as a catalyst.
You are making a tremendous contribution to progress in this coun-
try. I have, sensed, as you have, that there is a wealth~ of enthusiasm
backed by a willingiiess to perform on the part of the private sector.
We need some agency in Government that will act as a catalyst, .that
can utilize this and direct it. Wha.t you are doing in this area is very
commendable. It is going to make a major contribution.
As you know, I am familiar with the work in the Rochester area,
which is in my congressional district. I can attest to the fact that pri-
vate industry, the banks, and the SBA have been working with the
black community, and with those representing the black community,
to foster black ownership of small businesses. You were in Rochester
this past week, and SBA helped to develop such a business through
a cooperative effort with Eastman Kodak and the Urban League.
Small Business has been very cooperative there. I want to commend
Mr. J. Wilson Harrison of the Syracuse office for the work he has done
in this particular area.
He and other officials of the office in Syracuse have been working
very closely with Xerox and the FIGHT organization in Rochester
to set up FIGHTON, which will be another privately owned enter.
prise in the inner city.
I can personally attest to what is being done there. I feel, as does
my coll~ague'from N&w York, that there has not been in the past suffi-
cient activiiy by SBA in New York State, and parti~ularly in upstate
New York. I want to commend you for increasing your efforts in that
area.
As you also know, my congressional district not only, includes the
inner city, but also inciudes the rural area of Wayne Couñt~. So, I am
very much interested in the 502 loan program. There has been sonic
interest, but I think that we can do a great deal, more in that area.
I want to ask `you about small. business problems uI procurements
by the Department of Defense. I note that small business awards de-
clined from 20.6 percent in 1967 to 18.8 percent of total DOD procure-
ments in 1968, and the percentage of set-asides to small business has
declined from 4.7 percent to 4.4 percent of their procurements in 1968.
Prior to your administration, ther.e were SBA representatives in
the; major ~Department of Defense procurement centers. This `~ccouñted
in large measure for the sn~il b~isiness set asides by the Department
of Defense. It was decideçi, over'ôur objection, th~t `these representa-
tives would be withdrawn, and that the small businessman would
have to depend upon a Department of Defense employee to provide
this service. A decline in small business set-asides was the result.
Now, I am concerned, as I know you are, about small busjness getting
Government coutract~, and particularly through the Department~ of
Defense procurem~iit set-asides. 1~That have you done and what is yOur
policy with regard to set-asides?
Mr. SAMTJEL5. I thought, Congressman, I would ask Mr. Irving
Maness, who is in charge of this in our department, to answer this
specifically to you.
Mr. MANESS. Mr. Congressman, as you have alluded, just recently
we reinvolved the PCR's. We sent representatives to participate in the
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290
largest installations in order to increase both the set-asides and the
awards to small business. As you know, this program just commenced
a few months ago. We now have 33 men located in the largest
installations.
The figures you quote are the figures through fiscal year 1968, which
ended in July 1968, and does not carry the new figures in August and
September. We hope that, having located the 33 men in the largest
military procurement installations, that there will be an increase in
the percentage of procurements going to small business.
As far as the set-asides are concerned, we believe there will be an
increase due to the procurement center representatives' activities.
Mr. HORTON. Could I interrupt there, Mr. Maness? These representa-
tives that you are talking about are employed by the SBA and not by
the Department of Defense. Is that correct?
Mr. MANESS. These 33 men are SBA employees. They are PCR's,
procurement center representatives, employees of SBA.
The CHAIRMAN. Would you yield?
Mr. HORTON. Yes, sir.
The CHAIRMAN. Do you attribute this decline in SBA contracts and
set-asides to the fact that these personnel were not available to SBA
during this period?
Mr. MANESS. Mr. Chairman, I attribute the major decrease to the
failure to have procurement center representatives in these installa-
tions.
Mr. HORTON. Mr. chairman, I want to applaud the agency for going
back to this POR system. It will make a tremendous difference.
Mr. CONTE. The reestablishing of that program was at the urging
of this committee.
Mr. HORTON. That is right.
The CHAIRMAN. We hope that here again the trend may be reversed.
The decline has been rather dramatic.
Mr. HORTON. It certainly has. I am glad to see that the system of
procurement center representatives is now being reeffected.
I would like to indicate to you, Mr. Samuels, my support for what
you are doing, and wish you well.
Mr. SAMTJELS. Thank you very much, Congressman.
The CHAIRMAN. Mr. Dingell, any questions?
Mr. DxNo1~u~. Thank you, Mr. Chairman.
Mr. Administrator, I would like to commend you. You appear to be
moving into areas that need attention in a vigorous and effective and
forceful fashion. And this is most pleasing to me.
I am of course happy to see that you have with you this morning
Mr. Maness and Mr. Greenberg, who are good friends of mine, and
I think outstanding public servants, and an old friend of mine from
Army days by the name of Murray Kramer.
I want to talk to you about some of the things you have done. I
noted with considerable approval that you have moved in to eliminate
some of the arbitrary exclusions from loan capability and capacity
that previously the SBA had imposed on itself. Some of this has been
regarded as politically hazardous, such as in the case where you are
making loans to businesses which engage in the sale in one fashion or
another of alcoholic beverages.
Mr. SAMIJELS. I have taken politically hazardous steps before.
PAGENO="0295"
291
Mr. DINa~E1.. I am aware of this. And I think that this is desirable,
because I don't like government by regulation where the Congr~ss had
been silent on matters.
I would like to inquire, if I may, and perhaps elicit your views, as
to what you propose to do now with regard to loans to small news-
papers. We have large numbers of small newspapers around this
country thnt are excluded arbitrarily from participation in SBA loans.
Mr. SAMTJELS. I really haven't taken a look at that, Congressman.
I will at your suggestion. It seems to me that unless there is some dif-
ferent feeling by the Congress, that the development of small news-
papers in rural America and suburban America ought to be some-
thing that we ought to encourage as long as we in no way interfere
with the freedom of the press. And I will be glad to take a look at that
in terms of your suggestions.
Mr. DINGELL. I would be most pleased.
I wanted to comment on the set-asides, but I see that has already
been commented on by some of my colleagues.
I want to discuss your funding situation. Almost every Government
agency that I deal with `these days is faced by severe, oppressive limi-
tations on funds. The portion of your funds that I am most concerned
with would be the area of your funds available for loans to business
directly, your revolving fund, and things of that kind. Can you tell
us what the status of that fund is ~
Mr. SAMTJELS. The revolving fund-we have funds to 1970 in our
revolving fund. And then I will have to come to Congress again for
support for our revolving fund in 1970. But under the accounting pro-
cedures that we have-I have very little direct money available, but
under the accounting procedures that we have I have a lot of oppor-
tunity to fund guarantee loans. In fact, we can move up considerably
in the total number of loans. And that is how I hope to move up from
$800 million last year to a billion or a billion, one hundred million this
year from guarantees out of the banks.
I would like to say that we are obviously moving to some entirely
new thrusts in the agencies which require an entirely different kind of
utilization of our manpower in the field. And nobody in our agency
can be hired without Mr. Greenberg's or my signature, not even a sec-
retary. And our attempt is to meet the needs of Congress, the desires
of Congress, and to make effective use of our personnel, and at the
same time begin to understand that we have got some new thrusts to
the agency that require some support.
I might say at this time, as difficult as this is, I am hopeful that we
can successfully execute the responsibilities you have given us with
the limitations that Congress has provided us.
Mr. DINGELL. I am pleased to see the shift of emphasis. But I am
still troubled about your direct loan program. My experience has been
that you have a diStinct shortage of funds.
Mr. SAM1JELS. We have a distinct shortage. And therefore if we
don't get the banks involved-and I made it clear-I think you came
in late, Congressman-that the first duty that I had with the SBA,
if I was going to he effective, was to find new sources of money. And
I think we found it in the ABA. And we are getting that kind of
support.
PAGENO="0296"
292
I might say that this afternoon we are going to make an announce-
ment with Congressman Patman on the way we are going to support
an expansion of the SBICs, using funds from, other financial institu-
tions.
So I think what you have really given me is a. new responsibility.
When I first came in the SBA it was, where was I going to find the
capital, ~the money to operate it. And we are `going to the private
iiistitutions. And I assure you; Congressman, this is the businesslike
way to approach the matter anyway.
Mr. DINGELL. The question I `ha~ve, though, I do run into a number of
instances back home with ~constitiients, businessmen who do find them-
selves unable to get direct ~loans, not because they don't qualify, but
simply because from time to time there will be a freeze on, or there is
a shortage of direct loan money. I have found that the SEA officers
back home are extremely cooperative in this area, and they do their
level best. But the information I have been able to gather from my own
scrutiny is that a lot of the difficulties that come from the direct loan
program stem directly arid entirely from a shortage of funds available
to you to carry forward this program2 a lot of times because of
budgetary freeze, or something of this kind. And I would like to get
whatever `comment yOu can give us at this time that would be `helpful
in this regard.
Mr. SAMUELS. Mr. Congressman, this will continue, and I see no `help
certainly in terms of the present restraints put on us by Congress,
looking at next y~ar, that we are going to have more direct money.
Therefore, it is my job and my responsibility to get the banks in your
district deeply invo'lv~d. But' in reality, `if we are willng to `take the
guarantee up to 90 percent of `the loans of the banks, the banks should
be wiling to take a i~easonabie risk.'
What I ~m sayhig tO you Congressmau, is that I hope we will be
able to service yoU better, because we are moi~ing from $800 million to
over a billion dollars t'his year, and I hope over a billion and a half
next year, and we will be able to service you better, despite the fact that
we' have less direct mohey, with' a vigorous effort `to get the banks
involved as our partners.
Mr. DINGELL. You are still going to have a `shortage of direct loan
funds, which is g ing to hurt? `
Mr. SAMUE'LS. It shouldn't necessarily hurt if the `borrower can get
the money' from the hunks directly, as long as `he can get the money.
And the same kind of criteria thAt we use should' be criteria that the
banks would accept, particularly if we are' going'to `guarantee up to
90'percent of the loans.' ` `,
Mr. DINGELL. Let me ask you' this: Are yorir procedures for `the
guarantees going to `be' substantially' similar to those Of SBA pro-
cedures?
Mr. SAMUELS. Very similar, in terms of reducing paperwork, to SBA
procedures.
The CHAIRMAN. Further questions?
Mr. DINGELL. No further questions.
The CHAIRMAN. Mr. Morton.
Mr. MORTON. Than'k you, Mr. Chairman.
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293
Mr. Samuels, I want to congratulate you on the impact you have had
on this committee. I have seen some members here for the first in the
2 years that I have been on the committee.
Mr. SAMUELS. I hope I have had somewhat of the same impact on
doing the job for you.
Mr. MORTON. A couple of housekeeping questions. I know we are
all trying to operate the Government as efficiently and frugally as we
can. I notice you have been keeping your building open on weekends.
Is a 24-hour operation necessary?
Mr. SAMUELS. Mr. Morton, you come there on Saturday, you will
find me all day there on Saturday, and a lot of our people there all
day Saturday. I don't know how we can do this new thrust without the
involvement of our top personnel. I might say that one of the great
and pleasing things for me as a public servant down here for my 11th
month is the tremendous amount of support that the public servants
in Washington are giving me in working considerably over the 40-
hour week.
Mr. MORTON. I don't begrudge you a bit, considering those of us in
Congress who work all the time.
Mr. SAMUELS. Congressman, actually, the office is open all day Sat-
urday, but on Sunday when I come in you have to have a key to get
in the building. There is no staff or anybody there on Sunday.
Mr. MORTON. I guess you know the cost figures when you are open
on weekends. Your guard figures are $38 an hour, and your air-con-
ditioning figures are around $1,000 a day.
Mr. SAMIJTALS. Mr. Congressman, I have been there at night, and I
have been very upset because we turned the air conditioning off at our
building at 7 o'clock at night. And you will find a lot of us there past
7 o'clock. You can call me.
Mr. MORTON. I probably will.
I am concerned about the realinement of the thrust of the SBA.
You have clarified this to an extent, but as I first understood it from
the press releases that I have seen of the meetings that you have had,
the focus was going to be on minority problems of the inner city. The
implication was that priorities were going to change. Are you or are
you not changing the basic system of priorities so that the rural areas
are going to lose proportionately the privileges and economic assist-
ance they have formerly received from SBA?
Mr. SAMUELS. Congressman, I would like you to know that what
we are doing is adding on, not anything else. In fact, one of the things
that I am constantly doinig, which I did in my company, is taking a
look at the way we use our management and our people. Because ob-
viously if I am going to just add on, we have got to make a more
effective agency, if we are going to have more attention and more
people in terms of the minorities, we are either going to take it away
from what we are doing, or do it more efficientry. And I like to feel
that we are moving toward efficiency and not neglecting an important
part of the country.
Mr. MORTON. Is one of the important criteria for making a loan,
whether it be done direct or through the bank, as far as you are con-
cerned, the number of jobs that this capital will produce, whether it
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294
is under white ownership or black ownership or any other kind of
ownership?
Mr. SAMIJELS. In reality, Congressman, our decisions on whether we
make a loan are really based on the economy of that loan, whether we
feel we are going to get our money back and whether that business can
make a profit. That is the basis upon which the SBA has made their
loans.
I think our section 502 corporation, however, really understands the
social needs of the economy, jobs in the rural parts of America. And
therefore, indirectly, we are involved in jobs, but not directly. And
when we move this agency, with your help, from supporting not $800
million but a billion and a half dOllars worth of development of small
businesses in the country, rural and in the inner cities, we are creating
jobs.
Mr. MORTON. What is the total amount of money that the banks have
loaned to date under this 90-10 ratio guarantee?
Mr. SAMur~s. I think you would have to take a period of time. Right
now this month we expect to be close to 55 percent of our total loans
will be loans which the banks will be picking up.
Mr. MORTON. How much is that?
Mr. SAMUELS. Well, in terms of dollars we are loaning-in one part,
53 percent, the private sector came up with about $50 million in the first
2 months of the year.
Mr. MORTON. Now, most banks look at their loan deposit ratio as an
important indicant of their condition. When you go to a bank with a
proposition that you share with them on a 90/10 basis-and there is
apparently an eagerness on the part of the bank to share this, because
they do get guarantees that they wouldn't get in the ordinary money
marketplace-are you seeking money that these banks would put into
the economy over and above what they would put into the economy if
this program did not exist, or are these loans that the banks are
putting into the economy through the SBA instead of through their
normal managerial channels?
Mr. SAMUELS. Well, I would think it is a little of both, Mr. Congress-
man. I would say that if the banks are limited by commercial loan
money, that the money they put into this part would have to come from
some other place. On the other hand, the amount of money we are talk-
ing about is pretty small iii terms of the commercial loans of the coun-
try. If we get to a billion, $100 million this year, and the banks come
up with 50 percent, or half a billion dollars, it is still pretty small in
terms of the total commercial loans of the country. I don't think it is
going to have appreciable effect on any other part of the economy.
Mr. MORTON. This is important, and it is important for the record
that you state that. I agree with you that the question has been raised
as to whether or not the SBA really, in effect, is underwriting a bank
condition. The answer in my book is that it is not, because it provides
such a small fraction of the total collateral.
Mr. SA~UELS. Right.
Mr. MORTON. As far as the minority ownership program is con-
cerned-and this certainly is a wonderfully ambitious one-what
kind of monitoring are you going to have of management develop-
ment? You brought in the Urban Coalition and Talent. What is going
to happen if these things start to go sour? How quickly are you going
PAGENO="0299"
295
to know it? How much personnel is it going to require on your part to
involve yourself in monitoring the condition of these new businesses?
Mr. SAMUELS. First, let me say, we don't have additional personnel
to put on. This is the utilization of the private sector program area
by area.
Second, this is one of the advantages of working with the banks, be-
cause banks tend to have a closer relationship individually than we
can have as a Government agency.
Third of all, if the program works the way I hope, Congressman,
every single minority will have a businessman assigned to him who
will keep us constantly informed as to the progress of that business
and the support that he needs. And this is really the kind of support
I think it is going to take.
Mr. MORTON. I represent a rural area in which the largest town is
some 30,000 people. Can you honestly say that the thrust of the Sinali
Business Administration is going to be such that areas like mine are
not going to be penalized by the new policy?
Mr. SAMUELS. I can say, certainly, they wouldn't be penalized. I
might say, Mr. Congressman, that they don't have all the tools that
they think they ought to have in terms of economic planning even
today.
Mr. MORTON. I agree with that.
Mr. SAMUFLS. I think today in Washington as far as I know the
really only viable tool-the $50 million that the EDA has is peanuts
compared to what I think we can put out in 502 corporate support.
And these kinds of thingsL~~~what the EDA has-and as you know, I
was Under Secretary of Commerce-it can go iiito a city and do a
technical analysis, economic analysis, it can really bring the people
together to start to think about their economic planning, but it has no
real support for it, $50 million.
It can build sources, but after you have built the source you have got
to plan, how do you bring the industry in? It really doesn't go far now.
And thus the 502 corporation is really an important part of this whole
vehicle. And I might say that some of the areas of the country have
used TV effectively, and some others haven't and I have asked our staff
to write an analysis up for all of the Congressmen of this country to
give them information encouraging the utilization of this program
in their specific areas.
Mr. MORTON. Mr. Administrator, you have mentioned planning
several times today, and you have said that you think this is the great
weakness, that we don't have long-range guidelines that are set well
enough in advance to actually prevent all kinds of bad things from
happening to our social and economic structure. I agree with you 100
percent. What agency of government do you think-and you have had
some broad experience in government-should be totally involved
or should be most involved in this planning effort?
Mr. SAMUELS. Well, I am not sure that there shouldn't be a realine-
ment of agencies, Congressman. I think economic planning ties in not
only with the economy of the country, but also the manpower of the
country. And the U.S. Employment Service, you know, is for the biid~.
It is about 30 years behind any kind of reasonable manpower planning
with a computer. And I can go into the city of New York and find out
PAGENO="0300"
296
in 10 seconds whether I can get an airplane from Chicago to San Fran-
cisco, and I can't go into, in this computer age, any U.S. employment
agency and get any kind of information as to where I should go for a
job in the country. Our utilization of manpower all ties in to a much
better planning cycle. I am an engineer by profession. And we have
had more technical change in 15 years than the 1,750 years after the
birth of Christ. And we are still trying to deal with planning in this
country like American business did 100 years ago. I did better planning
in running my $80 million business than the Government does in
running the economy of the country.
Now, we have just got to begin to bring the word "planning" into
our thinking, and we have got to have some central agency in Wash-
ington that is really beginning to do planning leadership. In the end
it has got to be done locally, because there are some technological revo-
lutions taking place in all of the areas of the country, the Appalachian
and the problems of the South can take part in other industry tomor-
row, and we would just be caught with our pants down as we are
almost every time in one of these crises.
Mr. MORTON. You would support a commission similar to the Hoover
Commission to try to come up with a reorganization of the executive
branch so that planning would have its proper place?
Mr. SAMUELS. We have got to begin to bring planning into our
thinking. We operate by crisis and not by planning.
Mr. MORTON. There are a few of us who are trying to bring the
Legislative Reorganization Act, which passed the Senate overwhelm-
ingly, out on the floor of the House so that we can debate it and look
at it. Here again is an effort to bring the Congress into the 20th century
and out of the horse-and-buggy era. I agree with your comments on
planning, Mr. Administrator. But for Heaven's sake, let's not be
guilty of going after one thing, like putting a man on the moon, and
then all of a sudden, because there are some economic changes, wipe
that whole program out and do something else. Let's not jeopardize
the efforts that we have made toward stabilizing, as the gentleman
from Oklahoma said, the population through the development of
capital job-producing structures in our rural areas.
I hope that in our overwhelming desire to solve the ghetto problem
you don't, in effect, neglect the area where I think, long term, the
solution lies.
That is all I have. Thank you.
Mr. SAMUELS. Mr. Chairman, I think that is important not only from
the standpoint of the economy but also the quality of the life.
The CHAIRMAN. Mr. Burton, any questions?
Mr. BURTON. Thank you, Mr. Chairman.
Mr. Samuels, I would just like to underscore what several of our
colleagues have said about Project Own. Certainly, the objectives are
desirable. My voting record as far as civil rights and some other
legislation would pretty well meet with your approval. I am worried
and concerned, however, that the project may more "ghettoize" the
ghetto than it is now. I would hope that would not be the case. One
of the dangers in the program is that we won't know for possibly 5
or 10 years what the impact of this is going to be. I would proceed
with caution because, if you are going to take a minority community
and build an enclave out of it, businesswise, socially, racially, and
PAGENO="0301"
297
every other way, that isn't the direction some of us want to go. It is
segregation in reverse. Some of us think that what the races need
is more integration and more communication.
It seems to me that the thrust of the program-and I have your
press release here in which you announced what you were going to
do-is toward discrimination in reverse. It is a program that is di-
rected at the minorities. It will make some people of the majority
more upset than they otherwise would be when they see this article in
the Post that an agency of Government is going to go out and direct
its attention solely to minorities.
I would like to have your comment.
Mr. SAMUELS. First of all, I think we have covered that our effort
is not certainly solely to minorities. It is an emphasis.
The second thing, Mr. Congressman, is that I would love nothing
more than to face a country that was integrated and not segregated.
And I would like to be part of any kind of positive program that
we could do to bring that about; I think the reality is, they-the
point that I have made and the point that I would like to emphasize
is that we have a segregated inner city. And all the data indicates that
this is a movement of the country, at least for a short period of time,
that we are going to face. And building the apartments and the parks
in the inner city without building the economy and the stores and
the services in the inner city just does not make any sense.
And if you have been-and I am sure you have-in the inner cities
of America like I have been, and you have seen the boarded up stores
and the bombed out stores, I know you recognize that the reality is
that they are not being rebuilt and they will not be rebuilt without
more minority participation. I think the reality is that this has to be
the first step in developing the country, and maybe the second step
which the country may be more willing to face 10 or 12 years frOm
now to move to a more integrated society.
Mr. BURTON. We can agree on the realities of the cities.
I recognize the problems. One can't drive through the streets of
Washington and not recognize that there are problems.
I just want to say for the reco~'d that I have some concern about
the direction of the program. If it is going to be a "segregated" pro-
gram, I don't think it is good.
Mr. Samuels, I would like for you to repeat as best you can to the
members of this committee the statement that you made before the
present majority party platform committee regarding tax incentives
for small business.
Mr. SAMURLS. Mr. Congressman, I am a great believer in incentive.
I~came to Washington as a great believer in tax incentives. I think we
need incentives to move people where they should move and the
economy where it serves the interest of the country. The differential
is between tax incentives and grants. What worries me about tax
incentives is that they don't show on one side of the ledger and they
are just as expensive as if they were a grant on the other side. As a
businessman I would like to see what I spend. And if tax incentives
have the kind of controls in them to be sure that we know what we are
spending and how effective we are spending it, I am for tax incentives.
Otherwise, I think a more effective tool very often is grants. And that
is the only differential I made. I could believe that the Federal Gov-
PAGENO="0302"
208
ernment has the responsibility and opportunity to use its economic
tools to move the economy in the way which serves the social and
economic interests of the country.
Mr. BURTON. Have you had an opportunity to read the identical
bills that have been introduced by the chairman of this committee,
Mr. Morton, Mr. Corman, Mr. Patman, Mr. Horton, Mr. Steed, and my-
self regarding tax incentives?
Mr. SAMUELS. I am not sure that I have in detail-
The CHAIRMAN. We want you to look at it a little more carefully
instead of just glancing through.
Mr. SAMUEL5. Thank you. I got that message, Mr. Chairman.
Mr. BURTON. I would appreciate it if your staff would analyze these
eight bills, and give us in writing your opinion and analysis of them.
(See p. 299 infra for letter from Mr. Samuels to Chairman Evins.)
Mr. BURTON. I would like to say that in the future, if you have any
comments to make-and I am. sure I speak for members on both sides of
the Chair-I would like you to make them before this committee and
not before a platform committee.
Mr. SAMUELS. First of all, I appreciate the opportunity of appearing
before this committee that has given us the kind of tools that make it
possible for me to execute my job. And I would be glad to communicate
with the committee any time you will allow me in the future.
Mr. BURTON. That is all.
The CHAIRMAN. Mr. BroyhilL
Mr. BROYHILL. I do share the concern of Mr. Burton, that we do not
change the SBA program that has been operating in the rural area.
Mr. SAMTJELS. Particularly good in your State.
Mr. BR0YHILL. The 502 program, particularly, in our State has
been fabulous. I think the last time I checked it had created some 8,000
or 9,000 jobs. This has prevented migration of families to the cities
and has alleviated an already troubled situation.
Do you favor the retention of SBA as an independent agency, or do
you personally feel that it should be a part of the Department of Com-
merce, as has been advocated by many?
Mr. SAMUELS. It seems to me that I favor, certainly under. the present
organization of the Government-and I don't negate the possibilities
as we discussed earlier of some restructuring of economic planning
and programing later-but certainly today this agency can only be
effective as a separate agency with the tools that you have given us. I
would not look with favor to encouraging its involvement in any
other agency in the Federal Government.
Part of my effectiveness in being able to execute my responsibility
is the fact that we are an independent agency and we have the kind
of support in Congress that we have today.
Mr. BROYHILL. Thank you.
The CHAIRMAN. Mr. Administrator, we want you to look with a
little more favor on this tax incentive proposal. You talk about the
banks' participation because of the incentives that are generated with
the little risk they take. Why not interest industry in little towns and
rural areas because of tax incentives? This is not available to them.
When you have a tax incentive you have an incentive. When you get
a grant you lose some incentive. It becomes welfare.
Any further questions, gentlemen?
PAGENO="0303"
299
Mr. MORTON. Mr. Chairman, we didn't get into the SBIC program
to any extent except as the Administrator alluded to it in his remarks.
Is this program a forward looking program, or do you feel that it
has run its course? What is your evaluation of the SBIC program?
It seems to me that here again it is possible to put to use an awful
lot of talent in your managerial assistance programs, but I haven't
heard you refer to it except once.
Mr. SAMIJELS. Congressman, let me say to you that until we solve
the financial problems of the SBIC's, how are we going to get money
into them, the SBIC's are standing still. I say the only approach to
providing money is by going to the other financial institutions to put
in money for SBIC's. I think we have got that part solved. We are
hoping to get the support of Congress for the tax changes in the
SBIC's. It will be very discouraging if we do not get this support.
At the same time I am having problems with the SEC. It seems
to me that the SBIC's are standing still. It seems to me that there is
a tremendous need and a potential of using the SBIC's not only to
expand small business, but also to provide incentives so the SBIC's
can support minority businesses or other social interests of the country
on a profitable basis.
I really have this under investigation today. I would like to make
some additional recommendations on this, because I think we have a
vehicle that we have only begun to use and which I think we ought
to use much more effectively than we have, and I am trying to make
the changes in it to go in that direction.
Mr. MORTON. Thank you.
The CHAIRMAN. Mr. Administrator, you may extend your remarks
on the SBIC's for the record and on these other subjects if you so
desire.
Mr. BURTON. May I have your assurance, Mr. Samuels, that you
will give each member of the committee your personal observations
and opinions on this tax incentive bill?
Mr. SAMUELS. You certainly may. I will appreciate the opportunity
of doing this.
(Mr. Samuels subsequently wrote to Chairman Evins as follows:)
TJ.S. GOVERNMENT,
SMALL BUSINESS ADMINISTRATION,
Washington, D.C., October11, 1968.
Hon. JOE L. EVINS,
Chairman, ~eZeot Committee on $maflBusiness,
Hoase of Representatives,
Washington, D.C.
DEAR MR. CHAIRMAN: During my appearance before your Committee on Octo-
ber 1, there was brief discussion of similar bills introduced by you (HR. 14600),
by Congressman Burton (HR. 9032) and by other members of the Committee to
provide tax incentives for the establishment of new or expanded job-producing
industrial and commercial establishments in rural areas having high proportions
of persons with low income.
In the case of H.R. 14600, for example, the Secretary of Agriculture would
designate economically deficient areas, in accordance with standards prescribed
in the bill. A business enterprise which established in one of these areas an oper-
ation creating at least 20 new jobs for persons of low income would, under certain
conditions, be eligible for increased tax credit against its investment in plant
and machinery and for accelerated amortization benefits.
On questioning at the Hearings, I offered some general comments on the merits
of tax incentives as a means of enlisting the resources of private industry in the
PAGENO="0304"
300
War on Poverty. As a general rule, I feel that tax incentives are inferior to
grants or other forms of direct assistance for these purposes.
Although tax benefits may not be more expensive to the Government as grants,
the amount of revenue loss entailed in a given case is usually difficult to measure.
In further contrast to grants which are subject to periodic public review to
determine whether their objectives are being accomplished in the most economical
way, tax benefits tend to get built into the system.
I heartily endorse the purpose of HR. 14600-to promote the economic de-
velopment of rural America. Economic development of these areas is a national
necessity. It is essential to stem the tide of migration out of rural America into
overcrowded cities. I believe the small business community and the Small Busi-
ness Administration can and should play an important role in this development.
The provisions of the bill which concern inc as Administrator of the Small
Business Administration are those which provide for additional tax incentives
in specified areas for the types of investment already covered by investment tax
credit provisions of existing law and which limit the application of the additional
credit to investments which result in the employment of twenty or more persons.
As you probably know, some spokesmen for the small business community
have been critical of the investment tax credit because they felt that its primary
benefits were enjoyed by the larger, capital intensive and higher profitmaking
concerns. HR. 14600, because of its application only to substantial investments,
would appear to be even more restrictive in this respect. The rapid amortization
feature would appear to have the same discriminating effect.
In closing, I would like you to know that I do not object to incentives to small
businessmen to achieve national objectives. Rather my position is related to the
techniques of accomplishing this purpose as opposed to the principle of incentives,
which I wholeheartedly support.
Your continued support for the small business community of the country is
deeply appreciated.
Sincerely,
HOWARD J. SAMUELS, Afmin'istrator.
The CHAIRMAN. Our counsel, Mr. Jacques.
Mr. JACQD~S. You can't read the Small Business Act without getting
the clear-cut impression that the Congress attaches a high degree of
importance to the agency's procurement activities. The question I have
is, In promoting your Project Own, have you stripped the procure-
ment personnel from the various regional offices? And the main reason
I ask is because a Member of the House called this committee's office
not very long ago and wanted some help for a company which was,
for the first time, trying to sell to the Government. So I called the
appropriate regional office but the answer I got was, "We have no-
body that could provide that service at this time. The last procurement
man I had was assigned to Project Own." Can you comment on that?
Mr. SAMUEI45. As far as I know, we have not assigned any procure-
ment people. Obviously, when you reestablish the agency-I am re-
viewing every single job., and I certainly will look into that. And if
we are not servicing the procurement need, we will take a look at the
reutilization of our people.
It isn't necessary in my mind for that part of our program to suffer
in terms of Project Own.
Mr. JAOQU~S. It is very important to the Members of Congress that
their constituents receive this service. And I think it would be a very
high price to pay to give it up.
Mr. SAMU~LS. I appreciate the comment. And you will get a com-
ment from me in writing about that.
(NOTE. The comment had not been received prior to the printing
of this record.)
Mr. JACQUES. Until about August of this year the agency would not
consider as eligible an application for a loan the proceeds of which
PAGENO="0305"
301
would be used to effect a change of ownership. Now, are you going to
bump into an adverse ruling of the Comptroller General if you perse-
vere. The agency's prior policy, I believe, was in reflection of the then
interpretation of the Small Business Act?
Mr. SAMUELS, I have reviewed this with our counsel. And our coun-
sel has given me written indication that we will have no trouble in this
execution.
Mr. JACQUEs. I haven't seen a new regulation published. Has there
been-
Mr. SAMTJELS. Bill?
Mr. GENErrI. We haven't changed our regulation at all in that re-
gard. If you will recall, the regulation does have wo'rds to the effect-
may I read it to you?
Mr. JACQUES. Did I misstate the former policy?
Mr. `GENETTf. The exact words of the regulation are:
Unless such a change will promote the sound development or preserve the
existence of a small business concern.
Mr. JACQUES. Oh, yes, there has always been that exception, to' pre-
serve an existing entity. That is not the test today, as I understand it.
Mr. GENETTI. Our attitude is, particularly in this Project Own,
where we are primarily concerned with the transfer of businesses, we
feel that the majority of these cases will fall under the exception.
Mr. JACQUES. You mean the business world oth~rwise disappear?
Mr. GENETTI. That is right.
Mr GREENBERG. Or would be prevented frorn expanding.
Mr. JACQUES. But you don't intend to. limit it to that?
Mr. GENETTI. For the tiiue being we have. We have no instances
where we have not. Of course, if we come to the point `where we have
to expand beyond that point we. will have to have a change in the
regulation.
Mr. JACQUES. Would the law permit it?
Mr. GENETTI. We think so.
(A letter from Mr. Samuels regarding this matter follows:)
SMALL BUSINESS ADMINISTRATION,
Washington~, D.C., October 9, 1968.
Hon. JOE L. EvIN5,
Chairman, House select Committee on ~Smctll Business,
House of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN: At the recent hearings before your Committee this
Agency was asked to explain its policy for loans to effect a change in ownership,
particularly as it relates to Project OWN.
The present regulations provide thiat business loans under Section 7(a) of
the Small Business Act may be made where a change in ownership will promote
the sound development or preserve the existence of a small business concern
(~ 120.2(d) (2) of Part 120). As to loans under the Economic Opportunity Act,
the regulation provides that a loan may be made where the change in ownership
will further the objectives of the economic opportunity loan program, i.e., loans
to low1income individuals or loans to small business concerns located in areas
with high proportions of unemployed or low-income individual's (~ 119.21 (c) of
Part 119).
Under Project OWN, loans that have been made to inner-city applicants to
effect a change in ownership have been within the policies published in `the out-
standing regulation's, namely, to promote or preserve the continued existence of
the s'ma'll business concern, or to achieve the objectives of the EOL loan program.
We are considering, however, broadening the policy position for business loans
under the Small Business Act, that is loans made to Project. OWN applicants
which are in excess of $25,000. Section 7(a) of the Act authorizes loans "as may
95-193-68-20
PAGENO="0306"
302
be necessary to ensure a weThbalancecl national economy." The policy of Congress
as stated in Section 2(a) of the Small Business Act, includes the following
statement:
Only through full and free competition can free markets, free en/try into busi-
ness, and opportunities for the eJipression and growth of personal initiative and
individual judgment be assured. [Emphasis added.]
It is within the context of this policy statement by Congress that
entry into ownership will provide `opportunities for growth in personal initiative
and individual judgment, will preserve and expand competition under the free
enterprise system, and will contribute to the economic well-heing and security of
the Nation.
Accordingly, we are considering expanding the change of ownership policy to
permit loans which would contribute to a well~ba.lanced national economy by
facilitating ownership by persons who could not otherwise participate in the free
enterprise system because of economic, physical or social disadvantages, or be-
cause of `the disadvantage of being located in an area where adequate business
financing through normal lending channel's is not available on reasonable terms.
I appreciate this o~pportunlty to explain our policies on a matter significant to
the advancement of Project OWN `and your continued interest in our programs.
Sincerely,
HOWARD J. SAMUELS, Administrator.
The OHAIRMAN. Mr. Administrator, I think this hearing will be very
helpful. And we appreciate the opportunity for a get-acquainted meet-
ing with you. You have many tools, and this committee is interested
in seeing you utilize these tools properly and effectively in line with
the intent of Congress.
Your policy regarding the independence of SBA has already been
mentioned by Mr. Broyhill and others. Of course, you brought from
GSA a very efficient and very effective man, Mr. Greenberg. If you
bring efficient and effective men from Commerce over, maybe they will
get the Gospel and the indoctrination, and they will not be wanting
you to consolidate or m.erge with the Department of Commerce.
Mr. SAMUELS. Thank you.
The CHAIRMAN. I have a question here, that you are utilizing a num-
ber of personnel in Commerce. Who is paying the salaries, what
authority, what arrangement has been made?
Mr. SAMUELS. This is part of an attempt to stop the fragmentation of
efforts between agencies in terms of utilization of people. When I was
with the Commerce Department, we had some programs for the devel-
opment of minority businesses, and it just seems to me that the worst
thing this Government can do is have the same kind of program going
on in four or five different agencies.
When I came over, there was an understanding that we would bring
all the services together. These people have been detailed over to us,
and I think some of them are going to stay with us in the program.
The CHAIRMAN. Have you got any information as to the number of
new minority-owned businesses that have been created since you have
been Administrator?
Mr. SAMUELS. I don't hate-
The CHAIRMAN. Numberwise, you testified earlier that you wanted
to bring in 20,000 new businesses a year in your agency.
Mr. SAMUELS. Do we have those figures with us today?
I think we have July and August figures.
The CHAIRMAN. You have only been aboard as Administrator for
about 3 months, and your goal is 20,000 businesses in a-
Mr. SAMUELS. That is about 1970, Mr. Chairman, that this is what
I think the agency requires.
PAGENO="0307"
303
Are you talking about minority or total?
The CHAIRMAN. Both, total and minority.
Mr. SAMUELS. Minority went from 2,000 ~o 4,100 in the last 60 days,
really. And the development of regular businesses are going at it at
about the same rate they did last year.
The CHAIRMAN. Again, we commend you for your testimony, and
all of your staff. And we thank you for the opportunity of this get-
acquainted meeting.
Mr. SAMUELS I thank you for the opportunity and for your
continued support.
The CHAIRMAN. We will stand adjourned until further notice.
(Whereupon, at 12:30 p.m., October 1, 1968, the hearing was
adjourned, subject to the call of the Chair.)
PAGENO="0308"
PAGENO="0309"
APPENDIX
SUMMARY OF SBA LOAN APPROVAL ACTIVITY
April-June 1968
July 1967-March
`
1968
Num-
SBAshare
Num-
SBAshare
ber of
Total amount amount
ber of
Total amount
amount
loans
loans
ALABAMA
1ST CONGRESSIONAL DISTRICT
.
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL II:
1
0
1
5, 000, 00 2, 500. 00
0 0
100, 000. 00 50, 000. 00
3
6
8
30, 500. 00.
290, 000. 00
667, 000. 00
30, 500. 00
215, 250. 00
494, 000. 00
Direct
Participation
Displaced business loans:
Direct
Participation
0
1
0
0
0 0
5, 000. 00 2,500. 00
0 0
0 0
1
1
4
1
18, 500. 00
5, 000. 00
338, 000. 00
120, 000. 00
18,500. 00
2, 500. 00
338, 000. 00
90, 000. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 3 82, 500. 00 82, 500. 00 7 133, 000. 00 128,950. 00
Participation 10 431,000.00 328, 550, 00 36 1,690, 000, 00 1,259,975. 00
Guarantee 6 565, 000. 00 445,250. 00 15 1,227, 000. 00 937, 150. 00
Economic opportunity loans,
EOL II: Direct 1 10,000.00 10, 000.00 3 37, 000. 00 37, 000. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 11,000. 00 11,000. 00 4 75, 500. 00 75, 500. 00
Participation 7 387,000. 00 264, 500. 00 17 1, 024, 500.00 752,375. 00
Guarantee 4 305, 000. 00 189, 150. 00 5 360, 000.00 239,250.00
Economic opportunity loans,
EOL II:
Direct 0 0 . 0 2 33, 000. 00 33, 000. 00
Guarantee 0 0 0 1 10, 000. 00 10, 000. 00
Disaster loans: Participation...... 1 20, 000. 00 15,000.00 1 20, 000. 00 15, 000. 00
Development company loans:
Direct 1 350,000.00 350,000.00 1 350,000.00 350,000.00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 3 34,000.00 34,000.00
Participation 3 130,000.00 106, 500.00 7 275,000. 00 215,250. 00
Guarantee 2 407,000. 00 357,750.00 3 507,000. 00 432, 750.00
Economic opportunity loans,
EOLII:
Direct 0 0 0 2 40,000.00 40, 000.00
Guarantee 0 0 0 1 15, 000.00 15,000.00
Development company loans:
Direct 0 0 0 1 218, 500. 00 218, 500.00
(305)
PAGENO="0310"
306
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num. SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
ba s loans
ALABAMA-Continued
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 8,000. 00 8,000. 00 2 48,000.00 48, 000. 00
Participation 4 210, 000. 00 129,700. 00 12 730, 000.00 537, 450. 00
Guarantee 2 220, 000. 00 177, 750. 00 6 498,500. 00 419, 025. 00
Development company loans:
Direct 0 0 0 4 1, 088, 300. 00 1, 088, 300. 00
Participation 0 0 0 1 27, 000. 00 21, 600. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
1
1
5
7,000.00 7,000.00
12, 000. 00 8, 400. 00
499, 000. 00 391, 446. 00
3
4
12
118,000.00
117, 000. 00
1, 500, 000. 00
118,000.00
79,900. 00
1,245, 396. 00
Direct
Participation
EOL II: Direct
Displaced business loans:
Direct
0
0
0
0
0 0
0 0
0 0
0 0
1
1
2
1
2 000.00
6, 000. 00
19,000.00
30, 000. 00
2,000.00
5, 400. 00
19,000.00
30, 000. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans
EOL II: Direct
Disaster loans:
0
3
4
1
0 0
86, 000. 00 68, 100. 00
261, 000. 00 232, 260. 00
15,500.00 15,500.00
2
18
8
1
35, 000. 00
1, 008, 000. 00
687, 000. 00
15,500.00
35, 000. 00
723, 150. 00
559, 260. 00
15,500.00
Direct
Participation
8
2
329, 300. 00 329, 300. 00
135, 000. 00 90, 165. 00
9
2
336, 300. 00
135, 000. 00
336, 300. 00
90, 165. 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Disaster loans:
0
5
5
0 0
156, 500. 00 134,265. 00
170,000.00 151,000.00
5
12
8
114,000.00
520, 500. 00
730,000.00
114,000.00
386, 941. 00
623,500.00
Direct
Participation
2
4
44, 000. 00 44, 000. 00
153, 000. 00 130, 260. 00
2
4
44, 000. 00
153, 000. 00
44,000. 00
130, 260. 00
STATE TOTALS
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
5
33
29
103, 500. 00 106, 000. 00
1,412,560.00 1,040,015.00
2, 527, 000. 00 1,994,606. 00
29
112
65
588, 000. 00
5,655,000.00
6, 176, 500. 00
583, 950. 00
4,170,291.00
4, 950, 331. 00
Direct
Participation
EOL II:
0
0
0 0
0 0
1
1
2, 000. 00
6 000. 00
2, 000. 00
5 400. 00
Direct
Participation
Guarantee
Displaced business loans:
Direct
Participation
Disaster loans:
2
1
0
0
0
25, 500. 00 25, 500. 00
5, 000. 00 2, 500. 00
0 0
0 0
0 0
11
1
2
5
1
163, 000. 00
5, 000. 00
25, 000. 00
368,000.00
120, 000. 00
163, 000. 00
2, 500. 00
25, 000. 00
368,000.00
90, 000. 00
Direct
Participation
Development Company loans:
Direct
Participation
10
7
1
0
373, 300. 00 373, 300. 00
308,000.00 235,425.00
350, 000. 00 350, 000. 00
0 0
11
7
6
1
380, 300. 00
308,000.00
1, 656, 800. 00
27, 000. 00
380, 300. 00
235,425.00
1,656,800. 00
21, 600. 00
PAGENO="0311"
307
SUMMARY OF SI3A LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
SBA share
Total amount amount
Mum-
her of
Total amount
SBA share
amount
loans
loans
ALASKA
AT LARGE
CONGRESSIONAL DISTRICT-S
TATE TOTALS
Business loans:
Direct 7 236,938.00 236,93800 11 321,338.00 321,338.00
Participation 8 575, 900. 00 513, 435. 00 20 1, 552, 900. 00 1,305, 285. 00
Guarantee 1 20,000. 00 18, 000.00 1 20, 000. 00 18, 000. 00
Economic opportunity loans:
EOL I: Direct 0 1, 000. 00 4,400. 00 3 26, 000. 00 20, 600. 00
EOL II: Direct 1 25, 000. 00 25, 000. 00 2 45, 000. 00 45, 000. 00
Displaced business loans:
Direct 2 165, 625. 00 165, 625. 00 8 878, 325. 00 878, 325. 00
Disaster loans:
Direct 463 8, 056, 525. 00 8, 057, 725. 00 3 279 55 539 185. 00 55, 360, 117. 00
Participation 1 28, 000. 00 27, 670. 00 8 1, 168, 170. 00 1, 147, 163. 00
Development Company loans:
Direct 0 894. 00 894. 00 3 514, 504. 00 514, 504. 00
Participation 0 0 0 0 43,280. 00 41, 052. 00
ARIZONA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Disaster loans: Direct
4
1
2
3
0
1
93, 500. 00 93, 500. 00
45, 000. 00 40, 500. 00
110, 000. 00 99, 000. 00
17, 400. 00 17, 400. 00
100. 00 100. 00
300, 000. 00 300, 000. 00
16
5
10
6
3
1
457, 150. 00
160, 000. 00
806, 500.00
45, 900 00
19, 000. 00
300,000. 00
457, 150. 00
134, 000. 00
700, 200. 00
45,900. 00
19, 000. 00
300, 000. 00
2D CONGRESSIONAL DISTRICT
Buslnes~ loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOLI:
0
2
0
5, 200. 00 5, 200. 00
160, 000. 00 84, 000. (,0
0 0
9
3
5
287, 800. 00
286, 000. 00
560, 000. 00
287, 800. 00
197, 400. 00
501,750. 00
Direct
Guarantee
EOLII:
Direct
Guarantee
Displaced business loans:
Direct
Disaster loans: Direct
Development company loans:
Direct
0
1
2
0
0
1
0
0 0
10, 000. 00 10, 000. 00
26, 000. 00 26, 000. 00
0 0
0 0
138, 000. 00 138, 000. 00
0 0
3
1
4
2
1
1
1
27, 300. 00
10, 000. 00
76,000. 00
29,000.00
60, 000. 00
138, 000. 00
59,400.00
27, 300.00
10, 000. 00
76, 000. 00
29,000.00
60, 000. 00
138, 000. 00
59,400.00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Disaster loans: Direct
5
3
0
0
0
7
167,000.00 167,000.00
251, 600. 00 218, 940. 00
0 0
0 0
0 0
102,900. 00 102, 900. 00
15
10
5
3
2
7
465,500.00
796,600. 00
381, 800. 00
21, 000. 00
15, 500. 00
102, 900. 00
465,500.00
601, 140. 00
334, 320. 00
21, 000. CO
15, 500. 00
102, 900. 00
STATE TOTALS
Business loans:
Direct 9 255, 300. 00 255, 300. 00 40 1,210, 450. 00 1, 210, 450. 00
Participation 6 456,600. 00 343, 440. 00 18 1, 242, 600. 00 932, 540. 00
Guarantee 2 110,000. (0 99, 000. 00 20 1, 748, 300. 00 1, 536, 270. 00
PAGENO="0312"
308
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
ARIZONA-Continued
STATE TOTALS-Continued
Economic opportunity loans:
EOL I:
Direct
Guarantee
EOL II:
3
1
17, 400. 00 17, 400. 00
10, 000. 00 10, 000. 00
12
1
94,200. 00
10 000. 00
94,200. 00
10 000. 00
Direct
Guarantee
Displaced business loans:
Direct --
Disaster loans: Direct
Development company loans:
Direct
2
0
0
9
0
26, 100. 00 26, 100. 00
0 0
0 0
540, 900. 00 540,900. 00
0 0
9
2
1
9
1
110, 500. 00
29,000.00
60, 000. 00
540,900. 00
59, 400. 00
110, 500. 00
29,000.00
60, 000.00
540, 900. 00
59, 400. 00
ARKANSAS
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
0
0
8
0 0
0 0
338, 800. 00 297, 760. 00
2
5
21
50, 000. 00
355, 500. 00
784, 550. 00
47, 500. 00
265, 900. 00
691, 835. 00
Direct
Participation
EOL II
2
1
20, 340. 00 20, 340. 00
15, 000. 00 11, 250. 00
5
1
43, 640. 00
15 000. 00
43,640. 00
11 250. 00
Direct
Participation
Disaster loans:
2
0
11,000.00 11,000.00
0 0
2
1
11,000.00
10, 000. 00
11 000.00
7~ 500. 00
Direct
Participation
10
2
389, 000. 00 389, 000. 00
40, 000. 00 36, 000. 00
16
2
623, 000. 00
40, 000. 00
623, 000. 00
36, 000. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
0
1
7
0 0
65, 000. 00 58, 500. 00
437, 500. 00 373, 250. 00
1
4
22
43,700. 00
163, 600. 00
1, 145, 500. 00
43, 700. 00
144, 240. 00
982, 775. 00
Direct
Guarantee
EOL II: Direct
Displaced business loans:
Direct
Disaster loans: Direct
8
0
0
1
1
78, 000. 00 78, 000. 00
0 0
0 0
50, 000. 00 50, 000.00
25, 000. 00 25, 000.00
18
1
5
1
1
183, 200. 00
9, 000, 00
56, 100. 00
50, 000. 00
25, 000. 00
182, 200. 00
8 100.00
56, 100. 00
50 000. 00
25, 000. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
1
0
4
15, 000. 00 15, 000. 00
0 0
212, 000. 00 186, 000. 00
2
5
12
75, 000. 00
138, 600. 00
732, 500. 00
75, 000. 00
104, 820. 00
600, 000. 00
Direct
Guarantee
EOL II:
2
0
2, 500. 00 2, 500. 00
0 0
20
2
158,996.00
27, 500.00
158, 996. 00
26, 000. 00
Direct
Guarantee
Displaced business loans:
Direct
1
0
1
15, 000. 00 15, 000. 00
0 0
350, 000. 00 350, 000. 00
3
1
1
60, 000. 00
25,000.00
350, 000. 00
60, 000. 00
18,750.00
350, 000. 00
PAGENO="0313"
~O9
SUMMARY O~' .SBA LOAN ~A~PROVAL NO1~IV!~FY-Coth1~uéd
*
~
April-June 1968
July 1967-March
1968
Hum-
ber of
loans
SBA share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
ARKANSAS-Cohtinued
4TH CONGRESSIONAL DiSTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
Direct
Guarantee
EOL II:
Direct
Guarantee
Disaster loans: Direct
Development company loans:
Direct
0
0
6
2
1
3
0
1
0
0 2
0 0
987,000.00 865,800.00
23,000. 00 23, 000. 00
15, 000. 00 15, 000. 00
41,500. 00 41, 500. 00
0 0
36,000. 00 36, 000. 00
3,000. 00 3,000. 00
2
3
14
9
2
6
1
1
2
28, 000. 00
135, 000. 00
1,272,500. 00
96,000. 00
18 500. 00
79, 500.00
15,000.00
36, 000.00
225, 000. 00
28,000.00
103, 500. 00
1,091,000.00
96,000.00
17,625. 00
79,500.00
13,500.00
36, 000. 00
225,000.00
STATE TOTALS
Business loans:
DIrect 1 15, 000. 00 15, 000. 00 7 196,700. 00 194,200.00
Participation 1 65,000.00 58, 500.00 17 792, 700. 00 618,460. 00
Guarantee 25 1,975, 300. 00 1,722,810. 00 96 3,935, 050. 00 3,365,610. 00
Economic opportunity loans:
L Direct 14 123, 840. 00 123, 840.00 52 481, 836. 00 480,836. 00
Participation 1 15, 000. 00 11,250.00 1 15, 000. 00 11, 250. 00
Guarantee 1 15, 000. 00 15, 000.00 5 55, 000.00 51,725. 00
EOL II:
Direct 6 67, 500. 00 67, 500.00 16 206,600. 00 206,600.00
Participation 0 0 0 1 10, 000. 00 7, 500. 00
Guarantee 0 0 0 2 40,000.00 32,250.00
Displaced business loans:
Direct 2 400, 000. 00 460, 000. 00 2 400,000. 00 400, 000. 00
Disaster loans:
Direct 12 450, 000. 00 450, 000.00 18 684,000. 00 684, 000. 00
Participation 2 40, 000. 00 36, 000. 00 2 40, 000, 00 36, 000.00
Development company iaons:
Direct 0 3,000. 00 3,000.00 2 225, 000.00 225, 000. 00
CALIFORNIA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 4 68, 000. 00 68, 000. 00 8 227,200. 00 217,700. 00
Participation 0 0 0 1 20, 000. 00 18, 000. 00
Guarantee 5 146,500.00 121,800.00 8 231,250.00 196,575.00
Economic opportunity loans:
EOL I: Direct 1 15,000. 00 15, 000. 00 1 15, 000.00 15, 000. 00
Disaster loans: Direct 1 2,000. 00 2, 000. 00 16 118,782. 00 118,782. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans,
(EOL) I: Direct
2
3
0
27, 000. 00 27, 000. 00
70,600.00 63,540. 00
0 0
6
3
2
171, 500. 00
70,600.00
11, 150.00
154,000.00
63, 540.00
11, 150.00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
(EOL) I: Direct
1
1
0
11,000. 00 11,000. 00
17,400.00 11,484.00
0 0
4
1
1
126,000. 00
17,400.00
1,700.00
126,000. 00
11,484.00
1,700.00
PAGENO="0314"
310
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Nuni- SBA share
her of Total amount amount ber of Total amount amount
loans loans
CALIFORNIA-Continued
4TH CONGRESSIONAL DISTRICT
Business loans:
Participation 0 0 0 0 15, 000. 00 13, 500. 00
Guarantee 2 50, 550. 00 45, 495. 00 3 70, 550. 00 63,495. 00
Economic opportunity loans:
(EOL) I: Direct 0 0 0 2 2, 100.00 2, 100. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 30, 000. 00 30, 000. 00 2 40, 000. 00 40, 000. 00
Participation 0 0 0 1 20, 000. 00 15, 000. 00
Guarantee 1 19, 000. 00 17,100.00 3 374, 000. 00 336,600. 00
Economic opportunity loans:
EOL I: Direct 1 3,300.00 3,300. 00 3 23, 300. 00 23,300. 00
EOL II: Direct 0 0 0 1 5,000. 00 5,000. 00
Displaced business loans:
Direct 1 6, 000. 00 6, 000. 00 4 350, 530. 00 350, 530. 00
Development company loans:
Direct 1 24, 106 00 24, 106. 00 1 24, 106. 00 24, 106. Oü
6TH CONGRESSIONAL DISTRICT
Business Loans: Guarantee 2 34,000.00 23,950.00 2 34,000.00 23,950.00
Economic opportunity loans,
EOL I: Direct 1 5, 000. 00 5,000. 00 2 11, 500, 00 11, 500. 00
Displaced business loans:
Direct 1 10, 000. 00 10,000. 00 1 10, 000. 00 10, 000. 00
Disaster loans: Direct 1 2, 100. 00 2, 100. 00 1 2, 100. 00 2, 100. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 3 56, 500. 00 56,500. 00 7 154,900.00 154,900. 00
Participation 1 150,000. 00 75, 000. 00 1 150, 000. 00 75, 000. 00
Economic opportunity loans:
EOL I:
Direct 1 10, 000. 00 10,000. 00 8 80,450. 00 80,450. 00
Guarantee 0 0 0 1 7, 300. 00 7, 300. 00
EOL II: Direct 0 0 0 1 18,000.00 18,000.00
Displaced business loans:
Direct 3 138, 000. 00 138, 000. 00 4 145, 800. 00 145, 800. 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 44, 500. 00 44, 500. 00
Guarantee 1 15,000.00 11,250.00 2 135,000.00 119,250.00
Economic opportunity loans,
EOL I: Direct 0 0 0 5 43, 400. 00 43,400. 00
Displaced business loans:
Direct 2 133, 500. 00 133, 500. 00 4 190, 500. 00 190, 500. 00
Participation 0 0 0 1 1, 025, 000. 00 922,500. 00
Disaster loans: Direct 0 0 0 1 11,000.00 11,000.00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 4 71,881.00 71,881.00
Guarantee 1 15, 000. 00 13, 500, 00 6 125, 000. 00 93, 250. 00
Economic opportunity loans
EOL I: Direct 1 3, 500. 00 3, 500. 00 5 28,650. 00 28, 650. 00
PAGENO="0315"
311
SUMMAEY OF Silk LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1961-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Nurn-
ber of
loans
Total amount
SBA share
amount
CALIFORN IA-Continued
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct 4 144, 000. 00 144, 000. 00 6 172, 000. 00 172, 000. 00
Guarantee 2 52, 500. 00 40, 250. 00 4 224, 000, 00 183,875. 00
Economic opportunity loans:
EOt. I: Direct 0 0 0 2 5, 500. 00 5, 500. 00
EOL II: Direct 0 0 0 2 50, 000. 00 50, 000. 00
Displaced business loans:
Direct 0 0 0 1 18, 000. 00 18, 000. 00
11TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 10,000.00 10,000.00
Participation 1 110, 000.00 77,000.00 1 110,000.00 77,000.00
Guarantee 0 0 0 3 86,000.00 63,000.00
Displaced business loans: Di-
rect 1 20,000. 00 20,000.00 1 20,000.00 20,000.00
Disaster loans: Direct 0 4,000. 00 4,000.00 9 43,900.00 43,900.00
12TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 14,000.00 14,000.00 3 69,000.00 69,000.00
Guarantee 3 138,000. 00 118,200. 00 4 188,000.00 163,200. 00
Economic Opportunity loans
EOL I: Direct 1 10,000.00 10,000.00 1 10,000.00 10,000.00
Displaced business ones: Di-
rect 0 0 0 1 3,500.00 3,500.00
13TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 25,000.00 25,000.00 4 100,000.00 100,000.00
Guarantee 1 17,000.00 15,300.00 1 17,000.00 15,300.00
Displaced business loans: Di-
rect 1 77,900.00 77,900.00 2 85,900.00 85,900.00
Disaster loans: Direct 1 1,600. 00 1,600. 00 1 1,600. 00 1,600. 00
14TH CONGRESSIONAL DISTRICT
Business loans:
Direct - 0 0.00 0. 00 2 35,000.00 35, 000. 00
Participation 0 0. 00 0. 00 1 250.000,00 125, 000. 00
Guarantee 4 150,000.00 109,100.00 5 170,000.00 124,100.00
Economic opportunity loans,
EOL I: Direct 0 0. 00 0. 00 1 15,000.00 15, 000. 00
Disaster loans: Direct 1 41, 000. 00 41, 000. 00 10 231, 550. 00 231, 550. 00
15TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 110,000.00 110,000.00 2 110,000.00 110,000.00
Participation 1 100, 000. 00 75, 000, 00 3 245, 000. 00 194,250. 00
Guarantee 0 0 0 1 35,000.00 31,500.00
Displaced business loans:
Direct 0 0 0 1 25, 000. 00 25, 000. 00
PAGENO="0316"
~12
SUMMARY 10F SEA LOAN APPROVAL ACPiVIi~Y-Continued
April-June 1968 July 1967-March 1968
Nurn- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
CALIF~RNIA-Continued
16TH CONGRESSIONAL DISTRICT
Business loans:
Direct 3 67, 000. 00 67, 000. 00 9 232, 000. 00 232, 000. 00
Guarantee 1 12,500.00 11,250.00 1 12,500.00 11,250.00
Economic opportunity loans,
EOL I: Direct 2 11, 500. 00 11, 500, 00 3 26, 500. 00 26, 500. 00
Displaced business loans:
Direct 1 90, 000. 00 90, 000. 00 1 90, 000. 00 90,000. 00
17TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 41, 000. 00 41, 000. 00 2 61, 000. 00 61, 000. 00
Guarantee 1 107, 000. 00 96, 300. 00 2 142, 000. 00 127, 800. 00
Displaced business loans:
Direct 1 15, 000. 00 15, 000. 00 1 15, 000. 00 15,000. 00
18TH CONGRESSIONAL DISTRICT
Business loans:
Direct 3 182, 000. 00 182, 000. 00 4 207, 000. 00 207, 000. 00
Participation 1 20, 000. 00 15, 000. 00 5 220, 000. 00 184, 500. 00
Guarantee 2 29, 000. 00 26, 100. 00 2 29,000.00 26, 100.00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 7, 500.00 7, 500. 00
Disaster loans: Direct 0 0 0 2 52, 500. 00 52~ 500. 00
19TH CONGRESSIONAL DISTRICT
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
1
1
15, 000. 00
12,000. 00
15, 000. 00
12, 000. 00
20TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 17, 900. 00 17,900. 00 3 41,400. 00 41, 400. 00
Guarantee 0 0 0 1 150,000.00 135,000.00
Economic opportunity loans:
EOL I: Direct 2 20, 000. 00 20, 000. 00 3 24,700. 00 24, 700. 00
EOL II: Direct 1 15, 000. 00 15, 000.00 1 15, 000. 00 15, 000. 00
Displaced business loans:
Direct 1 35, 000. 00 35, 000.00 1 35,000. 00 35, 000. 00
21ST CONGRESSIONAL DISTRICT
Business loans: Direct 1 126, 000. 00 126, 000.00 4 301, 000. 00 301, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 9,000.00 9, 000. 00
EOL II: Direct 0 0 0 2 22,500.00 22, 500.00
22D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 75, 000. 00 75, 000. 00
Guarantee 0 0 0 2 150,000.00 135,000.00
Economic opportunity loans:
EOL I: Direct 1 10,000. 00 10, 000.00 2 15,000.00 15, 000. 00
Disaster loans: Direct 106,850. 00 106, 850. 00 6 135, 850. 00 135,850.00
PAGENO="0317"
313
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
SBA share
Num-
of
Total amount
SBA share
amount
ber of
Total amount amount
loans
loans
CALIFORNIA-Continued
23D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 60,000. 00 60, 000. 00
Guarantee 0 0 0 1 185, 000. 00 166, 500. 00
Economic opportunity loans:
EOL I: Direct 1 15~ 000. 00 15, 000. 00 3 31 100.00 31, 100 00
EOL II: Direct 0 0 0 1 10,000. 00 10, 000. 0~
24TH CONGRESSIONAL DISTRICT
Economic opportunity loans:
EOL I: Direct 1 15, 000.00 15,000. 00
25TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 44, 500. 00 44, 500. 00
Participation 1 166, 000. 00 149,400. 00
Economic opportunity loans:
EOL I: Direct 1 15, 000. 00 15,000. 00
EOL II: Direct 2 36, 000. 00 36,000. 00
26TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 64, 000. 00 64, 000. 00 3 199,000. 00 199, 000.00
Guarantee 1 100, 000. 00 90, 000. 00 2 150, 000. 00 135, 000. 00
Economic opportunity loans:
EOL I: Direct 2 17, 000. 00 17, 000. 00 3 32, 000. 00 32,000.00
EOL II: Direct 0 0.00 0.00 2 35,000.00 35,000.00
Disaster loans: Direct 2 15, 000. 00 15, 000. 00 2 15, 000. 00 15, 000.00
27TH CONGRESSIONAL DISTRICT
Business loans: Direct 0 0 0 2 81, 000. 00 81,000. 00
Economic opportunity loans:
EOL I 0 0 0 1 10,500. 00 10,500. 00
Disaster loans: Direct 0 0 0 1 8, 000. 00 8,000. 00
Development company loans:
Direct 1 258, 000. 00 258,000. 00 2 586, 800. 00 586, 800. 00
28TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 20,000.00 20,000.00
Guarantee 1 35, 000. 00 24, 500. 00
29TH CONGRESSIONAL DISTRICT
Business loans: Direct - 0 0 0 2 55,000.00 55,000. O~
Economic opportunity loans:
EOL 1: Direct 1 15,000.00 15,000.00 1 15, 000. 00 15 000. 00
EOL II: Direct 1 8,000.00 8,000. 00 1 8,000.00 8 000.00
Disaster loans: Direct 1 1,150. 00 1, 150. 00 1 1, 150. 00 1, 150. 00
Development Company Loans:
Direct 1 82,060.00 82, 060. 00 11 302,000. 00 302,000.00
Guarantee 0 0 0 19 758,000.00 758,000.00
PAGENO="0318"
314
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Totnl amount amount
Num-
ber of
loans
Total amount
SBA share
amount
CALl FORNIA-Continued
30TH CONGRESSIONAL DISTRIC1
Business loans: Direct 1 60, 000. 00 60, 000. 00 6 275, 000. 00 275, 000. 00
Economic opportunity loans:
EOL I; Direct 2 19, 000. 00 19, 000. 00 8 91, 000. 00 91, 000. 00
EOL II; Direct 0 0 0 1 13,100.00 13,100.00
Disaster loans:Direct 2 8,400. 00 8, 400. 00 2 8, 400. 00 8,400. 00
31ST CONGRESSIONAL DISTRICT
Business loans:
Diect 0 0 0 2 80, 000. 00 80, 000. 00
Guarantee 1 100, 000. 00 90, 000. 00 1 100, 000. 00 90, 000. 00
Economic opportunity loans:
EOL 1; Direct 0 0 0 2 18, 700. 00 18,700. 00
EOL II; Direct 0 0 0 1 9, 000. 00 9,000. 00
Disaster loans: Direct 2 11,430.00 11,430.00 2 11,430.00 11,430.00
Business loans: Direct 1 50, 000. 00 50, 000. 00 2 150,000. 00 150, 000. 00
Economic opportunity loans,
EOL I: Direct 0 0 0 1 2, 800. 00 2, 800. 00
33D CONGRESSIONAL DISTRICT
Business loans:
Direct 3 61,000.00 61,000.00 5 201,000.00 201,000.00
Guarantee 0 0 0 2 190,000.00 171,000.00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 20, 000. 00 20, 000. 00
EOL II: Direct 0 0 0 1 15,000.00 15,000.00
Displaced business loans:
Direct 5 881,400.00 881,400.00 9 1,161,900.00 1,161,900.00
34TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 38, 000. 00 38, 000. 00
Guarantee 1 300, 000. 00 270, 000. 00
Economic opportunity loans:
EOL I: Direct 7 59, 000. 00 59, 000. 00
EOL II: Direct 1 11,500.00 11,500.00
35TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 27, 000. 00 27, 000. 00 5 84, 500. 00 84, 500. 00
Participation 0 0 0 1 150, 000. 00 135, 000. 00
Guarantee 0 0 0 4 200, 000. 00 162, 000. 00
Economic opportunity loans,
EOL I: Direct 0 0 0 2 19, 000. 00 19, 000, 00
Disaster loans: Direct 9 176, 700. 00 176, 700. 00 16 338, 780. 00 338, 780. 00
36TH CONGRESSIONAL DISTRICT
Business Loans:
Direct 6 112, 500. 00 107, 500. 00 17 543, 500. 00 533, 500. 00
Participation 0 0 0 1 55, 000. 00 49, 500. 00
Guarantee 1 35, 500. 00 26, 625. 00 3 140, 500. 00 96,625. 00
Economic opportunity loans:
EOL I: Direct 2 20, 000. 00 20, 000. 00 6 56, 000. 00 56, 000. 00
PAGENO="0319"
315
SUMMARY OF SEA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
berof Total amount amount ber of Total amount amount
loans loans
CALIFORNIA-Continued
37TH CONGRESSIONAL DISTRICT
Business loans:
500. 00
Direct 1 17, 500. 00 17, 500. 00 12 269, 500. 269,
Participation 0 0 0 1 75, 000. 00 67, 500. 00
Economic opportunity loans:
EOL I: Direct 4 35, 500. 00 35, 500. 00 10 73, 500. 00 73 500. 00
EOLII:Direct 1 11,500.00 11,500.00 3 23,500.00 23,500.00
38TH CONGRESSIONAL DISTRICT
Business loans:
200. 00
Direct 0 0 0 5 228, 200. 00 228,
Participation 1 35, 000. 00 31, 500. 00 2 55, 000. 00 49, 500. 00
Guarantee 0 0 0 1 15, 000. 00 13, 500. 00
Economic opportunity loans:
EOL I: Direct 1 12,000.00 12,00000 1 12,000.00 12,000.00
EOL II: Direct 1 11,850.00 11,850.00 2 26,850.00 26,850.00
Displaced business loans:
Direct 0 0 0 1 31,800.00 31,800.00
Disaster loans: Direct 0 0 0 1 13, 200. 00 13, 200. 00
STATE TOTALS
Business loans:
Direct 42 1, 311, 400. 00 1, 306, 400. 00 139 4, 578, 581. 00 4 541 581. 00
Participation 5 415, 000. 00 273, 500. 00 19 1, 531, 000. 00 1, 153, 150. 00
Guarantee 33 1, 109, 550. 00 931,244. 00 0 70 3, 576, 800. 00 3, 053, 394. 00
Economic opportunity loans:
£011:
Direct 22 191, 800. 00 191, 800.00 93 808, 550. 00 808, 550. 00
Guarantee 0 0 0 1 7, 300. 00 7, 300. 00
E0L II: Direct 4 46, 350. 00 46, 350. 00 24 317,950. 00 317, 950. 00
Displaced business loans:
Direct 17 1,406, 800. 00 1, 406, 800. 00 32 2, 182,930. 00 2, 182, 930. 00
Participation 0 0 0 1 1,025,000.00 922,500.00
Disaster loans: Direct 25 370,230. 00 370, 230. 00 71 993,242.00 993,242. 00
Development company loans:
Direct 3 364,166.00 364,166.00 14 912,906.00 912,906.00
Guarantee 0 0 0 19 758, 000. 00 758, 000. 00
COLORADO
UNIDENTIFIED CONGRESSIONAL DISTRICT
Business loans: participation 1 45,000.00 40, 500. 00
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 1 60, 000. 00 60, 000. 00 10 449, 700.00 449,700. 00
Participation 3 105, 000. 00 80,250. 00 7 213, 500.00 177,900. 00
Guarantee 12 488,650. 00 374, 135. 00 19 890, 150.00 701,885. 00
Economic opportunity loans
EOL II: Direct 2 35, 000. 00 35, 000. 00 17 249,200. 00 249, 200. 00
Disaster loans: Direct 0 0 0 1 18,000.00 18,000.00
PAGENO="0320"
316
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
SBA share Num-
SBA share
ber of
Total amount amount bar of
Total amount
amount
loans
loans
COLORADO-Continued
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
Direct
3
7
11
0
14, 500.00 14,300.00 18
334,500.00 242, 125. 00 13
406, 400.00 358, 260. 00 28
0 0 1
212,400. 00
910,750. 00
1,903, 100. 00
800.00
212,200. 00
688,250.00
1,630, 051. 00
800. 00
Guarantee
EOL II:
2
22, 500. 00 22, 500. 00 2
22,500.00
22, 500. 00
Direct
Guarantee
Development company loans:
Direct
0
3
0
0 0 2
31,000.00 31,000. 00 6
0 0 1
28,000.00
89,500.00
50, 000. 00
28,000.00
87,200.00
50, 000. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
1
6
10
25, 000. 00 25, 000. 00 9
161, 500. 00 119,725. 00 18
362, 800. 00 327, 230. 00 21
185, 000. 00
1, 458, 500. 00
930, 550. 00
183, 500. 00
1, 175, 975. 00
820, 965. 00
Direct
Guarantee
EOL II:
0
1
0 0 4
15, 000. 00 15, 000. 00 4
48, 500. 00
41,500. 00
48, 500. 00
41, 500. 00
Direct
Guarantee
Disaster loans:
1
6
15, 000. 00 15, 000. 00 6
100, 500. 00 96, 500. 00 8
103, 100. 00
124, 500. 00
103, 100. 00
120, 500. 00
Direct
Participation
Development company loans:
Participation
0
0
0
0 0 1
0 0 1
0 0 1
25, 000. 00
20, 000. 00
388, 000. 00
25, 000. 00
17, 500. 00
350, 000.00
4TH CONGRESSIONAL DISTRICT
Business Loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
1
7
13
15,000. 00 15, 000. 00 7
226,600. 00 188, 175. 00 39
1,010,600. 00 849, 540. 00 28
242,000. 00
2,685,714. 00
2,364,100. 00
224,000. 00
2, 017,460. 00
1, 861,790. 00
Direct
Participation
EOL II:
0
0
0 0 3
0 0 1
17, 000.00
7, 500.00
17,000. 00
5,625. 00
Direct
Participation
Guarantee
Disaster loans: Participation......
Development company loans:
Direct
2
1
4
0
0
29,500. 00 27, 850. 00 8
5, 000. 00 4, 500. 00 3
38, 400. 00 37, 500. 00 4
0 0 1
0 0 3
131, 500. 00
37, 000.00
38,400. 00
100,000. 00
241,692.00
129,850. 00
30,300. 00
37, 500. 00
83, 000. 00
241,692.00
STATE TOTALS
Business loans:
Direct 6 114,500. 00 114,300. 00 44 1, 089~100. 00 1,069,400. 00
Participation 23 827,600. 00 630,275. 00 78 5,313,464. 00 4, 100, 085. 00
Guarantee 46 2,268, 450. 00 1,909, 165. 00 96 6, 087,900. 00 5, 014,691. 00
Economic opportunity loans:
Direct 0 0 0 8 66,300. 00 66,300. 00
Participation 0 0 0 1 7, 500. 00 5,625. 00
Guarantee 3 37, 500. 00 37, 500.00 6 64 000.00 64 000.00
EOL II:
Direct 5 79,500. 00 77,850.00 33 511,800. 00 510, 150. 00
Participation 1 5,000. 00 4, 500.00 3 37,000. 00 30,300. 00
Guarantee 13 169,900. 00 165, 000.00 18 252,400. 00 245,200.00
PAGENO="0321"
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
,
April-June 1968
July 1967-March
1968
Nuns-
ber of
loanS
SB/5, share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
COLORADO-Continued
STATE TOTALS-Continued
Disaster loans:
Direct
Participation
Development company loans:
Direct
Participation
0
0
0
0
0 0
0 0
0 0
0 0
2
2
4
1
43,000.00
120,000.00
291,692. 00
388,000. 00
43,000 00
100,500.00
291,692.00
350,000.00
CONNECTICUT
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I, Direct
EOL II, Direct
3
0
1
0
1
36, 000. 00 36, 000. 00
0 0
17,000.00 12,750.00
0 0
5, 000. 00 5,000. 00
5
2
3
4
5
147, 000. 00
185, 000. 00
71,000.00
15,300. 00
45, 000. 00
147, 000. 00
86, 500. 00
~0, 500. 00
~
15, 300. 00
45, 000. 00
2D COI*GRESSIONAL DISTRICT
,
Business loans:
Direct
Participation
£conomk~ opportunity loans:
EOL I, Direct
EOL II, Direct
Development company loans:
Direct
2
1
*
0
0
1
`
75,000. 00 75, 000. 00
20, 000. 00 18, 000. 00
0 0
0 0
350, 000. 00 350, 000,00
3
4
2
1
2
125, 000. 00
85, OOIX 00
.
3, 500. 00
8,000.00
~
699,600 00
125 000. 0l~
64,250. 00
.
3~ 500. 00
8,000.00
664,640. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation ... -
Guarantee
Economic opportunity loans,
EOLII:
3
2
1
17,300.00 17,300.00
110,000. 00 96,500. 00
55, 000. 00 49,500. 00
7
5
1
57,300.00
260, 000. 00
55, 000. 00
~
57,300.00
184,000. 00
49; 600. 00
.
Direct
Guarantee
Development company loans:
Direct
1
1
1
6 000. 00 6, 000. 00
12,500.00 12, 500. 00
9Q, 000.00 90, 000~ 00
6
1
2
33, 400. 00
12, 500. 00
215,000.00
33, 400. 00
12, 500. 00
215,000.00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Economic opportuity loans:
EOL I, direct
EOL II, direct
Displaced business loans:
Direct
Participation
3
2
1
0
0
0
73, 000. 00 73, 000. 00
75, 000. 00 37, 500. 00
10, 000. 00 10, 000. 00
0 0
0 0
0 0
5
4
1
3
3
1
128, 000. 00
275, 000. 00
10, 000. 00
34, 500. 00
166,000.00
10, 000. 00
128, 000. 00
187, 500. 00
10, 000. 00
34, ~00. 00
166,000.00
5,000.00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Displaced business loans:
Direct
1
0
2
0
45, 000. 00 45, 000. 00
0 0
46, 000. 00 23, 420. 00
0 0
7
1
2
1
185, 000. 00
20, 000. 00
46, 000. 00
15, 000. 00
185, 000. 00
10, 000. 00
23, 420. 00
15, 000. 00
95-198-68-21
PAGENO="0322"
318
SUMMARY' OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- . SBA share Num- SBA share
of.. Total amount amount . ber of Total amount amount
loans loans
CONNECTICUT-Continued
6TH CONGRESSIQNAL DISTRICT
Business loans:
Direct ._..._ 1 8, 700. 00 8, 700. 00 4 115, 000. 00 115, 000. 00
Part;cipation 3 235, 000. 00 170, 750. 00 6 385, 000. 00 275, 750. 00
Guarantee 4 484, 000. 00 416, 100. 00 6 646, 5O0~ 00 539,850. 00
Displaced business loans: Direct_ 0 0 0 2 53,700. 00 53,700. 00
UNIDENTIFIED CONGRESSIONAL DISTRICT
Economic opportunity loan:
EOL II: Participation
1
12,000.00
10,200. 00
STATE TOTALS
Business loans:
Direct `13 255, 000. 00 255, 000. 00 31 757,300.00 757,300. 00
Participation 8 440, 000. 00 322, 750. 00 22 1,210,000. 00 808, 000. 00
Guarantee 8 602,000. 00 501, 770. 00 12 818,500.00 663,270. 00
Economic opportunity loans:
EOL I: Direct 1 10,000.00 10,000. 00 7 28,800. 00 28 800. 00
EOLll:
Direct 0 1,000.00 1,000. 00 15 120,900.00 120,900. 00
Participation 0 0 0 1 12,000. 00 10,200. 00
Guarantee~ 1 12,500. 00 12,500.00 1 12,500.00 12, 500. 00
Displaced business loans:
Direct 0 0 0 6 234,700.00 234,700. 00
Participation 0 0 0 1 10,000.00 5,000. 00
Development company loans:
Direct 2 440,000.00 440,000.00 4 914,600.00 879,640.00
DELAWARE
AT LA
RGE CONGRESSIONAL DISTRICT-STATE
TOTALS
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL I: Direct
0 0 0
0 0 0
0 0 0
0 0 0
5
4
1
1
194,500.00
83,000. 00
100,000.00
3,000.00
194,500.00
60,500.00
85,000.00
3,000. 00
DISTRICT OF COLUMBIA
AT LARGE CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Displaced business loans:
Direct
2 33, 000~ 00 33, 000. 00
1 50, 000. 00 37, 500. 00
4 25,000.00 25, 000. 00
2 22, 000. 00 22, 000. 00
1 8,900. 00 8,900. 00
6
4
6
6
4
107, 000. 00
250, 000.00
44, 000.00
77, 500. 00
375, 365. 00
107,000. 00
182, 500. 00
44 000. 00
77, 500. 00
375, 365. 00
TOTALS
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Displaced business loans:
Direct
2 33, 000. 00 33, 000. 00
1 50, 000. 00 37, 500. 00
0 0 0
4 25, 000. 00 25, 000. 00
2 22, 000. 00 22, 000. 00
1 8, 900. 00 8, 900. 00
11
8
1
7
6
4
301, 500. 00
333, 000. 00
100, 000. 00
47, 000. 00
77, 500. 00
375, 365. 00
301, 500. 00
243,000. 00
85, 000. 00
47,000. 00
77, 500. 00
375, 365. 00
PAGENO="0323"
319.
SUMMARY `OF SEA LOAN APPROVAL ACTIVITY-Continued
Num~
ber Of
loans
April-June 1968
July 1967-March
1968
SBA share Num~' `
Total amount amount ber Of Total amount
loans.
SBA share
amount
~LORIDA~
131 CONGRESSIONAL DiS1RICT~
Business loans: .` .
t$irect. 0 45,000.00 45, 000. Oo~ ~ 97, 500~00 . . 93,750.00
ParticiPation 11 975, 100. 00 656,425. 00. 36 3,394,200. 00... 2,229, 550.00
Guarantee 1 18,500. 00 13, 875. 00' 12 .238,500. 00. . 186,425.00
Economic opportunity loans; S . S
£01 1: Guarantee 0 0 0 1. .7,800.00 7,800.00
£0111: S S S S S
Direct . 0. 0 .. . - 0 . 1 . 3, 500.00 3,500.00.
Guarantee 0 0 . 0 1 5,000.00 5,000.00
Disaster loans: Direct 10 82, 500. 00 82, 500.~00 35 256,900.00 256,900. 00
2D CONGRESSIONAL DISTRICT
Business loans: S
Direct -0 0 0 4 147, 000. 00 147,000. 00
Participation 1 100, 000. 00 65, 000. 00 7 590, OQQ. 00 410,000.00
Guarantee 7 456, 500.00 329, 250. 00 15 553, 2~0. 00 39~, 225. 00
Economic opportunity loans: S - S
EOL II: Direct 0 0 0 1 9,500.00 9,500. 00
Development company loans:
Direct 2 307,600. 00 307,600. 00 2 307, 600.00 307, 500. 00
3D CONGRESSIONAL DISTRICT
Business loans: `
Direct
Participation
Guarantee
Economic opportunity loans:
OLDirect
Guarantee
EOL II: Direct
Development company loans:
Direct ...
4
1
2
2
1
1
0
29,900. 00 29,900. 00
100,000. 00 50,000. 00
45,000.00 31,250.00
. S
23,000.00 23, 000. 00
2,000.00 1, 500. 00
5, 70Q. 00 5, 700.00
0 0
12
2
10
6
1
1
1
S
190,400.00
148,000.00
390,000.00
43,025.00
. 2,000.00
5,700,00
350,000.00
`
190 400.00
81,200.00
311,750.00
43,025.00
1,500.00
5,700.00
350,000. 00
4TH CONGRESSIONAL. DISTRICT
S
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOLI:
Direct
Guarantee
Development company loans:
Participation
Guarantee
4
0
1
2
1
0
1
.. S
48,930. 00 48,930.00
0 0
- .52, 000.00 34, 750. 00 -
11, 500. 00 11,500.00
18, 000.00 9,000. 00
0 0
312,880.00 291,592.00
8
4
6
7
1
1
1
178,930.00
416,000. 00
195, 100. 00
51,500.00
18, 000. 00
132,800. 00
312,880.00
178,930.00
233, 750. 00
127,925. 00
S
51,500.00
9,000. 00
119, 520. 00
291,592.00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL I: Direct
Disaster loans: Direct
3
2
6
2
0
S
34, 500.00 34,500. 00
45, 000. 00 27, 500. 00
523,200.00 466,350.00
6, 000. 00 6, 000. 00
0 0
16
11
14
5
1
262,000.00
627, 000. 00
766,200.00.
23, 500. 00
2, 000. 00
262, 000.00
433, 750.00
654,175.00
23, 500. 00
2, 000.00
PAGENO="0324"
32Q
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
,
`
.
I
~
.
*
Nun,-
her Of
April-June 1968
July 1967-March
1968
SBA share
Total amount amount
Mum-
ber of
Total amount
SBA share
amount
loans
loans,
FLOR1DA-Oontlnued
61RCONGRESSIQNAL DISTRICT
Business loans:
Dtreot. ~ ~ 148,000.00 148,000.00 20 321,500.00 32t, 500.00
Participation - 6 785, Q00~ 00 367,600.00 14 1, 3Q7, 500.00 685,800.00
Guarantee 13 540,400.00 420 850.00 23 1,079,400.00 716,600.00
Economic opportunity loans:
EOL I: Direct 11 0 0 4 28,000. 00. ~, 000,00
EOL II: Direct 3 42, 000. 00 42, 000.00 5 75, 000. 00 75. Q01~, 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 5,000. 00 0, 000.00 10 198, 000. 00 198, 000. 00
Participation 2 355, 000. 00 177, 500. 00 6 767, 500. 00 497, 455. 013
Guarantee 4 190,000.00 131,250.00 14 1,002,000.00 747,750.00
Economic op~ortunlty loans,
EOL II: ENrect 0 0 0 1 10, 000. 00 10, 000, 00
Development company loans:
Direct 1 80,000. 00 80, 000. 00 1 80, 000. 00 80, 000. 00
,
8TH .CONGRESSI
ONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL0l~ `` . * `
~irect
~ticipation~~___
0
0
1
0
0
0
0
9, 800. 00
~
0
0
. 0 ,
0
7, 350. 00
0
0
9
2
10
2
1
235, 500. 00
291,. 000.00
170, 800. 00
10,400. 00
7, 500. 00
235, 500. 00
160,970.00
133, 550. 00
S
10, 400. 00
6, 750. 00
9TH CONGRESSIONAL DISTRICT S
Business loans:
Di~OctL.. ~
Participation
Guarantee
Econ6mic opportunity loans:
EOL I: Direct
[OL II: Direct
1
3
4
0
0
6, 500. 00
450, 000. 00
828, 000. 00
S
0
0
6, 500. 00
225, 000, 00
539, 000. 00
S
0
0
19
9
16
2
2
366, 800. 00
837, 000. 00
1, 650, 800. 00
19, 000. 00
42, 000. 00
342, 860. 00
469, 250. 00
1, 148, 700. 00
19, 000. 00
42, 000. 00
5 5. ` .
1
0TH CONGRESSI
ONAL DISTRICT
S
Business loans: S
Direct 2 57, 000. 00 57, Q00. 00 17 330, 500. 00 330, 500. 00
Participation-~_~ 3 115, 000. 00 79, 750. 00 7 265, 000. 00 177, 250. 00
Guarantee - 6 410, 000. 00 326, 250. 00 17 1, 512, 500. 00 1, 100, 000. 00
Economic opportunity loans:
EOLI:Direct 0 0 0 5 41,700.00 41,700.00
EOL II: Direct 1 25, 000. 00 25, 000. 00 32 606, 000. 00 606, 000. 00
11TH CONGRESSIONAL DISTRICT
Business loans:
Direct 9 130, 000. 00 130, 000. 00 53 936, 600. 00 911, 600. 00
Participation 1 15, 000. 00 10, 500. 00 7 628, 000. 00 469, 000. 00
Guarantee 9 279, 000. 00 218, 850. 00 21 1, 187, 000. 00 926, 850. 00
Economic opportunity loans:
EOL I:
Direct 0 0 0 6 25,100.00 25,100.00
Guarantee 0 0 0 1 12,000.00 10,800.00
EOL II: Direct 8 126,700.00 126,700.00 19 260,700.00 260,700.00
Displaced business loans:
Direct 0 0 0 3 90, 500. 00 90, 500. 00
PAGENO="0325"
321
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-~Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amouni ber of Total amount amount
loans loans
FLORIDA--Continued
12TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 17, 000. 00 17, 000. 00 2 25, 000. 00 25, 000. 00
Participation 3 249, 000. 00 186, 750. 00 6 389, 000~00 289,250.00
Guarantee - 1 45, 000. 00 27, 000. 00 2 54, 000. 00 33, 750.00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 20, 000. 00 20, 000. 00
UNIDENTIFIED CONGRESSIONAL DISTRICT
Business loans: Direct 0 0 0 1 22, 600. 00 22, 600. 00
Business loans: Guarantee 1 160, 000.00 80,000. 00
STATE TOTALS
Business loans:
Direct 32 431, 830. 00 431, 830. 00 174 3, 312, 330. 00 3, 259~ 640. 00
Participation 33 3, 189, 100. 00 1, 846, 025. 00 111 9, 660, 200. 00 6, 137,275. 00
Guarantee 55 3, 397, 400. 00 2, 546, 025. 00 161 8,959, 550. 00 6, 560,700. 00
Economic opportunity loans:
EOL I:
Direct 6 40, 500. 00 40, 500, 00 35 231, 825. 00 231, 825. 00
Guarantee 2 20, 000. 00 10, 500. 00 4 39, 800. 00 29, 100. 00
EOL II:
Direct 13 199,400.00 199 400.00 65 1,042,800.00 1, 0lt2,~800. 00
Participation 0 0 0 1 7, 500. 00 6;h750. 00
Guarantee 0 0 0 1 5,000.00 5,000.00
Dipplaced business loans:
Direct 0 0 0 3 90, 500.00 90, 500. 00
Disaster loans: Direct 10 82, 500.00 82600.00 36 258,900.00 258,900.00
Development company loans:
Direct 3 381,600.00 387,600.00 4 737,600.00 737,600.00
Participation 0 0 0 1 132, 800. 00 119, 520. 00
Guarantee 1 312,880.00 291,592.00 1 312,880.00 291,592.00
GEORGIA
i6t CONGRESSIONAL D1~TRICT
.
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
£01 I: Direct
0
0
0
0
0 0
0 0
0 0
0 0
0
10
5
1
0
651, 000. 00
310, 000. 00
15,000. 00
0
523, 740. 00
267, 500. 00
15, 000. 00
2D CONGRESSIONAL DISTRICT
Buslnest loans:
Direct 1 7 000.00 7 000.00 4 104 000.00 104 000.00
Participation 7 642, 400.00 422, 130.00 20 1, 899, 220. 00 1, 420, 767. 60
Guarantee 2 150, 000. 00 123, 500. 00 4 230, 000. 00 194, 750. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 15, 000. 00 15, 000. 00
£01 II: Direct 0 0 0 1 6, 500. 00 6 500. 00
Development company loans,
participation 0 0 0 1 179, 200. 00 161, 280. 00
PAGENO="0326"
322
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
GEORGIA-Continued
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 4 000. 00 4 000. 00
Participation 3 250, 000. 00 191, 000. 00 8 514 000. 00 376' 900. 00
Guarantee 2 91,000.00 50,770.00 4 212 650.00 142 008.00
Economic opportunity loans
EOL II: Direct - 0 0 0 1 25, 000. 00 25, 000. 00
Development company loans:
Participation 0 0 0 1 388, 889. 00 350, 000. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 10,000.00 10,000.00 8 181 500.00 181 500.00
Participation 1 100 000. 00 50 000. 00 8 606 500 00 379 125 00
Guarantee 1 15, 000. 00 11, 250. 00 2 28' 000. 00 21' 000 00
Economic opportunity loans:
EOL I: Direct 0 0 0 3 25, 500. 00 25 500. 00
LOL II: Direct 0 0 0 5 61, 000. 00 61, 000. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 8, 000. 00 8 000. 00
Participation 1 35, 000.00 26,250. 00 2 62, 000.00 46 500.00
~uarantee 1 25, 000. 00 15, 000. 00 1 25 000.00 15 000 00
Econodilc opportunity loans:
EOL I Direct 0 0 0 1 5 000.00 5 000.00
EOL II Direct 1 1,000.00 1,000. 00 2 16, 000.00 16, 000.00
Displaced business loans: Di-
rect 1 224, 000. 00 224, 000. 00 1 239,473. 00 239, 473.00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 43,000.00 43, 000. 00 5 70,000.00 66,750. 00
Participation 2 45, 500. 00 34, 115. 00 7 425, 500. 00 293 915. 00
Guarantee 2 445,000.00 346,250. 00 3 483,600. 00 375, 200. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 180, 000. 00 180, 000. 00 3 33,000. 00 33,000.00
Participation 1 35, 000. 00 26, 500. 00 6 425, 000. 00 321 250. 00
Guarantee 5 129,500.00 100,575.00 10 275,300.00 203,175.00
Economic opportunity loans:
EOL I: Direct 1 2, 000. 00 2, 000. 00 1 2, 000. 00 2 000. 00
EOL II: Direct 0 0 0 5 75, 000. 00 75, 000. 00
Disaster loans: Direct 0 0 0 1 900, 000. 00 900, 000. 00
Development company loans:
Direct 1 195, 000. 00 195, 000. 00 1 195, 000. 00 195, 000. 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 99, 000. 00 99 000. 00
Participation 3 80, 000. 00 62,250. 00 15 781, 000. 00 574, 850. 00
Guarantee 1 32, 500. 00 29,250. 00 1 32,500. 00 29,250. 00
Development company loans:
Direct 0 1, 500.00 1, 500. 00 3 167,700. 00 167, 700. 00
PAGENO="0327"
823
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968 -
Num-
ber of
loans
SBA share Num-
Total amount amount her of
loans
Total amount
SBA share
amount
GEORGIA-Continued
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Development company loans:
Direct
2
0
0
0
2
2
21,000.00 21,000.00 2
0 0 6
0 0 2
0 0 1
35, 000. 00 35, 000. 00 4
246,000.00 246, 000. 00 6
21,000.00
370,000.00
86,000.00
17,500.00
50, 500.00
795,000.00
21,000.00
265, 500. 00
64,500.00
17,500.00
50,500. 00
795,000.00
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Development company loans:
Direct
1
0
2
0
0
0
25, 000. 00 25, 000. 00 3
0 0 7
56, 500. 00 45,400. 00 4
0 0 1
0 0 2
0 0 1
67, 000. 00
359, 000. 00
102, 500. 00
2,000. 00
22, 500. 00
340,000. 00
67,000. 00
263, 000. 00
79,900. 00
2, 000. 00
22, 500. 00
340, 000. 00
STATE TOTALS
Business loans:
Direct 7 74, 000. 00 74,000. 00 28 587,500. 00 584,250. 00
Participation 18 1, 187,900. 00 812,245. 00 90 6,093,220. 00 4,465, 547.60
Guarantee 16 944, 500. 00 721,995. 00 36 1,784,550. 00 1 392,283. 00
Economic opportunity loans:
EOL I: Direct 1 2,000. 00 2,000. 00 9 82,000.00 82,000. 00
EOL II: Direct 3 36, 000. 00 36,000. 00 20 256,500. 00 256,500. 00
Displaced business loans: Direct. 1 224, 000. 00 224,000. 00 1 239,473. 00 239,473. 00
Disaster loans: Direct 0 0 0 1 900,000. 00 900,000. 00
Development company loans:
Direct 3 439,500. 00 439,500. 00 11 1,497,700. 00 1,497,700. 00
Participation 0 0 0 2 568,089. 00 511,280. 00
HAWAII
AT LARGE CONGRESSIONAL DISTRICT-STATE TOTALS
Business loans:
Direct 1 55, 000.00 55, 000. 00 10 232, 000. 00 230, 500. 00
Participation 6 282,800. 00 237,270. 00 29 1,541,300. 00 1, 322,995. 00
Guarantee 1 25,000. 00 22, 500. 00 1 25,000. 00 22, 500. 00
Economic opportunity loans:
EOL I: Direct 1 5,000. 00 5,000. 00 1 5,000. 00 5,000. 00
EOL II: Direct 0 0 0 3 25, 000. 00 25, 000. 00
Displaced business loans: Parti-
cipation.. 0 0 0 0 8,200. 00 7,380.00
Disaster loans: Direct 20 48,023.00 48,023.00 20 48,023.00 48,023.00
Development company loans:
Direct 0 0 0 1 320, 000. 00 320,000. 00
Participation 0 0 0 2 168, 000. 00 151, 200. 00
IDAHO
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 3 130, 000. 00 130, 000. 00 18 551, 800. 00 550, 370. 00
Participation 4 187, 000. 00 165, 100. 00 10 305, 100. 00 271, 390. 00
Guarantee 3 135, 000. 00 121, 500. 00 7 578, 800. 00 518, 295. 00
Economic opportunity loans:
EOL I: Direct 3 26, 000. 00 26, 000. 00 3 26, 000. 00 26, 000. 00
EOL II: Direct 0 0 0 1 4,000.00 4,000.00
PAGENO="0328"
324
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-~--Continued
April-June 1968
July 1967-March
1968
Num- SBA share Num-
SBA share
ber. of Total amount amount ber of
Total amount
amount
,oans loans
IDAHO-Continued
1ST CONGRESSIONAL DISTRICT-Continued
Displaced business loans:
Direct
Development company loans:
Direct
0 0 0 1
1 315,000.00 315000.00 3
96, 700. 00
688,201.00
96, 700. 00
688,201.00
20 CONGRESSIONAL DISTRICT
Business loans:
Direct 1 48, 000. 00 48, 000. 00 7 207, 000. 00 207, 000. 00
Participation 11 511, 500. 00 424,300. 00 33 1, 828, 000. 00 1,459,800. 00
Guarantee 3 123, 500. 00 111, 150. 00 5 431, 000. 00 387,900. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 2,500.00 2,500. 00
EOL II: Participation 1 25, 000 00 22,500.00 0 0 0
STATE TOTALS
Business loans:
Direct 2 82, 000. 00 82, 000. 00 25 758, 800. 00 757 370. 00
Participation 15 698, 500. 00 589, 400. 00 43 2, 133, 100. 00 1, 731, 190. 00
Guarantee 6 258, 500. 00 232, 650. 00 12 1, 009,800. 00 906, 195. 00
Economic opportunity loans:
EOL I: Direct 3 26, 000. 00 26, 000. 00 4 28, 500. 00 28, 500. 00
EOL II:
Direct 0 0 0 1 4, 000. 00 4, 000. 00
Participation . 1 25, 000. 00 22, 500. 00 0 0 0
Displaced business loans:
Direct 0 0 0 1 96,700. 00 96, 700. 00
Development company loans:
Direct 1 315, 000. 00 315, 000.00 3 688,201. 00 688, 201. 00
ILLINOIS
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 13,000.00 13,000.00
Guarantee 3 263, 000. 00 206, 700. 00 4 463, 000. 00 386, 700. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 6, 000. 00 6, 000. 00
EOL II:
Direct 2 49, 000. 00 49, 000. 00 4 98, 500. 00 98, 500. 00
Guarantee 4 85, 000. 00 85, 000. 00 4 85, 000. 00 85, 000. 00
Disaster loans: Direct 0 0 0 3 23, 500. 00 23, 500. 00
20 CONGRESSIONAL DISTRICT
Business loans:
Direct 2 15,000. 00 15, 000. 00 2 15, 000. 00 15, 000. 00
Guarantee 1 250,000. 00 225, 000. 00 1 250, 000. 00 225, 000. 00
Displaced business loans:
Direct 1 9, 000. 00 9, 000. 00 1 9, 000. 00 9, 000. 00
3D CONGRESSIO
NAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
EOL I: Direct
1
0
1
12, 000. 00
0
500. 00
12, 000. 00
0
500. 00
3
2
1
29 000. 00
385, 000. 00
500. 00
29, 000. 00
346, 500. 00
500. 00
EOL II:
Direct
Guarantee
Disaster loans: Direct
0
1
0
0
25, 000. 00
0
0
25, 000. 00
0
2
1
2
22, 000. 00
25, 000. 00
57, 000.00
22, 000. 00
25, 000. 00
57, 000. 00
PAGENO="0329"
32~
SUMMARY 01? SBA' LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Mum- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
ILLINOIS-Continued
4TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 1 25, 000. 00 22, 500. 00 1 25, 000. 00 22, 500. 00
Economic opportunity, EOL II:
Guarantee 0 0 0 1 10,000.00 10,000.00
Disaster loans: Direct 0 0 0 27 281,965. 00 281, 965. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 35, 000. 00 35 000. 00 2 60, 0000. 00 60, 000. 00
Guarantee 0 0 0 1 150, 000. 00 120, 000. 00
Economic opportunity loans,
EOL II:
Direct 0 0 0 1 22, 000. 00 22, 000. 00
Guarantee 1 20, 000. 00 20, 000. 00 1 20, 000. 00 20 000, 00
Disaster loans: Direct 0 0 0 1 700. 00 700. 00
6TH CONGRESSIONAL DISTRICT
Business loans: Direct
Economic opportunity loans:
EOL I:
Direct
Guarantee
1
0
0
9, 000. 00
0
0
9, 000. 00
0
0
1
1
1
9, 000. 00
9,300, 00
15,000.00
9, 000. 00
9,300. 00
13~500.00
Business loans:
Direct 1 100, 000. 00 90,000.00 5 485, 000.00 475, 000. 00
Guarantee 0 0 0 2 265, 000. 00 208, 500. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 15, 000. 00 15,000. 00
EOL II: Direct 0 0 0 3 53, 000. 00 53, 000. 00
Displaced business loans:
Direct 0 0 0 1 188, 000. 00 188, 000. 00
8TH CONGRESSIONAL DISTRICT
~ ~ ,-,,- ._~~_~~___*. ~ .,..__, *._.**_. .__.___~. _~.____~~_~_* ~ .,.._,_ ,,.,_. ~ .__.*_. _~_~___. ~.._. ...~ ~ _.,. _.._. _.,,._ ~ ~ ~
Business loans:
Direct 0 0 0 4 210, 000. 00 210,000. 00
Participation 1 85, 000. 00 63,750. 00 2 210, 000. 00 157, 500. 00
Guarantee 0 0 0 1 65, 000. 00 58, 500. 00
Economic ouportunity loans:
EOL II: Oirect 1 15, 000. 00 15,000.00 1 15, 000. 00 15, 000. 00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 63, 000. 00 63, 000. 00
Guarantee 2 36, 000. 00 24,480. 00
10TH CONGRESSIONAL DISTRICT
Economic opportunity loans:
EOL I: Oirect 0 0 0 1 8, 000. 00 8 000. 00
EOL II: Direct 0 0 0 1 7 000.00 7 000.00
Disaster loans: Direct - 1 . 8, 190. 00 8, 190. 00 34 89,980. 00 89, 980. 00
PAGENO="0330"
326
SUMMARY OF SBA LOAN APPROVAL_ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
ILLINOIS-Continued
11TH CONGRESSIONAL DISTRICT
Busines loans:
Direct 1 13, 000. 00 13, 000. 00
Guarantee 1 25,000.00 22,500.00
12TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 1 75, 000. 00 67, 500. 00 3 110, 000. 00 93, 750. 00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 12, 000. 00 12, 000. 00
Disaster loans: Direct 4 728, 900. 00 728, 900. 00 28 1, 016, 400. 00 1, 016, 400. 00
13TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Disaster loans: Direct
0
2
0
0
3, 500. 00
0
3, 500. 00
3
1
50
125, 000. 00
9, 000. 00
93, 200. 00
124, 000. 00
6, 750. 00
93,200. 00
14TH CONGRESSIO
NAL DISTRICT
Business loans:
Direct 1 29, 000. 00 29, 000. 00 2 44, 000. 00 44 000. 00
Guarantee 1 35, 000. 00 19, 250. 00 2 85, 000. 00 56, 750. 00
Displaced business loans: Direct 0 0 0 1 12, 000, 00 12, 000. 00
15TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 1 30, 000. 00 19, 800. 00 3 403, 000. 00 303, 000. 00
16TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 25, 000. 00 25, 000. 00
Participation 1 150, 000. 00 75, 000. 00
Disaster loans: Direct - 1 9,700. 00 9,700. 00
Development company loans:
Participation 1 310,220. 00 279, 198. 00
~ ___._. __~_--,___ --~- _._.-_ ~ -- ____. __. ---- ~ _~._.__ --~--
17TH CONGRESSIONAL DISTRICT
Business loans: Direct 2 11, 000. 00 11, 000. 00 2 11, 000. 00 11, 000. 00
Economic opportunity loans,
EOL II: Guarantee 1 25, 000. 00 16,666. 00 1 25, 000. 00 16,666. 00
18TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 1 15, 000. 00 13, 500. 00 3 37, 000. 00 31, 500. 00
Economic opportunity loans: -
EOL I: Guarantee 1 15,000. 00 15, 000. 00 1 15, 000. 00 15, 000. 00
EOL II:
Direct 0 0 0 1 25, 000. 00 25, 000. 00
Guarantee 1 11,000.00 11,000.00 1 11,000.00 11,000.00
-.-~ .._..~ -. -..- ..~ .-..-.. ... .~ .-.-~ .-.- -___, --~ .
19TH CONGRESSIONAL DISTRICT
Business loans:
Participation 1 150, 000. 00 112, 500. 00 1 150, 000. 00 112, 500. 00
Guarantee . 1 75, 000. 00 48. 750. 00 6 390, 500. 00 287, 700. 00
PAGENO="0331"
327
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount berof Total amount amount
loans loans
ILLINOIS-Continued
20TH CONGRESSIONAL DISTRICT
Business loans:
000. 0
Direct
Participation
Guarantee
1
1
1
50,000.00
8, 000. 00
10, 000. 00
50,
7, 200. 0
7, 500. 0
21ST CONGRESSIONAL D!STRICT
Business loans: Guarantee 3 138, 000. 00 124,200. 00
E~onomic opportunity loans:
EOL I: Direct 1 6 500. 00 6 500. 00
EO1. II: Guarantee 0 0 0
Displaced Business Loans:
Development Company
Loans: Participation 0 0 0
6
2
1
1
341, 000.00
17,000.00
4,500. 00
96,000. 00
271,700. 00
~
17,000.00
4,500.00
86,400.00
22D CONGRESSIONAL DISTRICT
Business loans:
500.00
Direct 1 20,000. 00 20,000. 00
Participation 1 25, 000. 00 18,750. 00
Guarantee 1 25, 000. 00 22, 500. 00
Economic opportunity loans
EOL I: Direct 0 0 0
2
1
1
1
45,000.00
25,000. 00
25,000. 00
15, 000. 00
42,
18,750. 00
22, 500.00
15, 000. 00
23D CONGRESSIONAL DISTRICT
Business loans:
000. 00
Participation 0 0 0
Guarantee 1 .45, 000. 00 40,500. 00
Economic opportunity loans:
EOL I: Direct 1 12,000.00 12,000.00
EOL II:
1
2
2
100, 000. 00
120, 000. 00
27, 000~ 00
90,
108, 000. 00
27,000.00
000. 00
Direct 1 15, 000. 00 15, 000. 00
Guarantee___~ 1 11,000.00 .9,900.00
2
1
18,000. 00
11,000.00
18,
9,900.00
24TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 0 0 0
Economic opportunity loans
EOL I: Direct 1 8, 000. 00 8, 000. 00
1
1
220,000.00
8,000. 00
22,000.00
8, 000. 00
STATE TOTALS
.
.
Business loans:
Direct 10.. 231, 000. 00 221, 000. 00. 33 1,197, 000, 00 1, 183,500. 00
Participation 3 260, 000.00 195, 000. 00 7 643, 000. 00 460,950.00
Guarantee 15 976,000.00 810,200. 00. 44 3,414,500. 00 2,625,830. 00
Economic opportunity loans: .
EOL I:
Direct 4 27,000.00 27, 000. 00 11 105,800. 00 105,800.00
Guarantee 1 15,000.00 15, 000. 00 2 .30,000.00 28, 500. 00
EOLII:
Direct 4 79,000.00 79, 000. 00 16 272,500. 00 272,500.00
Guarantee 9 177,000.00 167,566.00 11 191,500.00 182,066.00
Displaced business loans:
Direct 1 9,000.00 9,000. 00 3 209,000. 00 209,000.00
Disaster loans: Direct 7 740,590.00 740, 590. 00 146 1,572,445. 00 1,572,445. 00
Development company loans:
Participation 0 0 0 2 406,220 00 365,598.00
PAGENO="0332"
328
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share hum- SBA share
her of Total amount amount ber of Total amount amount
loans loans
INDIANA
UNIDENTIFIED CONGRESSIONAL DISTRICT
Business loans: Participation 1 35,000.00 31,500.00
Economic opportunity loans,
EOL II: Direct 1 3, 000. 00 3, 000. 00
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 3 32, 500. 00 32, 500. 00
Guarantee 2 65, 000. 00 52, 000. 00
Economic opportunity loans,
EOL II: Direct 2 10, 500. 00 10, 500. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 3 88, 000. 00 88,000. 00
Guarantee 2 310, 000. 00 222, 500. 00 2 310, 000. 00 222, 500. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 20, 000. 00 20, 000. 00 3 53,000. 00 53,000. 00
Participation 0 0 0 6 362, 045. 00 279, 693. 00
Guarantee 0 0 0 2 125,000.00 108,750.00
Displaced businessloans:
Participation 1 55, 000. 00 44, 000. 00 1 55,000.00 44, 000. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 7, 500. 00 7, 500. 00 5 157, 500, 00 157, 500. 00
Participation 1 65,000. 00 58, 500. 00 2 215, 000. 00 193, 500. 00
Guarantee 0 0 0 1 150,000.00 112,500.00
Displaced business loans:
Direct 0 0 0 1 22,400. 00 22, 400. 00
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL II: Direct
0
1
0
1
0
8, 000. 00
0
8, 000. 00
0
7, 200. 00
0
8, 000. 00
2
2
2
1
38, 500. 00
32, 000. 00
300, 000, 00
8, 000. 00
38, 500. 00
23, 200. 00
265, 000. 00
8, 000. 00
*
6TH CONGRESSIO
NAL DISTRICT
Business lOans:
Direct 3 65, 000. 00 65, 000. 00 6 90, 500. 00 90, 500. 00
Participation 1 20, 000. 00 15, 000. 00 3 146, 500. 00 128, 025. 00
Guarantee 1 15, 000. 00 13, 500. 00 1 15, 000. 00 13, 500. 00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 6,000.00 6,000.00
Dis~ilaced businesslOans: Direct. 1 39, 500. 00 39, 500. 00 1 39, 500. 00 39, 500. 00
PAGENO="0333"
329
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Mum-
ber of
loans
Total amount
SBA share
amount
lANA-Continued
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 15, 000. 00 15, 000. 00 1 15, 000. 00 15, 000. 00
Participation 1 36, 000. 00 27, 000. 00 2 65, 000. 00 48 750, 00
Guarantee 3 82, 200. 00 72, 300. 00 6 150,200. 00 133, 500. 00
Economic opportunity loans, S
EOL II: Direct 1 6, 000. 00 6, 000. 00 2 13, 000. 00 13,000 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 40, 000. 00 40, 000. 00 3 75, 000. 00 75, 000. 00
Participation 1 125, 000. 00 93, 750. 00 2 175, 000. 00 138,750. 00
Guarantee 3 46,400.00 41,760.00 3 46,400.00 41,760.90
Economic opportunity loans,
EOL II Direct 2 12,500.00 12,500.00 2 12,500.00 12,500.00
Development company loans:
Participation 1 28, 000. 00 25, 200. 00 1 28, 000.00 25, 200. 00
9TH CONGRESSIOF~AL DISTRICT S
BusineSs loans:
Participation 1 100, 000. 00 70, 000. 00 2 150, 000. 00 110, 000. 00
Guarantee 2 22, 500. 00 17, 700. 00 4 70, 500. 00 57, 900. 00
Economic opportunity loans,
EOL I: Guarantee 1 15,000.00 9,450, 00 1 15,000.00 9,450.00
10TH CONGRESSIONAL DISTRICT
Business loans: S
Direct 2 46, 000. 00 46, 000. 00 3 56, 000, 00 56, 000. 00
partIcipation 0 0 0 2 120, 0010. 00 94, 200. 00
Guarantee 0 0 0 1 40, 000. 00 36, 000. 00
11TH CONGRESSIONAL DISTRICT S
Business loans: 5~55. ~S
DireCt 2 18, 500. 00 7, 250. 00 8 86, 500..0O.~ 7~, ~5O~ 00
Participation 1 45, 000. 00 36, 000. 00 2 60, 000. 00 47, ~5Q~Q0
Economicopportunity loafl~:
EQL I: DirecL~._ 3 15,000.00 15,000.00 4 .17, 000. ~ ..~0p0.00
EOL II: DireCt 2 25, 750. 00 25, 750. 00 5 46, 250. 00 .. ~46 ZOO. 00
Displaced business loans: Direct_ 0 0 0 1 45, 000. 00 45, 000. 00
STATE TOTALS
St~
Business loans: S
Direct 12 212, 000. 00 200,750.00 37 692, 500. 00~ ;68t~*2~0. 00
Participation 7 399, 000. 00 307, 450. 00 24 1, 360, 545. 00 ~, O94~68. 00
Guarantee 11 476, 100. 00 367, 760. 00 24 1, 272, 100. Q~L S 1~ 043~.410. 500
Economic opportunity loans: S S
EOLI: S
Direct 3 15, 000. 00 15, 000. 00 4 17, 000. 00 . 1~, 000. 00
~3earantee . 1 1.5, 000. 00 9, 450. 00 1 15, 000. 00 9, 450. 00
EOL II: Direct 6 52,250.00 52,250.00 14 99,250,QO 99,250,Q0
Displaced business loans: S
Direct 1 39,500.00 39,500.00 3 106~900.00 . 106, 9011X QO
Participation 1 55, 000. 00 44, 000. 00 1 55, 000. 00 44,000. 00
Development company loans:
Participation 1 28, 0001 OO~ 25, 200. 00 1 28, 0001 00 25, 200. 00
PAGENO="0334"
330
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount her of Total amount amount
loans loans
IOWA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
Development company loans:
Direct
Participation
0
0
2
0
1
1
0 0
0 0
70, 000. 00 51, 800. 00
0 0
90, 000. 00 90, 000. 00
109, 000. 00 98, 100. 00
1
2
2
2
1
2
15, 000. 00
220, 000. 00
70, 000. 00
8, 000. 00
90, 000. 00
166, 600. 00
15, 000. 00
180, 000. 00
51, 800. 00
8, 000. 00
90, 000. 00
149, 940. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL I: Direct
Displaced business loans: Direct_
Development company loans:
Direct
0
0
2
0
1
0
0 0
0 0
382, 000. 00 295, 980. 00
0 0
24, 500. 00 24, 500. 00
0 0
1
1
7
1
6
1
15, 000. 00
58, 000. 00
787, 500. 00
1, 000. 00
495, 500. 00
320, 000. 00
15, 000. 00
43, 500. 00
660, 930. 00
1, 000. 00
495, 500. 00
288, 000. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans
EOL I: Direct
Disaster loans: Direct~__..
0
1
2
0
0
0 0
54, 000. 00 40, 500. 00
60, 000. 00 35,000. 00
0 0
0 0
1
3
7
1
6
65,000. 00
256, 500. 00
140, 500. 00
14,000. 00
36, 500. 00
65, 000. 00
184,250. 00
98, 160. 00
14,000.00
36,500. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Participation
Guarantee
Economic opportunity loans
~Ol. I: Guarantee
EGLII:
Direct
Participation
Guarantee
3
3
0
1
0
0
225,000. 00 174, 500. 00
168,600. 00 126,090.00
0 0
3,000. 00 3,000. 00
0 0
0 0
6
9
1
1
1
1
483, 500. 00
380,700. 00
15, 000. 00
3,000.00
22, 000. 00
7,000. 00
366,050. 00
282, 450. 00
13,500. 00
3,000. 00
16,500. 00
5,250. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II:
Direct
Guarantee
Displaced business loans: Di-
rect
Development company loans:
Direct
0
0
5
1
0
0
0
0
0 0
0 0
284,000. 00 240,600. 00
14, 000. 00 14, 000. 00
0 0
0 0
0 0
21, 000. 00 21, 000. 00
1
1
9
1
3
1
1
0
9,500. 00
70,000.00
362, 500. 00
14,000. 00
25,000.00
20,500. 00
8,500. 00
21, 000. 00
9,500. 00
45, 500. 00
301,750. 00
14, 000. 00
25,000. 00
20, 500. 00
8,500. 00
21, 000. 00
PAGENO="0335"
331
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
IOWA-Continued
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL I: Direct
Uevelopment company loans:
Participation
0
2
8
0
0
0 0
75, 000. 00 56,250. 00
207, 000. 00 182, 400. 00
0 0
0 0
1
4
12
1
1
20,000. 00
150,000. 00
544, 500. 00
8,000.00
170, 000. 00
20, 000. 00
123,750. 00
481 275, 00
8, 000.00
136,000. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Participation
Guarantee
Disaster loans: Direct
Development company loans:
Participation
0
8
1
0
0 0
504,100.00 438,090.00
3, 000. 00 3, 000. 00
0 0
5
11
8
1
228 500. 00
542,100.00
157, 500. 00
296, 000. 00
185 925. 00
465,290.00
157, 500. 00
266, 400. 00
STATE TOTALS
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
Direct -
Guarantee
EOL II:
Direct
Participation
Guarantee
Displaced business loans:
Direct
Disaster loans: Direct
Development company loans:
Direct
Participation
0
6
30
1
0
1
0
0
1
1
1
1
0 0
384, 000. 00 271,250. 00
1,675,700. 00 1,369,960. 00
14, 000. 00 14,000. 00
0 0
3, 000. 00 3,000. 00
0 0
0 0
24, 500. 00 24, 500. 00
3,000.00 3,000.00
111,000.00 111,000. 00
109,000.00 98, 100.00
5
22
57
6
1
4
1
2
7
14
2
4
124, 500.00
1,466, 500. 00
2, 827, 800. 00
45, 000. 00
15, 000. 00
28,000.00
22, 000.00
27,500.00
504,000.00
194, 000.00
431,000.00
632,600.00
124, 500.00
1, 128,975. 00
2,341,655. 00
45, 000. 00
13, 500.00
28, 000, 00
16, 500.00
25,750.00
504 000. 00
194,000. 00
399,000.00
552,340.00
KANSAS
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 8,000.00 8,000.00
Participation 7 483,500.00 M7, 400. 00 22 1,110,400.00 884,965.00
Guarantee 23 878,800.00 696,300.00 43 1,552,000. 00 1,265,625.00
Economic opportunity loans:
EOL I:
Direct 0 0 0 2 18,500.00 18,500.00
Guarantee 1 10, 000. 00 9,000. 00 3 32,000.00 24,250.00
EOL II: Participation 0 0 0 1 25,000. 00 18,750. 00
Disaster loans: Direct 0 0 0 8 22, 500. 00 22,500. 00
Development company loans:
Participation 0 0 0 2 700, 000. 00 630,000. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 14, 500.00 14,500. 00
Participation 1 60, 000. 00 30, 000.00 5 374, 000,00 280,500.00
Guarantee 10 655, 000. 00 510,050.00 20 1,331,000.00 1,020,200. 00
Economic opportunity loans:
EOL I:
Direct 0 0 0 1 3,000.00 3,000.00
Guarantee 0 0 0 1 5,000.00 5,000.00
PAGENO="0336"
332
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num- SBA share Num-
ber of Total amount amount ber of
loans loans
Total amount
SBA share
amount
KANSAS-Continued
2D CONGRESSIONAL DISTRICT-CONTINUED
Displaced business loans:
Direct
Development company loans:
Participation
0 0 0 1
0 0 0 1
175, 000. 00
160,800.00
175, 000. 00
144,700.00
3D CONGRESSIONAL DISTRICT
Business loans:
Participation 0 0 0 5 185, 345. 00 134, 008. 75
Guarantee 6 372, 000. 00 281, 850. 00 21 667, 890. 00 491, 725. 50
Economic opportunity loans:
EOL I: Direct 1 900. 00 900. 00 1 900. 00 900. 00
EOL II:.
Direct 0 0 0 1 5, 000. 00 5, 000. 00
Guarantee 1 17,500.00 14,000.00 1 17,500.00 14,000.00
Displaced business loans: Direct 1 105, 000. 00 105, 000. 00 1 105, 000, 00 105, 000. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 4 236, 000. 00 236, 000. 00 9 384, 000. 00 384, 000. 00
Participation 4 499, 000. 00 286, 100. 00 15 877, 300. 00 594,420. 00
Guarantee 8 170,500.00 136,425.00 24 1,042,300.00 916,995.00
Economic opportunity loans:
EOL I:
Direct 2 11, 900. 00 11, 900. 00 3 20,900. 00 20, 900. 00
Guarantee 1 8, 000. 00 7,200. 00 2 18, 000. 00 16, 200. 00
EOL II: Direct 0 0 0 1 3,000. 00 3, 000. 00
Displaced business loans: Direct_ 1 25, 000. 00 25, 000. 00 1 25, 000. 00 25, 000. 00
Development company loans:
Direct 0 0 0 3 99, 400. 00 99, 400. 00
Guarantee 1 8, 000. 00 7, 200. 00 1 8, 000. 00 7, 200. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 15, 000. 00 15, 000. 00 1 15, 000. 00 15, 000. 00
Participation 1 55,000.00 49, 50000 8 384, 500. 00 298, 500. 00
Guarantee 9 849, 600. 00 690, 830. 00 24 1, 951, 100. 00 1,473,785. 00
Economic opportunity loans:
EOL I:
Direct 0 0 0 0 4, 400. 00 4, 400. 00
Guarantee 1 6,600.00 5,940.00 2 14, 100, 00 12,690.00
Development company loans:
Direct 0 0 0 1 105, 200. 00 105, 200. 00
ADDITION AL
Business loans: Guarantee 1 15, 000, 00 13, 500. 00
.
STATE TOTALS
Business loans:
Direct 5 251,000.00 251,000.00 13 421,500.00 421,500.00
Participation 13 1,097,500.00 713,000.00 55 2,931,545.00 2,192,393.75
Guarantee 56 2,925,900. 00 2,315,455. 03 133 6, 559, 290. 00 5, 181, 830. 50
Economic opportunity loans:
EOL I:
Direct 3 12, 800. 00 12, 800. 00 7 38, 900. 00 38,900. 00
Guarantee 3 24, 600. 00 22, 140. 00 8 69, 100. 00 58, 140. 00
EOLII:
Direct 0 0 0 2 8, 000. 00 8, 000. 00
Participation 0 0 0 1 25, 000. 00 18,750. 00
Guarantee 1 17,500.00 14,000.00 1 17,500.00 14,000.00
PAGENO="0337"
333
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
Mum-
ber of
loans
- ~
July 1967-March
Total amount
-. .--.... ---- ..-, ..-
1968
SBA share
amount
.-
-..-. -.
.,.. ...-.---.,,..
Num-
ber of
loans
-.-,--.
SBA share
Total amount amount
-. .. ---~ ~ .-.__~. ..
KANSAS-Continued
~_.
._
STATE TOTALS-Continued
.__~. ._. .,._____
._____________.._.._..__
Displaced business loans:
Direct 2 130, 000. 00 130, 000. 00 3 305, 000, 00 305, 000. 00
Disaster loans: Direct 0 0 0 8 22, 500. 00 22, 500. 00
Development company loans:
Direct 0 0 0 4 204,600. 00 204, 600. 00 -
Participation 0 0 0 3 860, 8Q0. 00 774, 700. 00
Guarantee 1 8, 000. 00 7, 200. oo 1 8, 000. 00 7, 200. 00
KEN TU C KY
1ST CONGRESSIONAL DISTRICT
Business loans: . - -
Direct 0 0 0 1 9 500. 00 9, 500. 00
Participation 5 262, 500. 00 201, 873. 40 16 1, 101,475. 00 793, 100. 90
Guarantee 1 25, 000. 00 22, 500. 00 6 377, 152. 00 255, 076. 00
Economic opportunity loans,
EOLII:
Direct 0 0 0 2 9, 000. 00 9, 000. 00
Participation 0 0 0 1 15, 500. 00 11, 625. 00
Disaster loans: Direct 1 80,000. 00 80, 000. 00 1 80,000. 00 80,000. 00
---. -.-. -~-- --. ..------~---..- --- --- ---. --. .-. .---- -- ..______.. --- ------ --- -- .-.
-- - 2D CONGRESSIONAL DISTRICT
.-- --.--.--....- .. -~-- -.- .. .. ....-..- -.
Business loans:
Participation 8 299, 400. 00 231, 210. 00 23 1, 169,400. 00 906,758. 40
Guarantee 0 0 0 2 474,000. 00 355, 500. 00
Economic opportunity loans:
EOL I: Direct - 1 5, 000. 00 5, 000. 00 1 - 5,000. 00 5,000. 00
EOL II:
Direct 0 0 0 1 5,000. 00 5, 000. 00
Guarantee 1 16, 500. 00 12, 375. 00 1 16, 500. 00 12, 375. 00
Disaster loans: Direct 0 0 0 8 97,800. 00 - 97, 800. 00
Dovelopmeht company Loans:
Participation 0 25,000,00 0 -. - 1 425, 000.00 350, Q00. 00
.- -~ ~...- `.. -~ ----- .- --- --
- 3D CONGRESSIONAL DISTRICT
Business loans: - - -
Direct 0 0 0 . 3 70,610. 00 - 70,670. 00
Guarantee 5 510, 000. 00 388, 250. 00 8 978,000. 00 739, 250. 00
Economic opportunity loans:
- EOL DIrect~~__ .1 6, 400. 00 6, 400. 00 7 49, 300. 00 49, 300. 00
EOL II: Direct 1 25, 000. -00 25, 000. 00 - 1 25,000. 00 25, 000. 00
Displaced business loans:
Direct 3 306, 300. 00 30~, 300. 00 8 610, 000.00 610800. 00
4TH CONGRESSIONAL DISTRICT
Business loans: - - -
Direct ,~.. 0 0 0 3 37, 000. 00 37, 000 00
Participation 3 246,000.00 207,000.00 9 921,000.00 640,980,00
Guarantee 2 435, 000. 00 330, 000. 00 2 .435,000. 00 330,000. 00
Economic opportunity loans: -
EOLI: Direct -0 0 0 --1 12,000.00 12,000.00
FOL II: Direct 0 0 0 2 17, 500. 013 17, 500. 00
- - - 5Th CO1'IGRESSIONAL DISTRICT .. ...
Business loans:
Direct 0 0 0 5 88, 500. 00 88, 500. 00
Participation 4 281,500.00 221, 350~ 00 9 544,500.00 432,740.00
Guarantee 2 90, 000.00 43,000.00 4 115, 000.00 62, 500. 00
05-198--68----22
PAGENO="0338"
334
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
KENTUCKY-Continued
5TH CONGRESSIONAL DISTRICT-Continued
Economic opportunity loans:
EOL I: Direct
EOL II:
Direct
Participation
Disaster loans: Direct
0
2
1
1
0 0
18, 500. 00 18, 500. 00
27, 700. 00 24,930. 00
750. 00 750. 00
1
4
1
18
7,000. 00
34, 000. 00
27, 700. 00
44,265. 00
7, 000. 00
34, 000.00
24,930. 00
44,265. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Development company loans:
Direct
Participation
0
1
3
0
0
0 0
60, 000. 00 45,000. 00
435, 000. 00 335, 500. 00
0 0
148, 000. 00 0
1
2
3
1
0
15, 000. 00
96, 000. 00
435, 000. 00
165, 000. 00
148, 000. 00
15 000. 00
73,800.00
335, 500. 00
165, 000. 00
0
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Disaster loans: Direct
1
1
3
0
1
0
25, 000. 00 25,000. 00
150, 000. 00 135, 000. 00
235,250.00 181,725.00
0 0
5,000. 00 5,000. 00
0 0
3
12
5
3
2
1
54, 000. 00
1, 152, 000. 00
585,250.00
28, 500. 00
27, 000. 00
13, 000. 00
54, 000. 00
914,250. 00
496,725.00
28,500.00
27, 000. 00
13, 000. 00
STATE TOTALS
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOLI: Direct
EOL II:
Direct
Participation
Guarantee
Displaced business loans:
Direct
Disaster loans: Direct
Development company loans:
Direct
Participation
1
22
16
2
4
1
1
3
2
0
0
25, 000. 00 25, 000. 00
1,299,400. 00 1,041,433. 40
1,730,250.00 1,300,975.00
11,400.00 11,400.00
48, 500. 00 48, 500. 00
27, 700. 00 24,930. 00
16, 500. 00 12,375. 00
306,300. 00 306,300. 00
80,750.00 80,750. 00
0 0
173, 000. 00 0
16
71
30
13
12
2
1
8
28
1
1
274,670. 00
4,984,375. 00
3,399,402.00
101,800.00
117,500. 00
43,200. 00
16,500.00
610,800. 00
209,065. 00
165, 000. 00
573, 000. 00
274,670. 00
3,761,629.30
2,574,551.00
101,800.00
117,500.00
36,555.00
12,375.00
610,800.00
209,065.00
165,000.00
350,000. 00
LOUISIANA
151 CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL I: Direct
Disaster loans: Direct
1
0
0
0
0
10,000.00 10,000. 00
0 0
0 0
0 0
0 0
9
2
1
1
1
138,900.00
104,000.00
200. 000.00
25,000.00
300.00
138,900. 00
93,600.00
180,000. 00
25,000. 00
300. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee -
1
0
0
18,000.00 18, 000. 00
0 0
0 0
8
1
2
106,900.00
165,000.00
215,000.00
106,900.00
148,500.00
193,500.00
PAGENO="0339"
335
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March 1968
Num-
ber of
loans
SBA share Num-
Total amount amount ber of
loans
Total amount
SBA share
amount
LOUISIANA-Continued
3D CONGRESSIONAL DISTRICT
Business loans:
Participation 2
Guarantee 1
Economic opportunity loans,
EOL II: Direct 4)
Disaster loans: Direct 0
45,000.00 33,750. 00 6
30, 000. 00 24, 000,00 1
0 0 1
0 0 1
400, 000. 00
30,000.00
21,000.00
11,000.00
295,250. 00
24, 000. 00
21,000. 00
11,000.00
4TH CONGRESSIONAL DISTRICT
Business loans:
Participation 2
Guarantee 2
Economic opportunity loans:
EOL I:
Direct 0
Guarantee 1
EOL II:
Direct 0
Participation 0
Guarantee 1
37, 000. 00 33, 300. 00 6
32, 000. 00 28, 460.00 2
0 0 1
7, 000. 00 7, 000.00 1
0 0 1
0 0 1
7, 500. 00 7, 500.00 3
348, 400. 00
29, 000. 00
15, 000. 00
7, 000. 00
5, 000. 00
10, 000. 00
51, 500. 00
234, 810. 00
28,460. 00
15, 000. 00
7, 000. 00
5, 000. 00
9, 000. 00
48,900. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0
Participation 1
Guarantee 1
Economic opportunity loans:
EOL I: Direct 0
EOL II: Participation 1
0 0 2
40, 000. 00 36, 000. 00 4
65, 000. 00 48, 750. 00 2
0 0 1
16,200. 00 11,700. 00 1
47,000.00
480, 000. 00
210,000. 00
7,000. 00
16,200. 00
47,000.00
328, 500. 00
179,250. 00
7, 000. 00
11, 700. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1
Participation 2
Guarar.tee 0
Economic opportunity loans:
EOL I: Direct 0
EOL II: Direct 0
Disaster loans: Direct 0
Development company loans:
Direct 0
12, 300. 00 12, 300. 00 8
64,200.00 54,610.00 13
0 0 1
0 0 1
0 0 1
0 0 38
0 0 1
301,300. 00
759,200.00
300, 000. 00
1,500.00
15, 000.00
154,700. 00
193,380.00
298, 550. 00
613, 160. 00
270, 000. 00
1, 500. 00
15, 000. 00
154,700. 00
193, 380, 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1
Participation 1
Guarantee 3
Economic opportunity loans:
EOL II 0
17,000.00 17,000.00 4
50, 000. 00 40, 000. 00 4
158, 500. 00 126, 800. 00 7
0 0 1
222,000.00
174, 500. 00
243, 500. 00
17, 500. 00
219 000.00
138, 300. 00
198,050. 00
17, 500. 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2
Participation 0
Guarantee 2
43,000.00 43,000.00 3
0 0 1
450,000. 00 392, 100. 00 3
63,000.00
60, 000. 00
800,000. 00
63,000.00
54, 000. 00
707, 100. 00
PAGENO="0340"
336
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
LOU lSlANA-~-Continued
STATE TOTALS
Business loans:
Direct 6 100,300. 00 100, 300. 00 34 879, 100. 00 873, 350. 00
Participation 6 136,200. 00 117, 660. 00 37 2,491, 100. 00 1,906, 120. 00
Guarantee 9 735,500.00 620,110.00 19 2,027,500.00 1,780,360.00
Economic opportunity loans:
EOLI:
Direct 0 0 0 4 48, 500. 00 48, 500. 00
Guarantee 1 7, 0013. 00 7, 000. 00 1 7, 000. 00 7 000. 00
EOL II:
Direct 0 0 0 4 58, 500. 00 58, 500. 00
Participation 1 16, 200. 00 11,700. 00 2 26, 200. 00 20, 700. 00
Guarantee 1 7, 500. 00 7, 500. 00 3 51, 500. 00 48, 900. 00
Disaster loans: Direct 0 0 0 40 166, 000. 00 166, 000. 00
Development company loans:
Direct 0 0 0 1 193,380.00 193,380.00
~
MAINE
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 3 34, 000. 00 34, 000, 00 13 124, 850. 00 124, 850. 00
Participation 2 48, 000. 00 37, 200. 00 12 505, 700. 00 391, 244. 00
Guarantee 5 113,000.00 92,625.00 10 255,000.00 184,725.00
Economic opportunity loans:
EOL I:
Direct 1 15, 000. 00 15, 000. 00 6 65, 500. 00 65, 500. 00
Guarantee 0 0 0 2 8, 000. 00 8, 000. 00
EOL II Direct 0 0 0 1 25, 000. 00 25, 000. 00
Disaster loans: Direct 0 0 0 8 18, 735. 00 18, 735. 00
Development company loans:
Direct 1 129, 250. 00 129,250. 00 1 129, 250. 00 129, 250. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 2 21, 500. 00 21, 500. 00 11 144, 500. 00 144, 500. 00
Participation 7 386, 500. 00 287,250. 00 18 994, 000. 00 704, 575. 00
Guarantee 11 805, 300. 00 684, 820. 00 17 1,256, 800. 00 1, 090,270. 00
Economic opportunity loans:
EOLI:
Direct 1 1,700.00 1,700.00 13 117,300.00 117,300.00
Guarantee 1 15, 000. 00 15, 000. 00 4 30, 700. 00 30, 700. 00
EOL II:
Direct - 0 0 0 3 70, 500. 00 70, 500. 00
Guarantee 0 0 0 2 35, 000. 00 35, 000. 00
Displaced business loans: Par-
ticipation 0 0 0 1 150, 000. 00 135, 000. 00
Development company loans: ..
Direct 2 123, 000. 00 123, 000. 00 4 314, 885. 00 314, 885. 00
Participation 1 42, 000. 00 42, 000. 00 0 0 0
ADDITIONAL
750. 00
...
Business loans: Particip
.....~
ation
..-~. ~ .. ., --......... ...--... .. ..
... ..
25, 000. 00
...- .~..
18,
-..
STATE TOTALS
Business loans:
Direct 5 55, 500. 00 55, 500. 00 24 269, 350. 00 269,350. 00
Participation 9 434, 500. 00 324, 450. 00 31 1, 524, 700. 00 1, 114,369. 00
Guarantee 16 918,300.00 777,445.00 27 1,511,800.00 1,274,995.00
PAGENO="0341"
337
SUMMARY OF SBA LOAN APPROVAL ACTIViTY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
MAlNE~-Continued
STATE TOTALS-Continued
Economic opportunity loans:
EOL I:
Direct 2 16,700.00 16,700.00 19 182,800,00 182,800.00
Guarantee 1 15, 000. 00 15, 000. 00 6 38,700. 00 38, 700. 00
EOLII:
Direct 0 0 0 4 95, 500. 00 95, 500.
Guarantee: 0 0 0 2 35,000.00 35,000.00
Displaced business loans:
Participation 0 0 0 1 150, 000. 00 135,000. 00
Disaster loans: Direct 0 0 0 8 18,735.00 18,735.00
Development company loans:
Direct 3 252, 250. 00 252, 250. 00 5 444, 135. 00 444, 135, 00
Participation 1 42, 000. 00 42, 000. 00 0 0 0
MARYLAND
1ST CONGRESSIONAL DISTRICT
Business lOans:
00
Direct 0 0 0 2 40, 000. 00 40,
Participation 0 0 0 6 611,000.00 458,250.00
Economic opportunity loans:
EOLI:Direct 0 0 0 3 17,500.00 17,500.00
EOLII:Direct 0 0 0 2 31,000.00 31,000.00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 20, 000. 00 20, 000. 00 3 36, 500. 00 36, 500. 00
Participation 0 0 0 2 300~ 000. 00 175, 000. 00
Guarantee 2 440, 000. 00 386,000. 00 4 503, 000. 00 433, 250 00
Economic opportunity loans:
EOL II: Direct 0 0 0 6 125, 000. 00 125,000. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 3 35, 000.00 35,000. 00 8 158w 300.00 158, 300. 00
Participation 0 0 0 2 65, OQO. 00 36,250. 00
Guarantee 1 50, 000. 00 45,000. 00 1 50, 000. 00 45, 000. 00
Economic opportunity loans:
EOL I: Direct 1 4,000. 00 4,000. 00 3 21, 000. 00 21,000.00
EOL II; Direct 1 25, 000. 00 25,000. 00 7 99,800. 00 99, 800. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
00
Direct 1 50, 000. 00 50, 000. 00 6 162, 300. 00 162, 300.
Participation 1 60, 000. 00 30, 000. 00 4 281, 400. 00 196, 050. 00
Guarantee 0 0 0 1 30, 000. 00 22, 500. 00
Economic opportunity loans:
EOL I Direct 0 0 0 1 10,600. 00 10,600. 00
EOL II: Direct 0 0 0 2 27, 000. 00 27, 000. 00
Displaced business loans:
Direct 0 0 0 2 800,909. 00 800, 9Q9. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
00
Direct 1 100, 000, 00 100, 000. 00 7 303, 000. 00 303,
Participation 1 300, 000. 00 141, 000. 00 1 300, 000. 00 141, 000. 00
Economic opportunity loans,
EOL II: Participation 0 0 0 1 18,000.00 15,500.00
PAGENO="0342"
338
SUMMARY OF SBA LOAN. APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-,
SBA share
Num-
ber of
loans
Total amount amount
ber of
loans
Total amount
~
share
amount
MARYLAND-Continued
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Displaced business loans:
Direct
1
0
0
1
0
0
30, 000. 00 30, 000. 00
0 0
0 0
10, 000. 00 10, 000. 00
0 0
0 0
7
3
4
3
2
1
215, 000. 00
328, 000.00
560,000.00
32, 000. 00
29, 500. 00
171,500.00
215, 000. 00
246, 000. 00
450,000.00
32, 000. 00
29, 500. 00
171,500.00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Displaced business loans:
Direct
0
0
1
3
2
0
0 0
0 0
50, 000. 00 37, 500. 00
28, 500. 00 28, 500. 00
38 200. 00 38 200. 00
0 0
6
1
1
7
17
1
130, 000. 00
120, 000. 00
50, 000. 00
60, 575. 00
309 100. 00
10, 000. 00
130, 000. 00
90, 000. 00
37, 500. 00
60, 575. 00
309, 100.00
10,000. 00
8TH CONGRESSIONAL DISTRICT
.
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL I: Direct
1
2
2
0
10, 000. 00 10, 000. 00
145, 000. 00 119, 250. 00
183, 000. 00 138, 450, 00
0 0
6
4
3
1
189, 500. 00
293, 000.00
239, 000. 00
4, 500, 00
189, 500. 00
230, 250. 00
180, 450. 00
4, 500. 00
STATE TOTALS
.
Business loans:
Direct 8 245, 000. 00 245, 000. 00 45 1, 234, 600. 00 1, 234, 600. 00
Participation 4 505, 000. 00 290, 250. 00 23 2, 298, 400. 00 1, 572, 800. 00
Guarantee 6 723, 000. 00 606, 950. 00 14 1, 432, 000. 00 1, 168, 700. 00
Economic opportunity loans:
EOL I: Direct ` 5 42 500. 00 42, 500. 00 18 146, 175. 00 :146, 175. 00
EOLII: ,
Direct 3 63, 200. 00 63, 200,00 36 621, 400. 00 ` 621, 400. 00
Participation. 0 0 . 0 1 18,000.00 ` 15, 500. 00
Displaced business loans:
Direct 0 . 0 0 . 4 . 982, 409. 00 982, 409. 00
MASSACHUSETTS
Business loans:
.
Direct
Participation
Guarantee
Economic opportunity loans,
EOL~ Direct
Displaced business loans:
Direct
Participation
1
2
2
0
0
1
3, 000. 00
110,000. 00
130, 000. 00
0
100, 000. 00
200, 000. 00
3 000. 00
55', 000. 00
97, 000. 00
0
16, 000. 00
116, 000. 00
5
9
5
1
2
1
59, 000. 00
591, 200, 00
577, 000. 00
4, 000.00
350, 000. 00
200, 000. 00
58, 000. 00
357, 900. 00
423, 000. 00
4,000. 00
350, 000. 00
116, 000. 00
PAGENO="0343"
339
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
MASSACHUSEfl'S-Continued
2D CONGRESSIONAL DISTRICT
Business loans:
Dirett 0 0 0 5 111,000.00 109,500.00
Participation 5 233,900. 00 189,210. 00 6 243,900.00 198,210. 00
Guarantee 2 125, 000. 00 107, 000. 00 5 420,000.00 372, 500. 00
Economic opportunity loans:
EOL I: Direct 1 6,000. 00 6,000, 00 1 6,000. 00 6,000.00
EOL II:
Direct 1 15,000. 00 15, 000. 00 4 56,000. 00 56, 000.00
Participation 2 19,000. 00 17, 100. 00 2 19,000. 00 17, 100.00
Guarantee 1 10,000. 00 10,000. 00 3 50,000.00 50,000.00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 75,000. 00 75,000. 00 6 171,900. 00 171, 900. 00
Participation 2 75,000.00 56,250. 00 9 1,033,000.00 679,084. 00
Guarantee 6 419,000.00 347,600. 00 10 1,409, 000. 00 1,008, 100. 00
Economic opportunity loans,
EOL II:
Direct 0 0 0 1 7, 500. 00 7, 500. 00
Participation 1 20,000.00 18,000. 00 1 20,000.00 18,000. 00
Displaced business loans:
Direct 0 0 0 2 41,600. 00 41,600. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 3 42, 500. 00 2, 500. 00 7 112, 500. 00 100, 500. 00
Participation 5 600, 000. 00 283, 500. 00 21 1,797,000. 00 1, 078,740. 00
Guarantee 1 94, 000. 00 84,600. 00 2 169,000. 00 152, 100. 00
Displaced business loans:
Direct 3 507,000. 00 507, 000. 00 9 760,000. 00 760,000. 00
PartIcipation 0 0 0 1 30,000.00 27,000. 00
Development company loans:
Direct 0 0 0 0 32,000.00 0
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Development company loans:
Direct
0
2
4
1
0 0
42, 500~ 00 31,325. 00
491,000. 00 321,250. 00
80,000. 00 80, 000. 00
2
8
9
2
52,000.00
572, 500. 00
926, 000. 00
133, 000. 00
48,400. 00
398,825. 00
709,000. 00
~
220,000. 00
TH CONGRESSIONAL DISTRICT
Business loans:
*Direct
Participation
Guarantee
Displaced business loans:
Direct
Disaster loans: Direct
Development company loans:
Direct
3
1
2
1
2
0
49, 160 00 49, 160.00
70,000. 00 42,000.00
435, 500.00 267, 500. 00
25, 500.00 25,500 00
13,000.00 13,000. 00
0 0
8
8
4
2
8
1
183,760.00
549,500.00
510, 500.00
90, 50.0,00
32,900.00
58,000.00
183,760. 00
431, 100.00
335,000.00
90, 500.00
32,900.00
136,000.00
PAGENO="0344"
340
SUMMARY OF SEA LOAN APPROVAL ACTIVITY--Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num~ SBA share
ber of Total amount amount ber of Total amount amount
loans loans
MASSACHUSETTS-Continued
Business loans:
Direct
Participation -- -
Guarantee
Economic opportunity loans,
EOL II: Direct
Displaced business loans:
Direct
4
1
2
1
1
74, 000. 00
12,000. 00
75, 000.00
17,000.00
2, 500. 00
74, 000. 00
9, 000. 00
63, 750. 00
17,000.00
2, 500. 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 25, 000. 00 25, 000. 00 14 268,400. 00 268,400. 00
Participation 5 375, 000. 00 236, 500. 00 14 965,000.00 692, 500. 00
Guarantee 3 340, 000. 00 283, 000. 00 4 375, 000.00 314 500. 00
Economic opportunity loans:
EOL I: Direct 1 8, 000. 00 8, 000. 00 2 10, 000. 00 10 000. 00
EOL II: Direct 2 30,000.00 30,000.00 3 45,000.00 45,000.00
Displaced business loans:
Direct 8 8, 544, 000. 00 8, 544, 000. 00 12 9, 142,900. 00 9 142, 900. 00
Disaster loans: Direct 0 0 0 2 8, 500. 00 8, 500. 00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II:
1
3
0
2
5, 000. 00 5, 000.00
465, 000. 00 219, 500.00
0 0
19, 000. 00 19, 000. 00
6
8
1
11
257, 000. 00
866, 000. 00
100, 000. 00
83, 200. 00
257, 000. 00
516, 750. 00
90, 000. 00
83,200. 00
Direct
Guarantee
Displaced business loans:
Direct
Participation
9
0
2
1
65,000. 00 65, 000.00
0 0
115, 000. 00 115,000.00
90,000. 00 67, 500. 00
17
1
7
1
163, 500. 00
20, 000. 00
452, 300. 00
90, 000. 00
163, 500. 00
20,000. 00
452, 300. 00
67, 500. 00
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
3
1
0
169,400. 00 169,400. 00
40,000.00 30, 000. 00
0 0
5
5
1
214,400. 00
216,000. 00
25,000.00
214,400. 00
161, 000. 00
22,500.00
11TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 35, 000, 00 3~ 000, 00 9 169, 800. 00 169, 800. 00
Participation 1 100, 000. 00 90, 000. 00 10 741, 000.00 050, 500. 00
Guarantee 3 70, 000. 00 59, 210. 00 4 170, 000. 00 149, 2~0. 00
Displaced business loans:
Direct 1 10, 000. 00 10, 000. 00 1 10, 000. 00 10, 000. 00
Disaster loans: Direct 0 0 0 3 5, 100, 00 5, 100. 00
12TH CONGRESSIONAL DISTRICT
Business loans:
Direct 5 29, 000. 00 29, 000. 00 10 153,200. 00 153. 200. 00
Participation 3 128, 000. 00 194, 750. 00 14 764, 500. 00 601.575. 00
Guarantee 1 8, 000. 00 7,200. 00 7 185, 000. 00 165, 000. 00
PAGENO="0345"
341
SUMMARY OF SEA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
her of Total amount amount ber of Total amount amount
loans loans
~
MASSACHUSETTS-Continued
12TH CONGRESSIONAL DISTRICT-Continued
Economic opportunity loans:
EOL I:
Direct 0 0 0 5 27, 200. 00 27,200. 00
Participation 0 0 0 2 11,000.00 9,500.00
Guarantee 1 5, 100. 00 5, 100. 00 1 5, 100. 00 5, 100. 00
EOLII:
Direct 1 25, 000. 00 25, 000. 00 1 25, 000. 00 25, 000. 00
Guarantee 0 0 0 1 4, 000. 00 4, 000. 00
Displaced business loans:
Participation 0 0 0 1 65, 000. 00 58, 500. 00
Disaster loans: Direct 1 6, 000. 00 6, 000. 00 21 74, 400. 00 74, 400. 00
ADDITIONAL
-
Business loans: Guarantee 1 100, 000.00 90, 000. 00
Economic opportunity loans,
EOL II: Direct 1 3 000. 00 3,000. 00
STATE TOTALS
Business loans:
Direct 20 298, 060. 00 343, 060. 00 81 1, 826,960. 00 1, 808, 860. 00
Participation 30 2,239, 400. 00 1, 338, 035. 00 113 8, 351, 600. 00 5,675, 184. 00
Guarantee 24 2, 112, 500. 00 1, 574,400. 00 55 5,041, 500. 00 3, 894, 700. 00
Economic opportunity loans:
EOL I:
Direct 4 33 000. 00 33,000. 00 19 126,400.00 126,400. 00
Participation 0 0 0 2 11, 000. 00 9, 500. 00
Guarantee 1 5, 100. 00 5, 100. 00 1 5, 100. 00 5, 100. 00
EOL II:
Direct 13 135,000.00 135,000.00 29 321,000.00 321,000.00
Participation 3 39, 000. 00 35, 100. 00 3 39000. 00 35, 100. 00
Guarantee 1 10, 000. 00 10,000. 00 5 74, 000. 00 74,000. 00
Displaced business loans:
Direct 15 9, 101, 500. 00 9, 185,500. 00 36 10,849,800.00 10,849,800. 00
Participation 2 2~0, 000. 00 183, ~00. 00 4 385,000. 00 269,000. 00
Disaster loans: Direct 3 19, 000. 00 10,000. tib 34 120,900. 00 120,900. 00
Development company loans:
Direct 1 80,000. 00 80,000. 00 3 159, 000. 00 356,000. 00
MICHIGAN
UNID
ENTIF1ED CONGRESSIONAL DISTRICT
Business loans: Participation__
Disaster loans: Direct
0
0
0 0
0 0
1
2
25, 000, 00
39, 000. 00
22, 500. 00
39, 000. 00
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 113,000.00 113,000.00
Guarantee 2 100,000.00 82,500.00 2 100,000. 00 82,500.00
Economic opportunity loans:
EOL I: Direct 4 41,200.00 41,200.00 14 117,100.00 117,100.00
EOL II:
Direct 2 36, 000. 00 36, 0013. 00 5 78 000. 00 78, 000. 00
Guarantee 1 25, 000. 00 25, 000, 00 1 25, 000. 00 25, 000. 00
Disaster loans: Direct 16 441,300. 00 441,300. 00 106 1,974, 700. 00 1, 974,700. 00
2D CONGRESSIONAL DISTRICT
Business loans: guarantee
Economic opportunity loans,
EOL II; direct
1
0
81,600. 00
0
43, 000. 00
0
2
1
101,600. 00
8,000. 00
58, 000. 00
8, 000. 00
PAGENO="0346"
342
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
MICHIGAN-Continued
3D CONGRESSIONAL DISTRICT
Business loans:
Participation._. 0 0 0 1 75, 000. 00 60,000. 00
Guarantee 2 152, 000. 00 136, 800. 00 4 302,000. 00 238,300. 00
Disaster loans: Direct 0 0 0 1 8,000.00 8,000. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Participation 0 0 0
Guarantee 2 220, 000. 00 175, 000. 00
Economic opportunity loans:
EOL: II Direct 0 0 0
Displaced business loans:
Direct 1 28,000. 00 28, 000; 00
4
4
1
1
327, 200. 00
440,000. 00
25,000. 00
28,000. 00
250, 380. 00
333,000. 00
25, 000.00
28,000. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0
Participation 0 0 0
Guarantee 2 85, 000. 00 71,250.00
Economic opportunity loans:
EOL II: Direct 0 0 0
Disaster loans: Direct 0 0 0
2
1
6
3
4
28,200. 00
100,000. 00
701,000. 00
42,400.00
34,400. 00
28,200. 00
90,000. 00
549,750. 00
42,400. 00
34,400. 00
6TH 1~ONGRESSIONAL DISTRICT
Business loans: Guarantee 2 225, 000. 00 202, 500.00
Displaced business loans:
Direct 0 0 0
4
1
462, 000. 00
81, 000. 00
385, 800. 00
81, 000. 00
7TH CONGRESSIONAL DISTRICT
Business loans: Direct
1
5, 000. 00
5, 000. 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0
Guarantee 2 45, 000. 00 31, 250. 00
Displaced business loans:
Direct 0 2, 000. 00 2, 000. 00
Development company loans:
Direct 2 151,820.00 77,000.00
1
4
1
4
7, 500. 00
155, 000. 00
15, 500. 00
421,000.00
7, 500. 00
116, 000. 00
15, 500. 00
421,000.00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 30, 000. 00 30, 000. 00
Participation 0 0 0 1 10, 000. 00 5, 000. 00
Guarantee 2 280, 000. 00 252, 000. 00 4 647, 900. 00 545, 610. 00
Business loans:
Participation
Guarantee
Economic opportunity loans,
EOL II: Direct
0
2
0
0
105, 000. 00
0
0
81, 900. 00
0
3
3
1
104, 000. 00
145, 000. 00
6, 000. 00
78, 960. 00
117, 900. 00
6, 000. 00
PAGENO="0347"
343
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
MICHIGAN-Continued
11TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 27, 500. 00 27, 500. 00
Participation 2 55, 000. 00 37, 500. 00 5 174, 000. 00 127, 750. 00
Guarantee 5 378,700. 00 305,280. 00 28 2,065,200. 00 1, 448, 055. 00
Economic opportunity loans:
EOL I: Direct 1 10,000.00 10,000.00 4 47,100.00 47,100.00
EOL II:
Direct 0 0 0 2 43, 000. 00 43, 000. 00
Participation 0 0 0 1 25, 000. 00 22, 500. 00
Guarantee 1 25, 000. 00 22, 500. 00 1 25, 000. 00 22, 500. 00
Development company loans:
Direct 0 0 0 1 350, 000. 00 350, 000. 00
Participation 1 67, 500. 00 37, 500. 00 1 67, 500. 00 37, 500. 00
12TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 3 22, 500. 00 22, 500. 00
Participation 0 0 0 1 100,000 00 90, 000. 00
Guarantee 2 210, 000. 00 189, 000. 00 3 310, 000. 00 254,000. 00
Disaster loans: Direct 4 15, 300. 00 15, 300, 00 19 63, 000. 00 63, 000. 00
Development company loans:
Direct 1 159,600. 00 159,600.00 1 159,600. 00 159,600.00
13TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 33, 500. 00 33, 500.00 5 90, 500.00 90, 500. 00
Participation 0 0 0 1 25, 000, 00 12, 500. 00
Guarantee 2 40, 000.00 36, 000.00 9 790,000. 00 566, 000. 00
Economic opportunity loans:
EOL I: Direct 3 24, 000. 00 24 000.00 8 62, 000.00 62, 000. 00
EOL Ii: Direct 0 0 0 1 6,000,00 6 000. 00
Displaced business loans:
Direct 2 1,191, 000. 00 1, 191, 000.00 5 1,425 500. 00 1,425,500, 00
Disaster loans: Direct 21 183,900. 00 183,900.00 98 1,463,700, 00 1,463,700. 00
14TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 139,000.00 139, 000. 00
Guarantee 1 75, 000. 00 67, 500. 00 3 116,000.00 104,400. 00
Economic opportunity loans:
EOL I: Direct 1 6, 000. 00 6, 000. 00 1 6,000.00 6, 000. 00
Disaster loans: Direct 0 0 0 4 22,300. 00 22, 300. 00
15TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
1
1
6, 000. 00
7, 000. 00
6, 000. 00
3, 500. 00
2
2
41, 000. 00
22, 000, 00
41,000. 00
14,750. 00
16TH CONGRESSIO
NAL DISTRICT
Business loans:
Direct 0 0 0 2 70,000. 00 70,000. 00
Guarantee 2 90, 000. 00 69, 000. 00 4 320, 000. 00 264, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 9,600. 00 9,600. 00
Displaced business loans:
Direct 0 0 0 1 42, 000. 00 42, 000, 00
Disaster loans: Direct. 0 0 0 6 36,700. 00 36, 700. 00
PAGENO="0348"
344
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-Marc
h 1968
Num-
SBA share
Num-
ber of
Total amount amount
her of
SBA share
loans
loans
Total amount
amount
MICHIGAN-Continued
17TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans,
EOL I: Direct
Disaster loans: Direct
1
1
0
0
45, 000. 00 45, 000. 00
16, 700. 00 15, 030. 00
0 0
0 0
7
5
5
3
147, 000. 00
203, 137. 00
24, 500. 00
45, 200. 00
147, 000. 00
357, 873. 30
24, 500. 00
45, 200. 00
18TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Disaster loans: Direct
0
0
1
4
0 0
0 0
8, 000. 00 7,200. 00
60, 200. 00 60,200. 00
4
1
3
54
39, 000. 00
40, 000. 00
138, 000. 00
232, 150. 00
39, 000. 00
30, 000. 00
94, 700. 00
232, 150. 00
19TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
0
1
0 0
35, 000. 00 31, 500. 00
1
2
12, 500. 00
135, 000. 00
12, 500. 00
106, 500. 00
STATE TOTALS
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL 1: Direct
EOL II:
4
2
33
9
84, 500. 00 84, 500. 00
55, 000. 00 37, 500. 00
2, 154, 000. 00 1,800, 210. 00
81, 200. 00 81,200. 00
34
19
92
33
772, 700. 00
980, 200. 00
7, 153,837. 00
266 300. 00
772, 700. 00
767 090. 00
5,637, 138. 30
266 300. 00
Direct
Participation
Guarantee
Displaced business loans:
Direct
Disaster loans: Direct
Development company loans:
Direct
Participation
2
0
2
3
45
3
1
36,000. 00 36,000. 00
0 0
50, 000. 00 47, 500. 00
1,221, 000. 00 1,221, 000. 00
700, 700. 00 700, 700. 00
7, 780. 00 236,600. 00
67, 500. 00 37, 500. 00
14
1
2
9
297
6
1
208, 400. 00
25, 000. 00
50, 000. 00
1, 592,000.00
3,919, 150. 00
930,600. 00
67, 500. 00
208, 400. 00
22, 500. 00
47, 500. 00
1,592, 000. 00
3,919,150.00
930,600. 00
37, 500. 00
MINNESOTA
1ST CONGRESSIONAL DISTRICT
Business loans:
Participation
Guarantee
Economic opportunity loans,
EOL I: Direct
Disaster loans: Direct
4
7
0
0
272, 500. 00 191, 520. 00
510, 000. 00 398, 300. 00
~
0 0
0 0
7
15
1
4
517, 500. 00
772, 500. 00
10,000. 00
359, 853. 00
592,975. 00
10, 000. 00
Development company loans:
Direct
Participation
0
0
0 0
20, 000. 00 18, 000. 00
1
2
52,700.
320,000. 00
150, 500. 00
52, 700. 00
320, 000. 00
135, 450. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Development company loans:
Direct
Participation
0
2
8
0
1
0 0
187, 000. 00 111, 000. 00
657, 000. 00 565, 300. 00
0 0
240, 000. 00 212, 400. 00
1
7
24
2
1
8, 100. 00
466, 800. 00
1, 266, 200. 00
187, 900. 00
240, 000. 00
7, 290. 00
328, 350. 00
1, 031, 085. 00
187, 900. 00
212, 400. 00
PAGENO="0349"
a45
SUMMARY OF SEA LGAN APPROVAL ACTIVITY--Continued
*
April-June 1968
SBA share
Total amount amount
Ilum'
ber of
loans
July 1967-March 1968
SBA share
Total amount amount
Nerd-
ber of
loans
MINNESOTA-Continued
3D CONGRESSIONAL DISTRICT
Businesslbans:
Direct.
Guarantee
Econordic. opportunity loans:
EOL I: Direct
EOL II: Direct
Development company loans:
Participation
0
3
1
1
1
0 0
54,000.00 41,000. 00
10,000.00 10,000.00
7,500.00 7,500.00
72,000.00 64,800.00
1
5
1
1
2
6,000. 00
98,000.00
10,000.00
7, 500. 00
144,000. 00
8,000. 00
79; 150 00
10,000. 00
7, 500. 00
129,600. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 47, 000. 00 47, 000.00 2 72,000. 00 72, 000. 00
Participation 1 60, 000. 00 45, 000.00 .2 120, 000. 00 99, 000. 00
`Goarantee 3 191, 000. 00 148, 000.00 10 604,000. 00 477, 250. 00
Economic opportunity 1Q3n$:
EOL I: Direct 0 0 0 2 13, 300. 00 13, 350. 00
EQL II: Direct 0 0 1 8,000. 00 8,0(10. 00
Displaced business lOans:
Direct ~.. - 0 0 0 2 341,700. 00 341, 700. 00
Disaster loans: Direc~.,..,_ 1 53,30(1. 0(1 53,300. 00 2 55, 500. 00 55, 500. 00
5T14 CONGRESSIONAL DISTIIICT
Business loans:
Direct~~
P~rticipation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II:
0
*2
7
3
.
0
93,000. 00
535, 000. 00
9, 500. 00
0
69,750. 00
422, 200. 00
9, 500. 00
2
3
13
4
34,960.00
233,000.00
760,500.00
11,000. 00
305. 00
34, 96Q. 00
U4,750. 00
620,350. 00
11, 000. 00
305. 00
Direct
Guarantee
Displaced business loans:
Direct
Participation ...,. -
5
2
0
1
56, 305.00 56, 305. 00 .
31,500.00 31,500.00
.
232,650. 00 232, 650. 00
27, 000. 00 24,300. 00
7
2
3
1
76,
31,500.00
993, 750. 00
49, 000. 00
31,500.00
944,000.. 00
444 1(10. 00
.
6TH CONGRESSI
ONAL DISTRICT
Business loans:
Participation_.. - 3 555, 000. 00 322 500. 00 12 1,244, 000. 00 839, 100. 00
Guarantee 5 263,000.00 210)950.00 17 1,272,900.00 841;99oo0
Economic opportunity loans:
EOL I: Direct 0 0 0 1 4, 400. 00 4, 400. 00
Development company loans:
Direct 0 1, 000. 00 1, 000. 00 1 31, 200. 00 31, 200. 00
Participation 2 409,600. 00 368,640. 00 4 569,600. 00 492,240. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 8, 000. 00 8 000. 00 3 15, 500. 00 15, 500. 00
Participation 3 136, 000. 00 112,400. 00 16 921, 000. 00 768,550. 00
Guarantee 2 50, 000. 00 33,900. 00 16 565, 100. 00 383, 3~5. 00
Economic opportunity loans,
EOL I: Direct 0 0 0 1 2, 500. 00 2, 500. 00
Displaced business loans:
Direct 2 61, 500. 00 61, 500. 00 4 341, 500. 00 341, 500. 00
Development company loans:
Direct 1 86,000. 00 86, 000. 00 1 86, 000. 00 86, 000.00
Guarantee 0 0 0 1 55,200.00 41,400.00
PAGENO="0350"
346
SUMMARY OF SBA LOAN. APPROVAL ACTIVITY-Continued
.
.
*
Num--
ber of
loans
April-June 1968
July 1967-March
1968
SBA share
Total amount amount
*.
Num-
ber of
loans
Total amount
SBA share
amount
MINNESOTA-Continued
8TH CONGRESSIONAL DISTRICT
Business loans:
Participation 2 165,000. 00 108,200. 00 3 205,000. 00 144~200. 00
Guarantee _._ 5 130,000.00 114,750.00 16 685,500.00 *. 561,675.00
Economic opportunity loans,
EOL I: Direct. 3 10,800. 00 10, 800. 00 4 22,800. 00 22,800 00
Business loans: Guarante
e 1 38, 000. 00 34,200. 00
STATE TOTALS
Business loans:
Direct 3 55, 000. 00 55, 000. 00 9 136, 560. 00 135 750. 00
Participation 17 1,468, 500.00 960,370. 00 50 3,707,300. 00 2,713,803. 00
Guarantee 40 2,390,000. 00 1,934,400. 00 117 6,062,700. 00 4,622, 000. 00
Economic opportunity loans:
EOL I: Direct 7 30,300.00 30,300. 00 14 74 050. 00 74 050. 00
EOL II:
Direct 6 63,805.00 63,805. 00 9 91,805. 00 91,805. 00
Guarantee 2 31,500.00 31,500.00 2 31,500.00 31,500.00
Displaced business loans:
Direct 2 294, 150.00 294, 150. 00 9 1,676,950.00 1,627,250. 00
Participation 1 27,000. 00 24,300. 00 1 49,000. 00 44, 100. 00
Disaster loans: Direct * 1 53,300. 00 53,300. 00 6 108, 200~ 00 108,200. 00
Development company loans:
Direct 1 85, 000. 00 85, 000. 00 5 625, 100.00 625, 100. 00
Participation 4 741,600. 00 663,840. 00 9 1,104,100.00 969,690. 00
Guarantee 0 0 0 1 55,200.00 41,400. 00
MISSISSIPPI
1ST CONGRESSIONAL DISTRICT
Business loans:
DireCt
Participation *
Guarantee
Economic oppqrtunity loans:
EOLI:Direct
EOL II: Direct
Development company loans:
Direct
Participation
0
0
0
0
0
0
0
0 0
0 0
0 0
~
0 0
0 0
0 0
0 0
4
18
5
3
2
2
1
168,600.00
810,975.00
237,000. 00
14,000.00
30, 000. 00
204,224.00
31, 500. 00
168,600. 00
562,766.25
202, 050. 00
14000.00
30, 000. 00
204,224. 00
25,200. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II; Direct
Development company loans:
Direct
4
10
4
1
0
0
77, 000. 00 77, 000. 00
406, 000. 00 295, 750. 00
115, 000. 00 84, 500. 00
5, 000. 00 5, 000. 00
0 0
0 0
11
31
13
3
2
0
218, 000. 00
1, 014, 500. 00
327, 000. 00
32, 000. 00
43, 000. 00
13, 000. 00
218, 000. 00
759, 325. 00
248,750. 00
32, 000. 00
43, 000. 00
13, 000. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 3 52,592.92 52,592.92 11 217,958.78 217,958.78
Participation 11 764, 800. 00 575, 150. 00 32 1, 509,800. 00 1, 172,425. 00
Guarantee 3 105,000.00 78,750.00 15 811,000.00 548,250.00
PAGENO="0351"
347
SUMMARY OF SBA, LOAN APPROVAL ACTIVITY-Continued
* :.
.
~
April-June 1968
July 1967-March 1968
Hum- SBA share Num-
ber ~f Total amount amount. ber of
loans loans
Total amount
SBA share
amount
MISSISSIPPI-Continued
3D CONGRESSIONAL DISTRICT-Continued
Economic opportunity loans:
EOL I: Direct
E~QLB: Direct. ~_
Development company loans:
Participation
0 0 0 2
1 6,000.00 6,000.00 1
2 443,500.00 399, 150.00 2
.
7,500. 00 .
6,000.00 .
.
443, 500.00
.
7,500.00
6;000. 00
,.
399, 150W 00
.
.
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 4 122, 000.00 122,000. 00 7 209, 000. 00 209, 000,00
Participation 2 160,000. 00 120, 000, 00 18 1, 142, 300. 00 826, 000. 00
Guarantee 4 153,600.00 120,910.00 8 434,600.00 357, 160. 00
~conomlc opportunity loans,
EOL II: Direct 1 25,000. 00 25,000.00 2 45,000.00 45,000.00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 5 103, 500. 00 100,800. 00
Participation 4 256,500.00 184,285. 00 34 1,460, 500. 00 1, 128,615. 00
Guarantee 10 319, 500.00 245,250. 00 28 1, 135,400.00 944,985.00
Economic opportunity loans:
ED I: Direct 0 0 0 1 3,500.00 3,500.00
Disaster loans: Direct 6 53, 150.00 53,150. 00 22 458,650.00 458,650.00
Development company loans:
Direct. 0 0 0 2 527,000. 00 527,000. 00
ADDITIONAL
Business loans: Direct
Business loans: Participation
1
1
6,000.00
25,000.00
6,000.00
22,500.00
STATE TOTALS
Business loans:
Direct 11 251,592.92 251, 592.92 39 923, 058.78 920,318. 78
Participation 27 1,587,300. 00 1, 175, 185. 00 134 5,963, 075. 00 4, 471,631. 25
Guarantee 21 693, 100.00 529, 410.00 69 2,945,000.00 2,301,195. 00
Economic opportunity loans:
EOL I: birect 1 5,000.00 5,000.00 9 57, 000.00 57,000.00
EOL Ii: Direct 2 31,000.00 31,000.00 7 124,000.00 124,000.00
Disaster loans: Direct 6 53, 150. 00 53, 150. 00 22 458,650. 00 458,650. 00
Development company loans:
Direct 0 0 0 4 744,224.00 744,224. 00
Participation 2 443,500.00 399, 150. 00 3 475,000.00 424,350. 00
MISSOURI
1ST CONGRESSIONAL DISTRICT
B usiness loans: Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Disaster loans: Direct
0
0
0
0
0 0
0 0
0 0
0 0
5
3
3
1
209,000. 00
21, 500. 00
27, 200. 00
28, 000. 00
166,000. 00
21, 500. 00
27, 200. 00
28,000. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 75, 000. 00 75 000.00
Guarantee 0 0 0 1 38, 000.00 34,200.00
PAGENO="0352"
348
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share Num-
Total amount amount ber of
loans
Total amount
SBA share
amount
MISSOURI-Continued
2D
CONGRESSIONAL D ISTRICT-~-~ontinued
Econpniic opportunity loans:
EQL I: Direct
EOL II: Direct
Displaced business loans:
Direct
Disaster loans: Direct
0
1
0
0
0 0 1
7, 50'O 00 7, 5O0~ 00 2
0 0 1
0 0 2
3, 8C0. 00
17, 500. 00
133,400. 00.
41,900. 00
3,800.00
17800. 00
133,400. 00
41,900. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct -- - - - 0 0 0 . 1 100,000. 00 100,000. 00
Guarantee 1 60, 000. 00 54,000. ~ ~ 145,000. 00 122, 000. 00
Economic opportunity loans:
EOL I: Direct 4 33,000. 00 33, 000. 00 5 40, 500.00 40,500.00
EOL II:
Direct 4 29,000. 00 29, 000. 00 4 29, 000. 00 29,000. 00
Guarantee 1 4, 500. 00 4, 050. 00 1 4, 500. 00 4,050. 00
4TH CONGRESSIONAL DISTRICT -
Business loans:
Direct 2 35, 000. 00 28,750. 00 10 181, 500. 00 172, 250. 00
Participation 3 90, 000. 00 60, 000. 00 15 702,600. 00. ~Q1, 225. 00
Guarantee 7 348, 000. 00 263, 250. 00 23 1,256, 80Q. 00 967, ~5, 00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 6,300.00 6, .300. 00
EOLII:
Direct 1 2,500. 00 2,500. 00 4 34,500.00 34, 500. 00
Guarantee 0 0 0 1 10,000.00 9,000.00
Displaced business loans:
Direct 0 1 90,000, 00 90, 000. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 30, 000. 00 30, 000. 00 8 211, 000. 00 211, 000. 00
Participation 1 200, 000. 00 100, 000. 00 4 271, 000, 00 155, 750. 00
Guarantee. 10 320, 000. 00 255, 400. 00 16 480, 000. 00 378, 400.00
Economic opportunity loans:
EOL I: Direct 4 .7, 800. 00 7, 800. 00. 5 10,900. 00 10 900~ 00
EOL II: Direct 4 15,000. 00 15, 000. 00 7 36, 500. 00 36, 500. 00
Displated business loans:
Direct 1 35, 000. 00 35, 000. 00 2 57, 500. 00 57, 500. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct -- 0 0 0 4 56, 500. 00 56, 500. 00
Participation 2 113, 000. 00 66, 000. 00 9 363, 500. 00 238, 480. 00
Guarantee 11 438, 750. 00 338, 587. 50 33 1,446, 000. 00 1, 104, 662. 50
Economic opportunity loans:
EOL I: Direct 0 0 0 3 26, 500. 00 26, 500. 00
EOL II: Direct. 1 18, 000. 00 18, 000. 00 1 18, 000. 00 18, 000. 00
Disaster loans; Direct 0 0 0 1 10, 000. 00 10, 000. 00
Development company loans:
Participation 1 128, 000. 00 115, 200. 00 2 328, 000. 00 297, 200. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 87, 000. 00 87, 000. 00
Participation 3 138, 500. 00 118, 875. 00 24 993, 900. 00 809, 150, 00
Guarantee 8 803, 500. 00 677, 325. 00 33 1, 813, 166. 00 1, 459, 269. 00
Econor~ic onportunity loans:
EOL II: Direct 1 4, 000. 00 4, 000. 00 2 8, 000. 00 8, 000. 00
Development company loans:
Participation 0 0 0 1 110, 000. 00 65, 000. 00
0 0
PAGENO="0353"
349
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Nurn- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
MISSOURI-Continued
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 3 46,000. 00 46,000. 00
Participation 5 134, 400. 00 81,910. 00 20 1, 002,700. 00 672, 185. 00
Guarantee 1 12, 000. 00 9, 000. 00 7 110, 500. 00 80, 925. 00
Economic opportunity loans:
EOL I: Guarantee 0 0 0 1 1,600. 00 1,600. 00
EOL II: Direct 1 18,000. 00 18, 000. 00 2 38,000.00 38,000. 00
Disaster loans: Direct 2 26, 800. 00 26, 800. 00 2 26, 800. 00 26, 800. 00
Development company loans:
Direct 1 16,450. 00 16,450.00 2 181,450.00 181,450.00
Participation 1 247,400. 00 222, 660. 00 1 247,400. 00 222,660.00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL II: Direct
Development company loans,
Participation
1
2
1
0
0
15, 000. 00 15, 000. 00
160, 000. 00 128,250. 00
14, 000. 00 12,600. 00
0 0
0 0
3
7
6
1
4
79, 000. 00
495, 000. 00
165, 800. 00
5, 500. 00
906, 773. 60
79 000. 00
308,250. 00
122, 500. 00
5, 500. 00
700,896. 00
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 12, 500. 00 12, 500. 00 2 37, 500. 00 37, 500. 00
Participation 2 150, 000. 00 75, 000. 00 6 304,600. 00 207, 300. 00
Guarantee 6 108, 800. 00 93,620. 00 8 146, 800. 00 124, 370. 00
Economic opportunity loans,
EOL II: Guarantee 1 30, 000 00 24,900. 00 1 30, 000. 00 24,900. 00
Disaster loans: Direct 2 215, 000. 00 215, 000. 00 6 365, 500. 00 365, 500. 00
STATE TOTALS
Business loans:
Direct 6 92, 500. 00 86,250. 00 34 873, 500. 00 864,250. 00
Participation 18 985,900. 00 630, 035. 00 85 4, 133, 300. 00 2, 892, 340. 00
Guarantee 45 2,105,050.00 1,703,782.50 135 5,811,066.00 4,560,751.50
Economic opportunity loans:
EOL I:
Direct 8 40,800. 00 40, 800. 00 19 109, 500. 00 109, 500. 00
Guarantee 0 0 0 1 1,600. 00 1,600. 00
EOL II;
Direct 13 94, 000. 00 94, 000. 00 26 214,200. 00 214,200. 00
Guarantee 2 345, 500. 00 28, 950. 00 3 44~ 500. 00 37,950. 00
Displaced business loans:
Direct 1 35, 000. 00 35, 000. 00 4 280,900. 00 280,900. 00
Disaster loans: Direct 4 241,800. 00 241, 800. 00 12 472, 200. 00 472,200. 00
Development company loans:
Direct 1 16,450. 00 16, 450. 00 2 181, 450. 00 181,450. 00
Participation 2 375, 400. 00 337, 860, 00 8 1, 592, 173. 60 1,285,756. 00
MONTANA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 2 91, 853. 00 91, 853. 00 9 328, 569.00 328, 569. 00
Participation 2 127, 000. 00 92, 000. 00 16 1, 018, 100. 00 789, 170. 00
Guarantee 2 158, 000. 00 103, 850. 00 11 730, 500. 00 566, 725. 00
Economic opportunity loans:
EOL 1:
EOL I: Direct 1 5, 000 00 5, 000. 00 4 16, 000. 00 16, 000. 00
EOLII:
Direct - 0 0 0 2 27,500. 00 27, 500. 00
Guarantee 1 7, 000. 00 6, 300. 00 1 7,000. 00 6, 300. 00
Disaster loans: Direct 0 0.00 0.00 1 1,590.00 1,590.00
95-193-68----23
PAGENO="0354"
350
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
MONTANA-Continued
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0
Participation 3 475, 000. 00 307, 500. 00
Guarantee 5 239,600. 00 203, 250. 00
Economic opportunity loans:
EOL I:
Direct 3
Guarantee 1
EOLII:
Direct 0 0 0
Guarantee 0 0 0
Disaster loans: Direct 0 0 0
Development company loans:
Direct 0 0 0
Guarantee 0 0 0
Business loans:
District
Participation
Guarantee
Economic opportunity loans,
EOL I: Guarantee
Disasterloans: Direct
Development company loans:
Direct
1
2
3
1
0
1
17, 200. 00 17, 200 00
221,000.00 173,400.00
51, 500. 00 33,250. 00
10,300.00 7,725.00
0 0
280, 000. 00 280, 000. 00
1
9
10
1
7
1
17,200. 00
810,000.00
574, 800. 00
~
10,300.00
29,400.00
280,000. 00
17, 200. 00
615,150. 00
466,619. 00
7,725, 00
29,400.00
280, 000. 00
STATE TOTALS
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOLI:
3
~
5
109, 053. 00 109, 053. 00
348, 000. 00 265,400. ~
209,500.00 137,100.00
10
25
21
345, 769. 00
1, 828, 100. 00
1,305,300.00
345, 769. 00
1,404,320. 00
1,033,344.00
Direct
Guarantee
EOLII:
1
1
5, 000. 00 5, 000. 00
10,300.00 7,725.00
4
1
16, 000. 00
10,300.00
16,000. 00
7,725.00
Direct
Guarantee
Disasterloans: Direct
Development company loans:
Direct
0
1
0
1
0 0
7, 000. 00 6, 300. 00
0 0
280, 000. 00 280, 000. 00
2
1
8
1
27, 500. 00
7, 000. 00
30,990.00
280,000. 00
27, 500. 00
6,300. 00
30,990.00
280, 000. 00
NEBRASKA
1ST CONGRESSIONAL DISTRICT
Business loans:
Participation
Guarantee
Economic opportunity loans,
EOLI:
2
6
85, 000. 00 66, 500. 00
451, 000. 00 369, 100. 00
14
21
1, 098, 000. 00
I, 112, 500. 00
820,200. 00
874, 025. 00
Direct
Guarantee
Disaster loans: Direct
Development company loans:
Direct
Participation
0
0
0
0
1
0 0
0 0
0 0
0 0
280, 000. 00 252, 000. 00
1
2
2
3
3
1, 600. 00
17,900.00
8, 200. 00
152, 950. 00
910, 000. 00
1, 600. 00
17,900.00
8,200. 00
152, 950. 00
819, 000. 00
2D CONGRESSIONAL DISTRICT
3 57, 000. 00 57, 000. 00
6 535,500.00 357,450.00
12 509, 600. 00 432,450. 00
18,000.00 18,000.00 3 18,000.00 18,000.00
15, 000. 00 15, 000. 00 2 17, 300. 00 17, 300. 00
1 25, 000. 00 25, 000. 00
1 6, 000. 00 6, 000. 00
1 400. 00 400. 00
0 175,000.00 175,000.00
1 14,400.00 12,960.00
PAGENO="0355"
351
SUMMARY OF SEA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Num-
her of
loans
Total amount
SBA share
amount
.N EBRASKA-Continued
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 5, 000. 00 5, 000. 00
Participation 5 377, 000. 00 324, 300. 00 22 1, 467,900. 00 1,233,460. 00
Guarantee 6 269, 000. 00 217, 950. 00 19 882, 500. 00 718, 590. 00
Economic opportunity loans:
EOL I: Direct 1 2, 000. 00 2, 000. 00 2 16,900. 00 16,900. 00
EOLII:
Direct 0 0 1 10, 000. 00 10,000. 00
Guarantee 1 6, 750. 00 6,750. 00 1 6,750. 00 6,750. 00
Displaced business loans:
Direct 0 0 0 1 16,400. 00 16, 400. 00
Disaster loans: Direct 2 5, 500. 00 5, 500. 00 310 705, 800. 00 705, 800. 00
Development company loans:
Direct 0 0 0 1 306, 500. 00 306, 500. 00
Participation 1 185, 000. 00 166, 500. 00 1 185 000. 00 166, 500. 00
ADDITIONAL
Disaster loans: Direct
1
1, 000. 00
1, 000. 00
STATE TOTALS
Business loans:
Direct 0 0 0 4 62, 000. 00 62, 000. 00
Participation 10 937, 000. 00 698, 300. 00 42 3, 101, 400. 00 2, 411, 110. 00
Guarantee 17 959,600. 00 790, 300. 00 52 2, 504,600. 00 2, 025, 065. 00
Economic opportunity loans:
EOL I:
Direct 4 20, 000, 00 20, 000. 00 6 36, 500. 00 36, 500. 00
Guarantee 1 15, 000. 00 15, 000. 00 4 35, 200. 00 35, 200. 00
EOL II:
Direct 0 0 0 2 35, 000. 00 35, 000. 00
Guarantee 1 6,750.00 6,750.00 2 12,750.00 12,750.00
Displaced business loans:
Direct 0 0 0 1 16 40000 16,400.00
Disaster loans: Direct 2 5, 500. 00 5, 500. 00 314 715, 400. 00 715, 400. 00
Development company loans:
Direct 0 0 0 4 284,450. 00 284,450. 00
Participation 2 465, 000. 00 418, 500. 00 4 1, 095, 000. 00 985, 500. 00
Guarantee 0 0 0 1 14,400.00 12,960.00
NEVADA
AT
LARGE
CONGRESSIONAL DISTRICT-STAT
E TOTALS
Business loans:
Direct
Participation
Development company loans:
Direct
0
0
0
0 0
0 0
0 0
2
1
1
31,000.00
100, 000. 00
119,600.00
31,000.00
90, 000, 00
119,600. 00
NEW HAMPSHIRE
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL II: Direct
Displaced business loans:
Direct
Development company loans:
Participation
2
0
3
1
1
1
24,300. 00 24,300. 00
0 0
86,000. 00 77, 400. 00
2,000. 00 2, 000. 00
32,500. 00 32, 500. 00
50,000. 00 45, 000. 00
13
2
7
2
5
3
234, 100. 00
100, 000. 00
432, 000. 00
5 500. 00
101,200. 00
216, 500. 00
234, 100. 00
65, 000.00
289,300. 00
5, 500. 00
101,200. 00
194, 850.00
PAGENO="0356"
3~2
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
NEW HAMPSHIRE-Continued
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 6,000. 00 6,000.00 7 321,000.00 321, 000. 00
Participation 1 60,000. 00 30,000. 00 7 612,000. 00 406,500. 00
Guarantee 7 237,000.00 203150.00 21 1,143,700.00 911,320.00
Economic opportunity loans:
EOL I: Direct 1 10,300. 00 10,300. 00 3 22 730. 00 22 730. 00
EOL II:
Direct 1 800. 00 800. 00 1 800. 00 800. 00
Participation 0 0 0 1 22,000. 00 9,900. 00
Guarantee 1 6,000. 00 6, 000. 00 1 6,000. 00 6,000. 00
STATE TOTALS
Business loans:
Direct 3 30,300. 00 30,300. 00 22 586, 100. 00 586 100. 00
Participation 1 60,000. 00 30, 000. 00 10 812, 000. 00 561, 500. 00
Guarantee 10 323, 000. 00 280, 550. 00 28 1, 575,700. 00 1, 200, 620. 00
Economic opportunity loans:
EOL I: Direct 1 10,300. 00 10,300. 00 3 22 730. 00 22 730. 00
EOL II:
Direct 2 2, 800. 00 2,800. 00 3 6,300. 00 6,300. 00
Participation 0 0 0 1 22,000. 00 9,900. 00
Guarantee 1 6, 000.00 6,000. 00 1 6,000.00 6,000. 00
Displaced business loans:
Direct 1 32, 500. 00 32, 500. 00 5 101, 200. 00 101,200. 00
Development company loans:
Direct 0 0 0 1 119,600. 00 119,600. 00
Participation 1 50, 000. 00 45, 000.00 3 216, 500. 00 194, 850. 00
NEW JERSEY
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 4 186, 500. 00 186, 500. 00
Participation 1 72, 000. 00 54, 000. 00 2 112, 000. 00 84, 000. 00
Guarantee 0 0 0 1 15,000.00 10,000.00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 13, 000. 00 13, 000. 00 4 88, 000. 00 88, 000. 00
Guarantee 3 160, 000. 00 120, 000. 00 4 460, 000. 00 345, 000. 00
Economic opportunity loans:
EOL I: Direct 2 16, 200. 00 16, 200. 00 8 65,700. 00 65, 700. 00
EOL II: Direct 1 5, 000. 00 5, 000. 00 3 34, 000. 00 34, 000. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 6, 500. 00 6, 500. 00 5 68, 500. 00 68, 500. 00
Participation 5 341, 000. 00 237, 000. 00 8 449, 000. 00 318, 000. 00
Guarantee 0 0 0 1 175,000.00 131,250.00
Economic opportunity loans:
EOL I: Direct 2 28, 000. 00 28, 000. 00 14 143, 300. 00 143, 300. 00
EOL II: Direct 1 25, 000. 00 25, 000. 00 3 70, 000. 00 70, 000. 00
Dipplaced business loans:
Participation 1 55, 000. 00 41, 250. 00 1 55, 000. 00 41,250. 00
PAGENO="0357"
353
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num~ SBA share
her of Total amount amount ber of Total amount amount
loans loans
NEW JERSEY-Continued
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 40, 000. 00 40, 000.00 3 103, 000.00 103, 000. 00
Participation 1 150, 000. 00 112, 500. 00 1 150, 000. 00 112, 500. 00
Guarantee 1 15, 000. 00 7, 500. 00 4 375, 000. 00 277, 000. 00
Economic opportunity loans,
EOL I: Direct 0 0 0 1 7,000.00 7, 000. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 10, 000. 00 10, 000. 00 2 30, 000. 00 30, 000. 00
Participation 2 200, 000. 00 112, 500. 00 2 200, 000. 00 112, 500. 00
Guarantee 1 50,000. 00 37, 500. 00 3 240, 000. 00 172, 500. 00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 10, 000. 00 10, 000. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation.
Guarantee
Economic opportunity loans,
EOL I: Direct
0
2
2
0
0 0
38, 000. 00 23, 167. 00
108,000.00 81,000.00
0 0
6
5
4
1
144, 500. 00
176, 000. 00
258,000.00
4, 500. 00
144, 500. 00
144, 367. 00
193,500.00
4, 500. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans,
EOL II: Direct
0
1
1
0 0
40, 000. 00 30, 000. 00
15, 000. 00 15, 000. 00
3
5
1
55, 800. 00
350, 000. 00
15, 000. 00
55, 800. 00
240, 000. 00
15, 000. 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL II; Participation
0
1
1
1
0 0
60, 000. 00 30, 000. 00
50, 000. 00 37, 500. 00
15,000.00 13,500.00
2
1
3
1
77,000.00
60, 000, 00
250, 000. 00
15,000.00
77,000.00
30, 000. 00
187, 500. 00
13, 500. 00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 4 67, 200. 00 67,200. 00
Participation 0 0 0 1 200, 000. 00 100, 000. 00
Guarantee 1 150,000.00 112,500.00 1 150,000.00 112,500.00
Economic opportunity loans:
EOL II:
Direct 1 7, 000. 00 7, 000. 00 1 7, 000. 00 7, 000. 00
Guarantee 0 0 0 1 20, 000. 00 20, 000. 00
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 15, 000. 00 15, 000. 00 5 130, 000. 00 130, 000. 00
Guarantee 0 0 0 1 47,100.00 42,390.00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 32, 000. 00 32, 000, 00
EOL II: Direct 0 0 0 5 28, 200. 00 28,200. 00
Displaced business loans:
Direct 1 110, 000. 00 110,000. 00 1 110, 000. 00 110, 000. 00
Disasterloans: Direct 1 1,100.00 1,100.00 13 93,900.00 93,900.00
PAGENO="0358"
354
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
SBA share
Total amount amount
Num-
ber of
Total amount
SBA share
amount
loans
loans
NEW JERSEY-Continued
11TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Disaster loans: Direct
0
2
1
8
1
0 0
107,000.00 80,250.00
2, 000. 00 2, 000. 00
98, 800. 00 98, 800. 00
25, 000. 00 25, 000. 00
1
3
4
11
18
18, 500. 00
142,000.00
24, 500. 00
134, 700. 00
235, 750.00
18,500. 00
101,250.00
24,500. 00
134,700. 00
235,750. 00
12TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Displaced business loans:
Direct
2
0
0
0
21, 000. 00 21, 000. 00
0 0
0 0
0 0
5
1
2
1
70, 000. 00
150,000.00
120, 000. 00
10,000. 00
70, 000. 00
112,500.00
90, 000. 00
10, 000. 00
13TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
1
1
0
0
47, 000. 00 47, 000. 00
50, 000. 00 37, 500. 00
0 0
0 0
2
2
1
1
51, 000. 00
86, 400. 00
15, 000. 00
3,000. 00
51, 000. 00
64, 800. 00
15, 000. 00
3, 000. 00
14TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Disaster loans: Direct
2
0
0
1
2
0
32, 000. 00 32, 000. 00
0 0
0 0
8, 000.00 8, 000. 00
19, 000. 00 19, 000. 00
0 0
3
1
1
3
4
1
107, 000.00
400, 000.00
175, 000.00
23, 000. 00
40, 000. 00
2, 000. 00
107, 000. 00
150, 000. 00
122, 500. 00
23, 000. 00
40, 000. 00
2, 000. 00
15TH CONGRESSIONAL DISTRICT
Business loans:
.
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
0
0
1
0
0 0
0 0
5,000. 00 5, 000. 00
12, 000. 00 12, 000. 00
4
2
2
3
282, 000. 00
565, 000.00
15, 000.00
42, 000. 00
181, 500. 00
398, 750. 00
15, 000. 00
42, 000. 00
STATE TOTALS
Business loans:
Direct 10 184,500.00 184,500.00 49 1,197,000.00 1,197,000.00
Participation 13 911,000.00 606,667.00 28 2,265,400.00 1,410,167.00
Guarantee 10 580, 000. 00 431, 250. 00 35 3, 322, 100. 00 2,424, 140. 00
Economic opportunity loans:
EOL I: Direct 7 59, 200. 00 59, 200. 00 36 330, 000. 00 330, 000. 00
EOL II:
Direct 14 181,800.00 181,800.00 33 383,900.00 383,900.00
Participation 1 15, 000.00 13, 500. 00 1 15,000.00 13, 500. 00
Guarantee 0 0 0 1 20,000. 00 20, 000. 00
Displaced business loans:
Direct 1 110, 000.00 110, 000. 00 2 120, 000.00 120, 000. 00
Participation 1 35, 000. 00 41, 250. 00 1 55,000. 00 41,250. 00
Disaster loans: Direct 2 26, 100. 00 26, 100. 00 32 331,650. 00 331, 650. 00
PAGENO="0359"
355
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Mum- SBA share
ber of Total amount amount her of Total amount amount
loans loans
NEW MEXICO
AT LARGE CO~IGRESSIONAL DISTRICT-STATE TOTALS
Business loans:
Direct 8 148, 100. 00 148, 100.00 34 592, 100. 00 590, 100. 00
Participation 10 527, 600. 00 407, 660. 00 30 1, 381, 100. 00 1, 046, 485. 00
Guarantee 5 227, 000. 00 175, 500.00 22 1162, 000. 00 900, 700, 00
Economic opportunity loans:
EOL I:
Direct 1 3,600.00 3,600.00 10 66,700.00 66, 700. 00
Guarantee 2 23, 500. 00 19, 750. 00 2 23, 500. 00 19, 750. 00
EOL II: Direct 8 128, 100. 00 128, 100.00 11 172, 500.00 172, 500. 00
Displaced business loans:
Direct 1 45, 000. 00 45, 000. 00 1 75, 000. 00 75, 000. 00
Development company loans:
Participation 0 0 0 1 400, 000. 00 350, 000. 00
NEW YORK
UNIDENTIFIED CONGRESSIONAL DISTRICT
Business loans: Direct
Economic opportunity loans,
EOL II: Direct
1
0
15, 000. 00
2, 500. 00
15, 000.00
2, 500. 00
1ST CONGRESSIONAL DISTRICT
Business loans: Guarantee 2 100, 000. 00 78, 000. 00 2 100, 000. 00 78, 000. 00
Economic opportunity loans:
EOL I: Direct 1 13, 000. 00 13, 000. 00 1 13, 000. 00 13, 000. 00
EOL II: Direct 1 4, 000. 00 4, 000. 00 3 24, 000.00 24, 000. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 60, 000, 00 60, 000. 00 2 84, 600. 00 84, 600. 00
Participation 1 55, 000. 00 27, 500. 00 1 55, 000. 00 27, 500. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 3 16, 000. 00 16, 000. 00
EOL II: Direct 1 8,000. 00 8, 000. 00 2 33, 000. 00 33, 000. 00
Displaced business loans:
Direct 0 0 0 1 82, 000.00 82, 000.00
3D CONGRESSIONAL DISTRICT
Economic opportunity loans,
EOL I: Direct
1 12,000. 00
4TH CONGRESSIO
12, 000. 00 3 35, 500. 00 35, 500. 00
NAL DISTRICT
Business loans: Guarantee 1 150,000. 00 100, 000. 00 2 200, 000. 00 145, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 20,000. 00 20, 000. 00
EOL II: Direct 1 10, 000. 00 10, 000. 00 1 10, 000. 00 10,000. 00
5TH CONGRESSIONAL DISTRICT
Business loans: Direct 1 12, 000. 00 12, 000. 00 2 24, 000.00 24, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 15, 000. 00 15, 000. 00
EOL II: Direct 0 0 0 1 25, 000. 00 25, 000. 00
Displaced business loans:
Direct 0 0 0 1 49, 500.00 49, 500. 00
PAGENO="0360"
356
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
NEW YORK-Continued
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0
Guarantee 1 15, 000. 00 15, 000. 00
Economic opportunity loans:
EOL1: Direct 0 0 0
EOL II: Direct 0 0 0
0
1
3
2
4, 000. 00
15, 000. 00
31,300.00
22, 000. 00
4, 000. 00
15, 000. 00
31,300.00
22, 000. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
1
3
4
1
5, 000. 00
310, 000. 00
47, 600. 00
25, 000. 00
5, 000. 00
279, 000. 00
47, 600. 00
25, 000. 00
8TH CONGRESSIONAL DISTRICT
Business loans: Direct
Economic opportunity loans,
EOL I: Direct
1
3
50, 000. 00
24, 500. 00
50, 000. 00
24, 500. 00
9TH CONGRESSIONAL DISTRICT
.
Business loans: Direct
Economic opportunity loans,
EOL II: Direct
2
1
140, 000. 00
25, 000. 00
140, 000. 00
25, 000. 00
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 15, 000. 00 15, 000. 00 9 392, 000. 00 392, 000. 00
Guarantee 1 75, 000. 00 67, 500. 00 1 75, 000. 00 67, 500. 00
Economic opportunity loans:
EOL I: Direct 4 50, 000. 00 50, 000. 00 10 111, 000. 00 111, 000. 00
EOL II: Direct 2 17, 000. 00 17, 000. 00 9 131,200. 00 131,200. 00
11TH CONGRESSIONAL DISTRICT
Economic opportunity loans,
EOL II: Direct 1 1?, 000. 00
12, 000. 00 1 12, 000. 00 12, 000. 00
12TH CONGRESS
IONAL DISTRICT
Business loans:
Direct 0 0 0 1 37, 000. 00 37, 000. 00
Participation 0 0 0 1 20, 000. 00 13, 000. 00
Economic opportunity loans:
EOL I: Direct 4 39, 000. 00 39, 000. 00 6 50, 500. 00 50, 500. 00
EOL II: Direct 0 0 0 2 40, 000. 00 40, 000. 00
13TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 25, 000.00 25, 000. 00
Participation 1 100, 000. 00 75, 000. 00 1 100, 000. 00 75, 000. 00
Economic opportunity loans:
EOL I: Direct 3 23, 000. 00 23, 000. 00 4 36, 100. 00 36, 100. 00
EOL II: Direct 1 7,600. 00 7, 600. 00 3 27, 600. 00 27,600. 00
PAGENO="0361"
357
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
NEW YORK-Continued
14TH CONGRESSIONAL DISTRICT
Business loans: Direct 0 0 0 2 80, 000. 00 80,000. 00
Economic opportunity loans:
EOL I: Direct... 2 23, OOQ. 00 23, 000.00 6 59, 500. 00 59, 500. 00
EOL II: Direct 0 0 0 7 68,000.00 68, 000. 00
15TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 125, 000. 00 125, 000. 00 6 307, 500. 00 307, 500. 00
Participation 0 0 0 1 25,000. 00 18,750. 00
Economic opportunity loans:
EOL I: Direct 2 14, 000. 00 14, 000.00 4 23,500.00 23 500.00
EOL II: Direct 1 7,000.00 7,000.00 2 11,500.00 11,500.00
16TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 20, 000.00 20, 000. 00
Participation 0 0 0 2 177, 800.00 88,900. 00
Guarantee 1 30, 000. 00 27, 000. 00 2 45, 000. 00 40, 500.00
Economic opportunity loans,
EOL I: Direct 0 0 0 2 21, 000. 00 21, 000. 00
17TH CONGRESSIONAL DISTRICT
Business loans:
Direct 9 126 800.00 126 800.00 13 318 300.00 18,300.00
Participation__- - 1 100, 000. 00 75,000. 00 1 100, 000. 00 75, 000. 00
Guarantee 2 75, 000. 00 67, 500. 00 5 235, 000. 00 208, 500. 00
Economic opportunity loans:
EOL I: E~irect 3 22, 500. 00 22, 500. 00 12 75, 400. 00 75, 400. 00
EOL II:
Direct 1 24, 400. 00 24,400. 00 11 184,600. 00 184,600. 00
Guarantee 1 25, 000. 00 25, 000. 00 1 25, 000. 00 25, 000. 00
Displaced business loans: Direct- 1 10, 000. 00 10, 000, 00 1 10, 000. 00 10, 000. 00
18TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 10, 000. 00 10, 000.00 8 293, 000. 00 293, 000. 00
Guarantee 1 20, 000. 00 18, 000. lid 1 20, 000. 00 18, 000.00
Economic opportunity loans:
EOL I:
Direct 3 24, 500. 00 24, 500. 00 12 92, 100. 00 92, 100. 00
Guarantee 1 15,000.00 15000.00 1 15,000.00 15,000.00
EOL II: Direct 1 21, 500. 00 21, 500. 00 6 73, 000. 00 73, 000. 00
Displaced business loans: Direct. 0 0 0 1 10, 500. 00 10,500. 00
19TH CONGRESSIONAL DISTRICT
Business loans: Direct 1 25,000.00 25, 000. 00 2 65, 000. 00 65, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 4 43,000. 00 43 000. 00
EOL II: Direct 3 55, 000. 00 55,000. 00 3 55, 000.00 55, 000. 00
20TH CONGRESSIONAL DISTRICT
Business loans: Guajantee 1 10, 000, 00 7, 500. 00
Economic opportunity loans:
EOL I: Direct 1 15, 900. 00 15, 000~ 00
EOL II: Guarantee 1 25, 000. 00 25, 000. 00
PAGENO="0362"
27TH CONGRESSIONAL DISTRICT
1 200,000.00 180,000.00
1 74,000. 00 74,000. 00
28TH CONGRESSIONAL DISTRICT
2 400, 000. 00 360, 000.00
1 74, 000. 00 74, 000. 00
0 0 0
1 177,000. 00 106, 200. 00
1 10,000. 00 10, 000. 00
0 0 0
1 35, 000. 00 26, 250. 00
4 557, 000. 00 432, 200. 00
1 10,000.00 10,000.00
1 9500000 8550000
358
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num
ber of
loans
SBAshare
Total amount amount
Num
ber of
loans
Total amount
SBAshare
amount
NEW YORK-Continued
21ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans
EOL I Direct
EOL II Direct
1
1
2
1
20 000 00 20 000 00
75 000 00 67 500 00
12 700 00 12 700 00
15 000 00 15 000 00
2
1
3
2
45 000 00
75 000 00
24 700 00
25 000 00
45 000 00
67500 00
24 700 00
25 000 00
22D CONGRESSIONAL DISTRICT
Business loans Direct
Economic opportunity loans:
EOL I Direct
EOL II Direct
0
2
1
0 0
9 200 00 9 200 00
25 000 00 25 000 00
1
4
2
20 000 00
28 700 00
41 000 00
20 000 00
28 700 00
41 000 00
23D CONGRESSIONAL DISTRICT
Business loans: ~
Economic opportunity loans
EOL I Direct
1
1
7, 000. 00
15 000 00
7, 000. 00
15 000 00
2
1
107, 000. 00
15 000 00
107, 000. 00
15 000 00
EOL II Direct
1
17 500 00
17 500 00
1
17 500 00
17 500 00
24TH CONGRESSIONAL
DISTRICT
Economic opportunity loans
EOL I: Direct
EOL II: Direct
Displaced business loans
Direct
1
0
0
6,000. 00 6, 000. 00
0 0
0 0
1
1
1
6,000.00
12 000.00
100 000 00
6 000. 00
12 000.00
100 000 00
25TH CONGRESSIONAL DISTRICT
Business loans
Direct
Participation
Economic opportunity loans
EOL I Direct
EOL II: Direct
1
1
1
1
5 000 00 5 000 00
50, 000. 00 32,500.00
10 000 00 10 000 00
5,000. 00 5, 000. 00
2
2
1
1
42 000 00
100 000. 00
10 000 00
5,000. 00
42 000 00
57 500. 00
10 000 00
5,000. 00
26TH CONGRESSIONAL DISTRICT
Business loans
Direct
Participation
Guarantee
Displaced business loans:
Direct
1
0
2
~0
9 000 00 9 000 00
0 0
40 000 00 32 250 00
0 0
2
3
2
2
24 000 00
118 000 00
40 000 00
75,000. 00
24 000 00
87 250 00
32 250 00
70, 000. 00
Business loans: Guarantee
Development company loans:
Direct
Business loans:
Participation
Guarantee
Economic opportunity loans,
EOLI: Direct
Displaced business loans:
Participation
PAGENO="0363"
359
SUMMARY OF SEA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968 -
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
NEW YORK-Continued
29TH CONGRESSIONAL DISTRICT-NONE
30TH CONGRESSIONAL DISTRICT
Business loans:
00
Direct
Participation
Guarantee
Economic opportunity loans,
EOL: Direct
Displaced business loams:
Direct
Participation
0
1
0
1
1
0
0 0
350, 000. 00 150, 000. 00
0 0
5,000. 00 5,000. 00
50, 000. 00 50, 000. 00
0 0
1
2
2
1
1
1
25,000.00
362, 000. 00
90,000.00
5,000. 00
50,000.00
50, 000.00
25, 000.
159, 000. 00
57, 750. 00
5,000.00
50,000.00
45,000.00
31ST CONGRESSIONAL DISTRICT
Business loans:
Direct 1 2, 500. 00 2, 500. 00 . 4 85, 000. 00 85,000.00
Participation 2 235,000.00 176,250.00 8 531,000.00 401,500.00
Guarantee 2 285, 000. 00 213, 750. 00 7 494, 000. 00 385, 250. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 5 39, 300. 00 39, 300. 00
EOL II: Direct 1 20, 000. 00 20,000. 00 4 62,200. 00 62,200.00
Development company loans:
Participation 0 0 0 1 540,000. 00 345,600. 00
32D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL II: Direct
0
0
2
0
0 0
0 0
112,000.00 71,300.00
0 0
. 1
3
6
1
9,000. 00
180,000. 00
355,000.00
25, 000. 00
9,000. 00
100,000.00
251,250.00
25, 000. 00
33D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: birect
EOLII: Guarantee
Displaced business loans:
Direct
2
1
2
2
0
0
30, 000.00 30, 000. 00
32, 000.00 24, OOQ. 00
60,000.00 45,000. 00
27, 000.00 27,000. 00
0 0
0 0
5
5
2
3
1
1
90, 000. 00
1,907,000. 00
60,000. 00
30,700. 00
15,000.00
72 300. 00
90, 000. 00
225, 250. 00
45,000. 00
30,700. 00.
9,000.00
72, 300. 00
34TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Displaced business loans:
Direct
0
0
1
1
3
0
0 0
0 0
110,000.00 99,000.00
3,000. 00 3,000. 00
19, 800. 00 19,800. 00
0 0
4
1
2
.
6
8
2
57,000. 00
50,000. 00
117,500.00
46 800. 00
108,300.00
725,000.00
57, 000. 00
37, 500. 00
104,625.00
46,800. 00
108,300.00
725, 000.00
35TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 7,500.00 7 500.00 6 219 300.00 219,300.00
Participation 2 49, 000. 00 40,050. 00 4 429,000.00 325,050. 00
Guarantee 1 388, 000. 00 349, 200. 00 5 688,000.00 580,450.00
Economic opportunity loans:
EOL I: Direct 1 15, 000. 00 15, 000. 00 3 35,000.00 35,000.00
EOL II: Direct 0 0 0 1 4,000. 00 4,000.00
PAGENO="0364"
360
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
NEW YORK-Continued
Business loans:
Direct 1 16, 000. 00 16,000. 00
Participation 0 0 0
Guarantee 2 120, 000. 00 85, 000. 00
2
3
5
40, 000. 00
304, 000. 00
365, 000. 00
40 000. 00
156,800. 00
268, 750. 00
Economic opportunity loans:
EOL I: Direct 0 0 0
£01 II: Direct 3 54, 000. 00 54,000. 00
Displaced business loans: Direct. 1 50, 000. 00 50, 000. 00
3
6
1
16, 400. 00
92, 000. 00
50,000. 00
16,400. 00
92, 000. 00
50, 000. 00
37TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
EOL II: Direct
1
1
1
6, 000. 00
15, 000. 00
6, 000. 00
6, 000. 00
11,250. 00
6,000. 00
38TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 14, 000. 00 14, 000. 00 1 14 000. 00 14, 000. 00
Participation 1 40, 000. 00 30, 000. 00 2 90,000. 00 67, 500. 00
Guarantee 2 55, 000. 00 45, 000. 00 11 584, 000. 00 453, 700. 00
Economic opportunity loans,
EOL II: Direct 2 14, 000. 00 14, 000. 00 4 39, 400.00 39,400, 00
Disaster loans:
Direct 1 4, 000. 00 4, 000. 00 11 37,000. 00 37 000. 00
Participation 0 0 0 1 50,000. 00 45, 000. 00
39TH CONGRESSIONAL DISTRICT
Business loans: Guarantee
0
0
0
2
80, 000. 00
57, 000. 00
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
1
0
3,000. 00
0
3,000.00
0
*_____._~
DISTRICT
3
1
~
13, 000. 00
25, 000. 00
13, 000. 00
25, 000. 00
-
40TH CONGRESSI
ONAL
~---~-- ---
--~--~
26,500.00 26,500.00 1
Business loans: Direct 1 26, 500. 00 26, 500. 00
Economic opportunity loans:
EOL II:
Direct 1 20,000. 00 20, 000. 00 1 20, 000. 00 20 000. 00
Guarantee 1 11,400.00 9,120.00 1 11,400.00 9,120.00
41ST CONGRESSIONAL DISTRICT
Business loans: Guarantee
0
0
0
2
100, 000. 00
66,667. 00
Economic opportunity loans:
EOL I: Direct .
EOL II: Direct
0
2
0
28,000.00
0
28,000.00
1
6
5, 000. 00
71,500.00
5 000. 00
71, 500.00
Displaced business loans:
Direct
0
0
0
1
17,000.00
17,000.00
STATE TOTALS
Business loans:
Direct 23 451,300. 00 451, 300. 00 85 2,650, 200. 00 2,650, 200. 00
Participation 11 1, 011, 000 00 630,300. 00 41 4, 583, 800. 00 1, 941, 750. 00
Guarantee 26 2, 087, 000. 00 1, 661, 200. 00 72 5, 030, 500. 00 4, 032,642. 00
PAGENO="0365"
361
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
NEW YORK-Continued
.
STATE TOTALS-Continued
Economic opportunity loans:
EOLI:
Direct 37 336,900. 00 336,900. 00 117 1,015,600. 00 1, 015,600. 00
Guarantee 1 15, 000. 00 15, 000. 00 1 15 000. 00 15 000. 00
EOL II:
Direct 29 384, 800. 00 384, 800. 00 95 1,318,300. 00 1, 318, 300. 00
Guarantee 2 36, 400. 00 34, 120. 00 4 76,400. 00 68, 120. 00
Displaced business loans:
Direct 3 110, 000. 00 110, 000. 00 13 1, 241,300. 00 1, 236, 500. 00
Participation 0 0 0 2 145,000. 00 130, 500. 00
Disaster loans:
Direct 1 4,000. 00 4,000. 00 11 37,000. 00 37, 000. 00
Participation 0 0 0 1 50, 000. 00 45, 000. 00
Development company loans:
Direct 1 74, 000. 00 74, 000. 00 1 74, 000. 00 74,000. 00
Participation 0 0 0 1 540, 000. 00 345,600. 00
Guarantee 0 4,000. 00 32, 000. 00 1 40, 000. 00 36,000.00
NORTH CAROLINA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Development company loans:
Participation
0
4
1
1
1
0
0 0
235,000.00 168,000.00
30, 000. 00 22, 500. 00
2, 000. 00 2, 000. 00
4,000.00 4,000.00
0 0
5
6
3
3
1
1
60,600. 00
263,000.00
530, 000. 00
12, 500. 00
4,000. 00
117,000.00
50, 600. 00
189,000.00
435, 000. 00
12, 500. 00
4,000. 00
105,300. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Development company loans:
Participation
1
3
1
1
2
0
9, 000. 00 9, 000. 00
71,700.00 44,475.00
30, 000. 00 15, 000. 00
10, 000. 00 10, 000. 00
27,000.00 27, 000.00
4, 000. 00 3, 600. 00
4
8
1
1
4
1
50, 000. 00
151,200.00
30, 000. 00
100, 000. 00
49,700.00
92, 000. 00
50, 000. 00
110,775.00
15, 000. 00
10, 000. Oh
49,700.00
82,800. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 5 102, 500, 00 102, 500. 00
Participation 3 140, 000. 00 97, 500. 00 10 590, 000. 00 346,250. 00
Guarantee 1 400,000. 00 350, 000. 00 2 460,000.00 380,000.00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 14, 000. 00 14,000. 00
EOL II: Direct 1 14,500. 00 14, 500. 00 1 14, 500. 00 14,500. 00
Development company loans:
Participation 2 604,600. 00 525, 838. 00 2 640,600. 00 525,838. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 77, 900. 00 77,900. 00 11 232,900. 00 232,900. 00
Participation 2 29, 000. 00 21, 500. 00 8 494, 000. 00 316,200. 00
Guarantee 1 250, 000. 00 225, 000. 00 2 280, 000. 00 252, 000. 00
Economic opportunity loans:
EOL I: Guarantee 1 9, 000. 00 9, 000. 00 1 9, 000. 00 9, 000. 00
EOL II: Direct 1 10, 000. 00 10, 000. 00 4 44, 200.00 44,200, 00
Development company loans:
Participation 0 0 0 1 180, 000. 00 153, 000.00
PAGENO="0366"
362
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
NORTH CAROLI NA-Continued
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
0
0
1
0 0
25, 000. 00 20, 500. 00
52, 000. 00 46,800. 00
15
6
2
246, 800. 00
326, 000. 00
127, 000. 00
246,800. 00
241, 250. 00
114,300. 00
Direct
Guarantee
EOL II:
1
0
10, 000. 00 10,000. 00
0 0
3
1
20 400. 00
8 000.00
20 400. 00
7 200.00
Direct
Participation
Displaced business loans: Direct.
Development company loans:
Participation
0
0
0
0
0 0
0 0
0 0
0 0
1
1
1
1
4, 000. 00
22, 000. 00
99,600. 00
70, 000. 00
4,000. 00
19,800. 00
99,600. 00
63, 000. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
5 92, 000. 00 92, 000. 00
6 656, 000. 00 306, 000. 00
0 0 0
0 0 0
17
16
3
1
333, 300. 00
1,403,000. 00
325, 000. 00
7 000. 00
333,300. 00
824, 950. 00
242, 750. 00
7 000. 00
EOL II: Direct
Displaced business loans: Direct
2
3
7, 500. 00 7, 500. 00
233, 000. 00 233, 000. 00
3
5
32,000. 00
316,000. 00
32, 000. 00
316, 000. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Development company loans:
Direct
Participation
0
5
0
1
2, 500. 00 2, 500. 00
146, 700. 00 94,805. 00
0 0
225,000.00 202, 500.00
5
18
1
1
86, 900. 00
761, 700. 00
216,000.00
225,000.00
86,900. 00
499,245. 00
216,000.00
202,500.00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Displaced business loans: Direct
7
2
0
1
0
0
97,000. 00 97,000. 00
112,500.00 61,250.00
0 0
6,000. 00 6,000. 00
0 0
0 0
20
13
6
2
3
5
290,600. 00
760,600.00
247,000.00
9, 000. 00
28, 500. 00
241, 000. 00
290,600. 00
513,075.00
197,500.00
9,000. 00
28, 500. 00
241,000. 00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Development company loans:
Participation
1
4
1
1
5,000. 00 5, 000. 00
283, 000. 00 237, 000.00
75, 000. 00 56,250. 00
308, 500. 00 231, 37S. 00
4
8
4
4
38, 000. 00
858, 000. 00
476, 000. 00
658, 000. 00
38, 000. 00
608, 250. 00
417, 150. 00
545, 925. 00
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Development company loans:
Participation
0
3
3
1
1
0
0 0
280, 000. 00 144, 000. 00
320, 000. 00 288, 000. 00
3, 500. 00 3, 500. 00
5, 000. 00 5,000. 00
15, 000. 00 13, 500. 00
6
10
5
3
4
0
125,700.00
846, 500. 00
720, 500. 00
28, 500. 00
24, 500. 00
15,000. 00
125,700.00
573, 350. 00
640,875. 00
28, 500. 00
24,500. 00
13, 500. 00
PAGENO="0367"
363
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
NORTH CAROLI NA-Continued
11TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
0
6
1
0
2
0 0
270,800. 00 167,005. 00
100,000. 00 90, 000. 00
0 0
19,000.00 19,000.00
6
11
1
2
3
121,400.00
565, 800. 00
100, 000. 00
25,500.00
27,000.00
121,400.00
358,255. 00
90, 000. 00
25, 500.00
27, 000.00
STATE TOTALS
Business loans:
00
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
Direct
Guarantee
EOL II:
15
38
10
5
1
283, 400. 00 283,400.00
2, 141,700. 00 1, 278, 035.00
1,257,000.00 1,093,550.00
31, 500. 00 31, 500. 00
9, 000. 00 9, 000. 00
98
114
29
17
2
1,688,700. 00
7,019,800. 00
3,295,500.00
126,900. 00
17, 000. 00
00
1,678,700.
4, 580,600. 00
2,784,575.00
126,900. 00
16,200. 00
00
Direct
Participation
Displaced business loans:
Direct
Development company loans:
Direct
Participation
10
0
3
0
4
87, 000. 00 87, 000. 00
0 0
233, 000. 00 233, 000. 00
0 0
1,149,100.00 969,613.00
24
1
11
1
11
228,400.
22,000. 00
656,600. 00
216,000.00
1,961,600.00
228,400.
19,800. 00
656,600. 00
216,000.00
1,691,863.00
NORTH DAKOTA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 4 40, 500.00 38, 200. 00
Participation 4 53, 200. 00 40, 088. 00 15 481,200.00 346,913. 00
Guarantee 14 788, 800. 00 696,870. 00 30 1,662, 100.00 1,415,445. 00
Economic opportunity loans:
EOL I:
Direct 2 15,000. 00 15, 000. 00 3 18,000,00 18,000.00
Participation 2 28,000. 00 24,860. 00 3 47,000. 00 39, 110.00
Guarantee 1 8, 000. 00 7,200. 00 4 40, 500. 00 31, 700.00
EOL II:
Direct 1 15, 000. 00 15, 000. 00 2 32, 000. 00 32,000. 00
Participation 0 0 0 2 40,000. 00 33,000.00
Guarantee 0 0 0 1 22,000. 00 19,800. 00
Development company loans:
Direct 0 0 0 1 64,400. 00 64,400. 00
Participation 0 0 0 1 80,900. 00 72, 810. 00
2D CONGRESSIO
NAL DISTRICT
Businessloans:
000. 00
Direct
Participation
Guarantee
Economic opportunity loans:
EOLI:
0
2
9
0
36, 000. 00
577,000.00
0
32,400. 00
378,575.00
1
8
28
25,000. 00
318,000. 00
1,948,300.00
25,
201,480. 00
1,409,300.00
00
Direct
Participation
Guarantee
EOLII:
1
0
0
1, 000. 00
0
0
1,000. 00
0
0
1
1
4
1,000. 00
5,000. 00
28, 000. 00
1,
4, 500.00
24, 500. 00
000. 00
Direct
Participation
Disaster loans: Direct
Development company loans:
Direct
Participation
Guarantee
1
0
1
0
0
0
25, 000. 00
0
4, 000. 00
0
0
0
25,000. 00
0
4,000. 00
0
0
0
2
1
1
2
1
1
35, 000.
13, 500. 00
4, 000. 00
471,200. 00
27, 700. 00
62, 650. 00
35,
12, 150. 00
4, 000. 00
471, 200. 00
24,930. 00
56, 585. 00
PAGENO="0368"
364
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
NORTH DAKOTA-Continued
STATE TOTALS
Business loans:
Direct 0 0 0 5 65, 500. 00 63, 200. 00
Participation 6 89,200. 00 72,488. 00 23 799, 200. 00 548,393. 00
Guarantee 23 1,365, 800. 00 1, 075,445. 00 58 3, 610,400. 00 2, 824, 745. 00
Economic opportunity loans:
EOL I:
Direct 3 16, 000. 00 16, 000. 00 4 19, 000. 00 19, 000. 00
Participation 2 28,000. 00 24, 860. 00 4 52, 000. 00 43, 610. 00
Guarantee 1 8, 000. 00 7,200. 00 8 68, 500. 00 56, 200. 00
EOL II:
Direct 2 40, 000. 00 40, 000. 00 4 67, 000. 00 67, 000. 00
Participation 0 0 0 3 53, 500. 00 45, 150. 00
Guarantee._.~ 0 0 0 1 22,000.00 19,800.00
Disaster loans: Direct 1 4, 000, 00 4, 000. 00 1 4, 000. 00 4, 000. 00
Development company loans:
Direct 0 0 0 3 535, 600. 00 535,600. 00
Participation 0 0 0 2 108, 600. 00 97,940. 00
Guarantee 0 0 0 1 62, 650. 00 56, 585. 00
OHIO
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0
Guarantee 1 30, 000. 00 22, 500. 00
Economic opportunity loans,
EOL II: Direct 3 46, 000. 00 46, 000. 00
Displaced business loans:
Direct 0 0 0
2
1
6
1
45, 000. 00
30, 000. 00
86,600. 00
257, 000. 00
45, 000.00
22, 500. 00
86,600. 00
257, 000. 00
2D CONGRESSIONAL DISTRICT
Economic opportunity loans,
EOL I: Direct
Displaced business loans:
Direct
1
1
8,300.00
8, 000. 00
8,300. 00
8, 000. 00
3D CONGRESSIONAL DISTRICT
Economic opportunity loans,
EOL II: Direct
1
6, 500. 00
6, 500. 00
4TH CONGRESSIONAL DISTRICT
Business loans: -
Participation
Guarantee
1
1
29, 000. 00
20, 000. 00
15, 660. 00
- 15, 000. 00
5TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 1 35, 000. 00 26,250. 00
1
35, 000. 00
26, 250. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 31,000.00 31,000.00
Participation 1 200, 000. 00 150, 000. 00 1 240, 000, 00 180, 000. 00
Guarantee 1 29, 500. 00 22, 125. 00 1 29, 500. 00 22, 125. 00
PAGENO="0369"
365
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
her of Total amount amount ber of Total amount amount
loans loans
OHIO-Continued
7TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 1 54, 000. 00 40, 500. 00 2 244, 000. 00 200, 100. 00
Economic opportunity loans,
EOL I: Direct 0 0 0 1 8 000. 00 8 000. 00
8TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 3 142,000.00 102,400.00 3 142,000.00 102,400.00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 8,000. 00 8, 000. 00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 15, 000. 00 15,000. 00 2 107, 000. 00 107, 000. 00
Guarantee 0 0 0 1 10,000.00 9,000.00
Economic opportunity loans,
EOL I: Direct 1 6,000. 00 6, 000. 00 3 15, 000. 00 15, 000. 00
10TH CONGRESSIONAL DISTRICT
Business loans:
Participation 0 110, 000. 00 105, 000. 00 3 230, 000. 00 205, 000. 00
Guarantee 4 620,000. 00 534, 400. 00 7 889, 500. 00 754, 025. 00
Economic opportunity loans,
EOL II:
Direct 1 14, 500. 00 14, 500. 00 1 14, 500. 00 14, 500. 00
Participation 0 0 0 1 20,800. 00 18,720. 00
11TH CONGRESSIONAL DISTRICT
_._*. ._. _. ~ ___.______ .. _.~_*._~_ _.*. _..*_*._~_.~_ .---. .- ----- *__*. ___ __. _,_,.__ ~ *. ~__*_ ._._.
Business loans: Guarantee 2 90,000. 00 77, 000. 00 3 106,000. 00 91,400. 00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 14, 280. 00 14 280. 00
.~..-- ~--,-~~- ....`
12TH CONGRESSIONAL DISTRICT
---.- -.---.,..- - .-....--- --- --.--. - --- -.-.--..-- -.-.--.- ---- ----- .,-.--_.. --. -- -- --.--.-- ------- -..- - -. --
Business loans: Guarantee 1 100, 000. 00 50, 000. 00 2 280, 000. 00 185, 000. 00
Economic opportunity loans:
EOL I: Direct 1 5, 500. 00 5, 500. 00 2 7, 000. 00 7, 000. 00
EOL II: Direct 0 0 0 4 38, 000. 00 38, 000. 00
13TH CONGRESSIONAL DISTRICT
--...-. -- _, __,_ ___ ... __..:_. -~.
Business loans:
Direct 1 25, 000. 00 25, 000, 00 1 25, 000. 00 .25 000. 00
Guarantee 4 293,000.00 254,700.00 8 465,000.00 398,700.00
Economic opportunity loans,
EOL I: Direct 1 15, 000. 00 15, 000. 00 1 15, 000. 00 15 000. 00
Disaster loans: Direct 9 183,650. 00 183,650. 00 9 183,650. 00 183,650. 00
14TH CONGRESSIO
NAL DISTRICT
Business loans: Direct
Displaced business loans:
Direct
1
0
24,000. 00
0
24,000. 00
0
1
1
2,000.00
16, 300. 00
2, 000. 00
16, 300.00
95-193-68-24
PAGENO="0370"
366
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
OHIO-Continued
Business loans: Guarantee 0 0 0 1 100,000.00 90,000,00
Economic opportunity loans,
EOL II:
Direct 0 0 0 1 1,900. 00 1, 900. 00
Guarantee 1 7, 000. 00 6, 300. 00 1 7, 000. 00 6, 300. 00
16TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 110,000.00 110,000.00
Guarantee 0 0 0 2 100,000.00 75,750.00
Economic opportunity loans,
EOL I: Direct 1 6, 000. 00 6, 000. 00 1 6, 000. 00 6, 000. 00
Displaced business loans:
Direct 0 0 0 1 13, 900. 00 13, 900. 00
17TH CONGRESSIONAL DISTRICT
Business loans:
Participation 0 0 0 2 335, 000. 00 230, 200. 00
Guarantee 1 85,000.00 76,500.00 2 111,000.00 89,500.00
18TH CONGRESSIONAL DISTRICT
Business loans:
Participation 0 0 0 1 35, 000. 00 26,250. 00
Guarantee 1 130, 000. 00 97, 500. 00 4 204, 000. 00 151, 250. 00
Economic opportunity loans,
EOL II: Guarantee 1 15,000. 00 15, 000. 00 1 15, 000. 00 15,000. 00
Business loans:
Direct
Guarantee
Displaced business loans:
Direct
4
3
1
74,800.00
752, 000.00
11,000.00
74, 800.00
564, 000. 00
11,000.00
20TH CONGRESSIONAL DISTRICT
Business loans:
Direct 3 63, 000. 00 63, 000. 00 11 287, 500. 00 287, 500. 00
Participation 0 0 0 2 243, 000. 00 182, 250.00
Guarantee 1 25, 000. 00 12, 500. 00 1 25, 000. 00 12, 500. 00
Economic opportunity loans:
EOL I: Direct 1 10,800. 00 10,800. 00 5 51, 000. 00 51, 000. 00
EOL II: Direct 0 0 0 7 88, 400. 00 88,400. 00
Displaced business loans: Direct 1 5, 000. 00 5, 000. 00 2 74, 010. 00 74, 010. 00
21
ST CONGRESSION
AL DISTRICT
Business loans:
Direct
Guarantee
Economicopportunity loans:
EOL II: Direct
0
0
2
0
0
20, 000. 00
0
0
20, 000. 00
3
1
3
37, 500. 00
400,000. 00
34, 000. 00
37, 500. 00
150, 000. 00
34, 000. 00
PAGENO="0371"
367
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
SBA share
Num-
SBA share
ber of
Total amount amount
ber of
Total amount
amount
loans
loans
OHIO-Continued
22D CONGRESSiONAL D1STRICT
Business loans: Direct
Economic opportunity loans,
EOL I: Direct -
Displaced business loans:
Direct
1
2
0
10, 000. 00 10, 000.00
11, 000. 00 11, 000. 00
0 0
4
3
1
44, 000. 00
20,500. 00
4,000,00
44, 000. 00
20, 500. 00
4, 000. 00
23D CONGRESSIONAL DISTRICT
Business loans: Direct
Economic opportunity loans:
EOL I: Direct
EOL 11: DirecL
2
0
1
22, 500. 00 22, 500. 00
0 0
11, 500. 00 ii, 500. 00
8
1
3
168,500. 00
9,250.00
36,700.00
168, 500. 00
9,250. 00
36,700.00
24TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
0
1
0
0 0
25, 000. 00 18,750. 00
0 0
1
1
1
30,000.00
25,000.00
40,000.00
30, 000. 00
18,750. 00
30,000.00
Economic opportunity loans:
EOL I: Direct
0
0 0
1
10,000.00
10, 000. 00
STATE TOTALS
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOLll:
9
2
21
7
159, 500. 00 159, 500.00
335, 000. 00 273, 750. 00
1,633, 500. 00 1, 316,375. 00
.
54,300. 00 54, 300. 00
41
12
45
19
962,300.00
1,137,000. QO
3,983,000.00
150,050. 00
962,300. 00
858, 110. 00
2,989,500. 00
150,050. 00
Direct
Participation.
Guarantee
Displaced business loans:
Direct
Disasterloans: Direct
7
0
2
1
9
92, 000. 00 92, 000. 00
0 0
22,000.00 21,300.00
5,000. 00 5,000. 00
183,650.00 183,650,00
28
1
2
8
9
328,880. 00
20,800. 00
22,000.00
384,210. 00
183,650.00
328,880 00
18,720. 00
21,300.00
384,210. 00
183,650.00
OKLAHOMA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
EOLI:
0
4
0 0
98,000.00 71,100.00
1
13
9, 500. 00
506,950.00
9,500. 00
374,477.50
Direct
Guarantee
EOLII:
0
2
0 0
30, 000. 00 30,000. 00
4
2
38,600. 00
30, 000. 00
38,600. 00
30,000. 00
Direct
Guarantee
Displaced business loans:
Direct
1
2
3
13,000. 00 13,000. 00
46,000.00 43,900.00
430,900. 00 430,900. 00
3
3
8
48, 300.00
61,000, 00
741,652. 00
48,300. 00
58,900.00
741,652. 00
PAGENO="0372"
368
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
OKLAHOMA-Continued
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 20, 000. 00 20, 000. 00 2 40, 000. 00 40, 000. 00
Guarantee 9 624,600. 00 350, 890. 00 20 1, 403, 000. 00 925, 390. 00
Economic opportunity loans:
EOLI:
Direct 1 15, 000. 00 15, 000. 00 6 55, 000. 00 54, 300. 00
Guarantee 0 0 0 1 15, 000. 00 15, 000. 00
EOL II: Direct 1 20, 000. 00 20, 000. 00 4 74, 500. 00 74, 500. 00
Displaced business loans:
Participation 0 0 0 1 29, 000. 00 26, 100. 00
3D CONGRESSIONAL DISTRICT
Businessloans: Guarantee 4 246,600.00 132,195.00 11 420,000.00 256,445.00
Economic opprotunity loans:
EOL I: Direct 0 0 0 2 10,600. 00 10,600. 00
EOLII:
Direct 2 37, 000. 00 37, 000. 00 9 173, 000. 00 173, 000. 00
Guarantee 0 0 0 1 15,000.00 15,000.00
Di~pIaced business loans: Direct 1 42, 500. 00 42, 500. 00 2 192, 500. 00 192, 500. 00
4TH CONGRESSIONAL DISTRICT
_..... .* _~~______.__ ... __.___. ---- --------. -- ____._ __..__ -.----- _.. __.. --- .- __._____. _._._..
Business loans: Guarantee 7 233,500.00 168,325.00 18 553,400.00 410,800.00
Economic opportunity loans:
EOLI:
Direct 1 10, 000. 00 10, 000. 00 1 10, 000. 00 10, 000. 00
Guarantee 1 4,400. 00 4,400. 00 1 4, 400. 00 4,400. 00
EOL II: Direct 0 0 0 1 8, 000. 00 8,000. 00
Development company loans:
Guarantee 0 0 0 1 8,500.00 7,650.00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0
Guarantee 3
Economic opportunity loans:
EOL I: Direct 0
EOL II: Direct 0
Displaced business loans: Direct_ 0
0 0 1 12,700.00 12,700.00
63, 000. 00 47, 250. 00 11 300, 000. 00 223, 800. 00
0 0 3 17,400.00 17,400.00
0 0 1 25,000. 00 25, 000. 00
0 0 1 7,000. 00 7,000.00
6TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 2 80, 000. 00 56, 400.00 12 365, 500. 00 230, 592. 50
Economic opportunity loans:
EOL I: Guarantee 1 3, 000. 00 3, 000. 00 1 3, 000. 00 3, 000. 00
EOL II:
Direct 0 0 0 1 13, 500. 00 13, 500. 00
Guarantee 0 0 0 1 22, 000. 00 22, 000. 00
Development company loans:
Participation 1 342,319.81 308,088.00 3 793,394,62 714,056.00
Guarantee 0 7, 088. 00 6, 379.20 1 29, 700. 00 26, 730. 00
STATE TOTALS
62,200. 00 62 200. 00
3, 548, 850. 00 2,421, 505. 00
Business loans:
Direct 1 20, 000. 00 20, 000. 00 4
Guarantee 29 1,345, 600. 00 826, 160.00 85
PAGENO="0373"
369
SUMMARY. OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- . SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
OKLAHOMA-Continued
STATE TOTALS-Continued
Economic opportunity loans:
Direct 2 25,000. 00 25 000. 00 16 131 600. 00 130,900.00
Guarantee 4 37, 400. 00 37,400. 00 5 52,400. 00 52, 400.00
EOL II:
Direct 4 70,000. 00 70,000.00 19 342,300. 00 342,300.00
Guarantee 2 46,000. 00 43,900.00 5 98,000.00 95,900. 00
Displaced business loans:
Direct 4 473,400. 00 473,400.00 11 941, 152. 00 941,152. 00
Participation 0 0 0 1 29,000.00 26, 300. 00
Development company loans:
Participation 1 342, 319. 81 308,088. 00 3 793,394. 62 714,056. 00
Guarantee 0 7,088. 00 6,379.20 2 38,200. 00 34,380. 00
OR EGO N
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 4 183,171.00 183,171.00
Participation 0 0 0 4 197,000. 00 164,250. 00
Guarantee 5 73, 500.00 61, 750. 00 10 581, 000. 00 518, 500.00
Economic opportunity loans:
EOL I: Direct 1 1, 500. 00 1, 500. 00 1 1, 500. 00 1, 500. 00
EOL II: Direct 0 0 0 1 3,000.00 3,000.00
Disaster loans: Direct 5 36,85000 36,850.00 6 46,050. 00 46,050.00
Development company loans:
Direct 0 0 0 1 40,000.00 40,000.00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 35,000.00 35, 0Q0~ 00 15 468,070. 00 468,070. 00
Participation 4 144,500. 00 126,300. 00 8 566, 500. 00 447,800. 00
Guarantee 2 155,000.00 127,500.00 6 526,500.00 429,845.00
Economic opportunity loans:
EOL I Direct 1 5,000. 00 5,000. 00 2 8,500.00 8,500. 00
EOL II: Direct 0 0 0 1 4,800. 00 4,800. 00
Displaced business loans:
Direct 0 0 0 1 86,000. 00 86,000. 00
Development company loans:
Direct 0 0 0 2 185,600.013 185,600.00
~.
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II Direct
Displaced business loans:
Direct
2
2
0
1
0
49,000. 00 49,000. 00
94,000.00 72,600.00
0 0
12,000. 00 12,000. 00
0 0
3
5
1
3
1
64,000.00
414,000.00
5,000.00
23, 500. 00
17,500.00
64,000. 00
360,600~00
5,000. 00
23, 500. 00
17,500.00
*
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 42, 500. 00 42, 500. 00 9 716,383. 00 716, 383. 00
Participation 1 45,300. 00 22,650. 00 3 255, 300. 00 211, 650. 00
Guarantee 2 200,000. 00 160, 000. 00 3 235, 000. 00 191, 500. 00
Economic opportunity loans,
EOLI:Direct 1 12,000.00 12,000.00 1 12,000.00 12,000.00
PAGENO="0374"
Business loans:
Direct
Participation
Economic opportunity loans
Direct
Guarantee~...~~~
EOL II:
Direct
Guarantee
Development company loans:
Direct
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
Direct
Guarantee
EOL II:
Direct
Guarantee
370
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num SBAshare Num SBAshare
ber of Total amount amount ber of Total amount amount
loans loans
OREGON-Continued
STATE TOTALS
Business loans:
Direct
Participation
Guarantee
Economic Opportunity loans:
EOL I Direct
EOL Il Direct
Displaced business loans:
Direct
Disaster loans Direct
Development company loans
Direct
4 126,500.00 126,500.00 31
5 189 800 00 148 950 00 15
11 522 500 00 421 850 00 24
3 18 500 00 18 500 00 5
1 12 000 00 12 000 00 5
o 0 0 2
5 36 850 00 36 850 00 6
0 0 0 3
1,431,624.00
1 018 800 00
1 756 500 00
27 000 00
31 300 00
103 500 00
46 050 00
225 600 00
1,431,624.00
823 700 00
1 500 445 00
27 000 00
31 300 00
103 500 00
46 050 00
225 600 00
PENNSYLVANIA
UNIDENTIFIED CONGRESSIONAL DISTRICT
Business loans Direct
1
25 000 00
25 000 00
1ST CONGRESSIONAL DISTRICT
Business loans
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
Direct
Participation
Guarantee
EOL II:
Direct
Guarantee
1 3 500 00 3 500 00 2
3 340 000 00 177 500 00 5
0 0 0 2
3 25, 100. 00 25, 100. 00 9
1 5 000 00 5 000 00 1
2 16, 000. 00 14,800. 00 3
3 25,500. 00 25, 500. 00 5
1 10 000 00 10 000 00 6
5500 00
435 000 00
50 000 00
46, 525. 00
5 000 00
22,000.00
34,000.00
41 000 00
5 500 00
225 000 00
44 250 00
~
46, 525. 00
5 000 00
17, 800. 00
34,000. 00
36 475 00
20 CONGRESSIONAL DISTRICT
1 4,000. 00 4,000. 00 2 19,000. 00 19, 000. 00
O 0 0 2 365 000 00 261 500 00
0 0 0 2 7 500 00 7 500 00
1 10,000. 00 9,000. 00 2 15,800. 00 11,900. 00
2 20 500 00 20 500 00 2 20 500 00 20 500 00
2 30 000 00 25 500 00 6 59 200 00 46 900 00
O 100 000 00 100 000 00 0 100 000 00 100 000 00
3D CONGRESSIONAL DISTRICT
1 12 000 00 12 000 00 4 49 000 00 49 000 00
0 0 0 6 432,000. 00 248, 000. 00
2 71,000.00 66,000.00 3 221,000.00 201,000.00
0 0 0 1 1500 00 1 500 00
1 5 000 00 4 500 00 1 5 000 00 4 500 00
0 0 0 1 3 000 00 3 000 00
4 29,000. 00 28, 700. 00 5 37,000.00 35,900. 00
PAGENO="0375"
371
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Mum- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
PENNSYLVANIA-Continued
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 4 43, 500. 00 43,500.00 6 69,500.00 69,500. 00
Participation 1 81, 500. 00 61, 125. 00 2 90,500. 00 64, 125. 00
Guarantee 1 100,000. 00 80, 000. 00 2 125, 000. 00 100, 000. 00
Economic opportunity loans:
EOLI:
Direct 1 8,000.00 8,000. 00 1 8,000.00 8,000. 00
Guarantee 1 6,000.00 6,000. 00 1 6,000.00 6,000. 00
EOLII:
Direct 1 14, 100. 00 14, 100. 00 3 24, 100.00 24, 100. 00
Guarantee 3 36,000. 00 33,000. 00 4 41,000.00 38,000. 00
Disaster loans: Direct 0 0 0 1 20, 000. 00 20,000. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 4 32,000.00 32,000.00
Participation 1 39,649. 00 19,685. 00 2 61,649. 00 36, 185. 00
Guarantee 0 0 0 1 30,000.00 24,000.00
Economic opportunity loans:
EOL I:
Direct 1 5, 500. 00 5. 500. 00 2 11, 500. 00 11, 500. 00
Guarantee 1 14,500. 00 10,875. 00 1 14, 500. 00 10, 875. 00
EOL II: Direct 0 0 0 2 20,000. 00 20,000. 00
Disaster loans: Direct 0 0 0 1 800. 00 800. 00
Development company loans:
Participation 0 10, 187. 00 9, 167. 00 0 10, 187. 00 9, 167. 00
6TH CONGRESSIONAL DISTRICT
~
Business loans:
0 2 110, 000. 00 110, 000. 00
Direct
Participation
Guarantee
Economic opportunity loans,
EOL I: Direct
Displaced business loans:
Direct
Participation
0
2
0
0
0
0
0
500,000. 00 187, 500. 00
0 0
0 0
0 0
0 0
6
1
3
1
1
940, 000. 00
25,000.00
16, 000. 00
5,000. 00
275,000.00
525,000. 00
22,500.00
16, 000. 00
5,000. 00
206,250. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 6 106, 500. 00 106, 500. 00
Participation 0 0 0 3 243 000. 00 179,000. 00
Guarantee 1 150,000.00 112,500.00 1 150,000.00 112,500.00
Economic opportunity loans:
EOL I:
Direct 1 3,000. 00 3,000. 00 2 12, 500. 00 12, 500. 00
Guarantee 1 10, 000. 00 9, 000. 00 1 10,000. 00 9, 000. 00
EOL II: Direct 0 0 0 1 5, 000. 00 5, 000. 00
Displaced business loans:
Direct 1 20, 000. 00 20, 000. 00 1 20,000 00 20,000. 00
Guarantee 0 0 0 1 115,000.00 103,500.00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 23,300.00 23, 300. 00 4 49,300.00 49,300. 00
Participation 0 0 0 3 387, 000. 00 205,250. 00
Guarantee 3 242,000. 00 193, 000. 00 5 642, 000. 00 493, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 11,200.00 11,200.00
EOL II: Direct 1 8,000. 00 8,000. 00 1 8,000.00 8,000.00
Displaced business loans:
Participation 0 0 0 1 154, 000. 00 115, 500. 00
Development company loans:
Participation 0 0 0 1 480, 000. 00 349,920.00
PAGENO="0376"
372
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
PENNSYLVANIA-Continued
9TH CONGRESSIONAL DISTRICT
Business loans;
Direct
Participation
Guarantee
Economic opportunity loans,
EOL II: Direct
0
0
0
1
0 0
0 0
0 0
6, 500. 00 6, 500. 00
2
3
5
1
26, 000. 00
466,900. 00
352, 000. 00
6,500. 00
26, 000. 00
300,210. 00
299,750. 00
6, 500. 00
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 10, 000. 00 10, 000. 00
Participation 3 255, 000. 00 148, 750.00 11 945, 500. 00 562, 375. 00
Guarantee 2 280, 000. 00 240, 000. 00 3 290,000. 00 247, 500. 00
Displaced business loans:
Direct 1 377, 400. 00 377, 400. 00 1 377, 400. 00 377, 400. 00
Business loans:
Direct
Participation
Guarantee
0
0
1
0 0
0 0
35,000.00 26,250.00
3
2
2
40, 000. 00
275, 000. 00
335,000.00
40, 000. 00
162, 500. 00
211,250.00
12TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 11,000.00 11,000.00
Participation 1 68, 000. 00 51, 000. 00 2 178, 000. 00 133, 500, 00
13TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 40, 000. 00 40, 000. 00 11 190, 000. 00 190, 000. 00
Participation 1 100, 000. 00 90,000. 00 5 385, 000. 00 282, 500. 00
Guarantee 0 0 0 2 170,000.00 104,800.00
Economic opportunity loans:
EOL I:
Direct 0 4,000. 00 4,000. 00 3 23, 000.00 23, 000. 00
Guarantee 0 0 0 1 15, 000. 00 12,000. 00
EOL II: Direct 0 0 0 1 10, 000. 00 10, 000. 00
Disaster loans: Direct 0 0 0 9 38,450.00 38,450.00
14TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 58, 000. 00 58, 000. 00 4 90 000. 00 90, 000. 00
Participation 1 300, 000. 00 150, 000. 00 3 575, 000. 00 233, 200. 00
Guarantee 0 0 0 1 8, 000. 00 5, 600. 00
Economic opportunity loans:
EOL I:
Direct 1 3, 500. 00 3, 500. 00 2 8, 500. 00 8, 500. 00
Participation 0 0 0 0 1, 550. 00 775. 00
EOL II: Direct 0 0 0 2 21, 000. 00 21, 000. 00
Business loans: Guarantee
Economic opportunity loans,
EOL II: Direct
Disaster loans: Direct
0
0
1
0
0
5, 000. 00
0
0
5, 000. 00
2
2
1
70,000.00
20, 000. 00
5, 000. 00
63,000.00
20,000. 00
5, 000. 00
PAGENO="0377"
373
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
loans loans
PENNSYLVANIA-Continued
16TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 24, 000. 00 24, 000. 00
Participation 1 75, 000. 00 67, 500. 00 2 135, 000. 00 112, 500. 00
Economic opportunity loans,
EOL I: Direct 0 0 0 3 7, 400. 00 7, 400. 00
17TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 10, 000. 00 10, 000. 00
Participation 2 90, 000. 00 69,750. 00 15 1, 390, 350. 00 831, 240. 00
Guarantee 4 514, 200. 00 404, 780. 00 5 523, 700. 00 413, 330. 00
Development company loans:
Participation 0 0 0 1 590, 500. 00 348, 395. 00
___~.__ .____ ---- *______. -------
18TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 40, 600. 00 40, 600. 00
Participation 1 10, 000. 00 7, 500. 00
Economic opportunity loans,
EOL I: Direct 1 10,000,00 10,000.00
19TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 2, 500. 00 2, 500. 00 3 67, 500. 00 67, 500. 00
Participtation 2 137,000. 00 102, 750. 00 4 322, 000. 00 225, 250. 00
Guarantee 0 0 0 1 300, 000. 00 238, 000. 00
Disaster loans: Participation___ - 0 0 0 1 60,000. 00 54, 000. 00
20TH CONGRESSIONAL DISTRICT
Business loans: Guarantee 0 0 0 1 14, 800. 00 13, 320. 00
Economic opportunity loans,
EOL I: Direct 0 0 0 1 5, 500. 00 5, 500. 00
Displaced business loans:
Direct 1 19,700. 00 19,700. 00 1 19,700. 00 19,700. 00
----- --~----~------ -~--------~~~--- -- -- -~
21ST CONGRESSIONAL DISTRICT
Business loans: Direct 1 60,000.00 60, 000. 00 1 60, 000. 00 60,000. 00
Economic opportunity loans:
EOL I: Direct 1 15, 000. 00 15, 000. 00 2 17, 400. 00 17,400. 00
EOL II: Direct 1 2, 500. 00 2, 500. 00 1 2, 500. 00 2,500. 00
D~splaced business loans:
Participation 0 0 0 1 68, 000, 00 51, 000. 00
Development company loans:
Participation 1 275, 000. 00 247, 500. 00 1 275, 000.00 247, 500. 00
22D CONGRESSIONAL DISTRICT
Business loans:
Participation 1 120,000. 00 90, 000. 00
Guarantee 3 700,000. 00 462, 500. 00
Economic opportunity loans,
EOL I: Direct 3 11 000.00 11, 000. 00
PAGENO="0378"
374
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share
Nur~- SBA share
ber of Total amount amount ber of Total
amount amount
loans loans
PENNSYLVANIA-Continued
23D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 12,000.00 12,000.00
Participation 0 0 0 3 235, 000. 00 176, 250. 00
Guarantee 2 50, 000. 00 38, 500. 00 3 300, 000. 00 226, 000. 00
Development company loans:
Direct 0 0 0 1 304, 000. 00 304, 000. 00
24TH CONGRESSIONAL DISTRICT
Business loans:
Direct
0 0 0
0 900. 00 900. 00
Guarantee 0 0 0 2 285, 000. 00 246, 000. 00
Economic opportunity loans,
EOL I: Direct 1 4, 000. 00 4, 000. 00 5 61, 500. 00 61, 500. 00
Divplaced business Ioan~:
Direct 0 0 0 2 81. 500. 00 81, 500. 00
Participation 0 0 0 0 21, 000. 00 18, 900. 00
25TH CONGRESSIONAL DISTRICT
Business loans: Direct 1 24,000. 00 24, 000. 00 3 65, 000. 00 65, 000. 00
Economic opportunity loans:
EOL I:
Direct 2 21, 000. 00 21, 000, 00 3 24,200. 00 24, 200. 00
Guarantee 1 8,000. 00 3, 000. 00 1 8, 000. 00 3, 000. 00
EOL II: Direct 1 9, 000. 00 9, 000. 00 1 9, 000. 00 9, 000. 00
Displaced business loans:
Direct 1 43, 500. 00 43, 500. 00 1 43, 500. 00 43, 500. 00
26TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 83, 500.00 83, 500. 00
Guarantee 1 50, 000. 00 25, 000. 00 3 195, 000. 00 122, 500. 00
Economic opportunity loans:
EOL I: Direct 1 3, 000. 00 3,000. 00 2 8,000. 00 8, 000. 00
EOL II: Direct 0 0 0 1 5,000. 00 5,000. 00
Development company loans:
Direct 1 65, 000, 00 65, 000. 00 2 415, 000. 00 415, 000. 00
Participation 0 0 0 1 324,000.00 291,600. 00
27TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 7, 700. 00 7,700, 00 5 84, 700. 00 84, 700. 00
Participation 0 0 0 1 58, 500. 00 29,250. 00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 12, 000. 00 12,000. 00
STATE TOTALS
Business loans:
Direct 17 278, 500. 00 278, 500. 00 73 1, 261, 000. 00 1,261, 000. 00
Participation 18 1, 986, 149. 00 1, 125, 560. 00 82 8, 050, 399. 00 4, 890, 335. 00
Guarantee 17 1, 492, 200. 00 1, 186, 030. 00 48 4, 786, 500. 00 3 650,800. 00
Economic opportunity loans:
Direct 12 92,100.00 92,100.00 47 291,225.00 291,225.00
Participation 1 5, 000. 00 5, 000. 00 1 6, 550. 00 5,775. 00
Guarantee 8 69, 500. 00 57, 175. 00 11 96,300. 00 75,075. 00
EOL II:
Direct 10 86, 100. 00 86, 100. 00 25 200, 600. 00 200,600. 00
Guarantee 10 105, 000. 00 97, 200. 00 21 178,200. 00 157,275. 00
PAGENO="0379"
375
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
PENNSYLVANIA-Continued
STATE TOTALS-Continued
Displaced business loans:
Direct 4 460,600. 00 460,600. 00 7 547, 100.00 547, 100. 00
Participation 0 0 0 3 518,000.00 391,650.00
Guarantee 0 0 0 1 115,000.00 103,500.00
Disaster loans:
Direct 1 5, 000. 00 5, 000. 00 12 64, 250.00 64,250. 00
Participation 0 0 0 1 60, 000.00 54, 000. 00
Development company loans:
Direct 1 165, 000. 00 165, 000. 00 819, 000.00 819,000. 00
Participation 1 285, 187. 00 256 667. 00 34 1,679,687.00 1, 246, 582. 00
RHODE ISLAND
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 3 32, 500. 00 32, 500. 00 18 347,000. 00 342,000.00
Participation 5 220, 000. 00 125, 500. 00 12 840, 000. 00 551,000. 00
Guarantee 4 358, 000.00 312, 200. 00 7 418,000.00 366,200.00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 10, 500.00 10,500. 00
EOL II: Direct 2 9, 000. 00 9, 000. 00 3 27, 500. 00 27, 500. 00
Displaced business loans:
Direct 4 505, 000. 00 505, 000. 00 8 828, 000. 00 828,000. 00
Participation 0 0 0 2 550, 000. 00 442, 500.00
Disaster loans: Direct 0 0 0 1 62,300. 00 62,300. 00
Development company loans:
Direct 0 0 0 1 160 000.00 160 000.00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 6 136, 100.00 136, 100. 00 39 893,700. 00 886,200. 00
Participation 2 16,000. 00 11, 300. 00 12 684,000. 00 525, 550. 00
Guarantee 7 619, 500. 00 527, 550. 00 13 1, 153, 500. 00 1, 006, 650. 00
Economic opportunity loans:
EOLI:
Direct 4 27, 500. 00 27, 500. 00 6 38, 500. 00 38, 500. 00
Participation 1 11, 000.00 11,000. 00 0 0 0
EOL II: Direct 3 16,000.00 16,000. 00 9 88,000.00 88,000.00
STATE TOTALS
Business loans:
Direct 9 103, 600. 00 103, 600.00 57 1,240, 700. 00 1,228,200. 00
Participation 7 236, 000. 00 136,800. 00 24 1, 524, 000. 00 1,076, 550. 00
Guarantee 11 977, 500. 00 839,750. 00 20 1, 571, 500. 00 1, ~72, 850. 00
Economic opportunity loans:
Direct 4 27, 500. 00 27, 500. 00 8 49, 000. 00 49, 000. 00
Participation 1 11, 000. 00 11,000. 00 0 0 0
EOL II: Direct 5 25, 000.00 25,000. 00 12 115,500.00 115.500. 00
Displaced business loans:
Direct 4 505, 000. 00 505,000. 00 8 828,000.00 828,000. 00
Participation 0 0 0 2 550,000. 00 442, 500. 00
Disaster loans: Direct 0 0 0 1 62,300.00 62,300.00
Development company loans:
Direct 0 0 0 1 160, 000. 00 160, 000. 00
PAGENO="0380"
376
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
her of Total amount amount ber of Total amount amount
loans loans
SOUTH CAROLINA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 4 35, 500. 00 35, 500. 00 13 364, 000. 00 364, 000. 00
Participation 7 228 800. 00 157, 350. 00 27 1, 420, 500, 00 884, 750. 00
Guarantee 3 94,000.00 70,500.00 8 222,000.00 166,500.00
Economic opportunity loans:
EQL II:
Direct 2 27, 500. 00 27, 500. 00 3 41, 500. 00 41, 500. 00
Participation 1 6, 000. 00 5, 400. 00 1 6, 000. 00 5, 400. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 7 82, 000. 00 82, 000. 00 21 339, 800. 00 319, 200. 00
Participation 3 105, 000. 00 67, 500. 00 10 405, 000. 00 295, 750. 00
Guarantee 4 271, 000. 00 234, 700.00 13 520,000. 00 438, 700. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 25, 000. 00 25, 000. 00
EOL II:
Direct 3 26, 000. 00 26, 000. 00 3 26, 000. 00 26, 000. 012
Guarantee 0 0 0 1 25, 000. 00 25, 000. 00
Displaced business loans:
Direct 0 0 0 0 25, 000. 00 25, 000. 00
Development company loans:
Direct - 1 350, 000. 00 350, 000. 00 1 350, 000. 00 350, 000. 00
3D CONGRESSIONAL DISTRICT
*.*_ _*__*___. ~__..___.___ .__.____ .*_ .___ __._ -- .* _._____ -- .*
Business loans:
Direct 1 5, 000. 00 5, 000. 00 2 20, 000. 00 20, 000. 00
Participation 1 125, 000. 00 93, 750. 00 5 294, 000. 00 228, 850, 00
Guarantee 0 0 0 2 385, 000. 00 344, 995. 00
Economic opportunity loans,
EOL II: Direct 1 16,350.00 16,350.00 4 35,850.00 35,850.00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 5, 500. 00 5, 500. 00 3 155, 500. 00 155, 500. 00
Participation 1 3, 000. 00 2, 250. 00 15 764, 000. 00 568,275. 00
Guarantee 3 148,500.00 133,650.00 7 255,500.00 217,650.00
Economic opportunity Ioans~
EOL I: Direct 1 4, 500. 00 4, 500. 00 1 4, 500. 00 4, 500. 00
EOL II: Direct 0 0. 0 1 7, 000. 00 7,000. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 6, 000. 00 6, 000. 00 2 10, 000. 00 10, 000. 00
Participation 1 45,000. 00 31, 500. 00 6 507, 000. 00 401, 725. 00
Guarantee 1 35,000. 00 31, 500. 00 5 359, 000. 00 317, 500. 00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 25, 000. 00 25, 000. 00
Development company loans:
Direct 1 183,625. 00 183,625. 00 3 763, 625. 00 763, 625. 00
-.~-. - ...- ..- --.- ~- ---- .-: .-.
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct 3 32, 000. 00 32, 000. 00 10 136, 750. 00 134, 750. 00
Participation 10 731,000. 00 574, 250. 00 26 1, 845, 000. 00 1, 442, 275. 00
Guarantee 0 0 0 3 176, 000. 00 133, 500. 00
Economic opportunity loans:
EOL I: Guarantee 0 0 0 1 6, 300. 00 5, 670. 00
EOL II: Direct 0 0 0 2 5, 700. 00 5, 700. 00
PAGENO="0381"
377
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
- April-June 1968 July 1967-March 1968
Mum- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
SOUTH CAROL1NA-Contlnued
6TH CONGRESSIONAL DISTRICT-Continued
Development company loans:
Direct 0 0 0 1 350, 000. 00 350, 000. 00
Participation 2 289,650.00 257, 185. 00 2 289,650.00 257, 185. 00
STATE TOTALS
Business loans:
Direct 17 166,000.00 166,000.00 51 1,026,050.00 1,003,450.00
Participation 23 1,237,800. 00 926,600. 00 89 5,235, 500. 00 3, 821,625. 00
Guarantee 11 548,500.00 470,350.00 38 1,917, 500. OQ 1,618,845.00
Economic opportunity loans:
EOL I:
Direct 1 4,500. 00 4, 500. 00 3 29, 500. 00 29, 500. 00
Guarantee 0 0 0 1 6,300. 00 5,670. 00
EOL II:
Direct 6 69,850. 00 69,850.00 14 141,050.00 141,050.00
Participation 1 6,000. 00 5,400. 00 1 6,000. 00 5,400. 00
Guarantee 0 0 0 1 25, 000. 00 25,000. 00
Displaced business loans:
Direct 0 0 0 0 25,000. 00 25,000. 00
Development company loans:
Direct 2 533,625. 00 533,625. 00 5 1,463,625. 00 1, 463,625. 00
Participation 2 289, 650. 00 257, 185. 00 2 289,650. 00 257, 185. 00
SOUTH DAKOTA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 5 71,300.00 71,300.00
Participation 12 589, 500. 00 448, 125. 00 37 1,634, 700. 00 1, 175,700. 00
Guarantee 14 650, 500. 00 493, 150. 00 26 917, 500. 00 715, 750. 00
Economic opportunity loans:
EOL I:
Direct 0 0 0 1 3, 500. 00 3, 500. 00
Participation 1 9, 000. 00 8, 100. 00 2 24,000. 00 19, 350. 00
Guarantee 0 0 0 1 15, 000. 00 13, 500. 00
EOL II:
Direct 1 2, 000. 00 2, 000. 00 5 52, 000. 00 52, 000. 00
Participation 2 15, 000. 00 12, 750. 00 2 15, 000. 00 12, 750. 00
Guarantee 1 6,000. 00 5,400. 00 4 43,000. 00 39, 450. 00
Displaced business loans:
Direct 0 0 0 1 120, 000. 00 120, 000. 0')
Disaster loans: Direct 0 0 0 1 6, 500. 00 6, 500. 00
Development company loans:
Direct 0 0 0 1 20, 350. 00 20, 350. 00
Participation 0 0 0 1 203, 000. 00 182, 700. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 3 90, 000. 00 90, 000. 00
Participation 15 840, 500. 00 683, 750, 00 37 1, 944, 000. 00 1, 579, 900, 00
Guarantee 6 153, 500. 00 126, 150, 00 13 455, 000. 00 385, 500. 00
Economic opportunity loans:
EOL I:
Direct 0 0 0 2 19, 500. 00 19, 500. 00
Part 1 13,000.00 11,700.00 3 31,400.00 25,500.00
Guarantee 1 14, 000. 00 10, 500. 00 2 22, 000. 00 18, 500. 00
EOL II:
Direct 2 23, 000. 00 23, 000.00 3 30, 000. 00 30, 000. 00
Part 3 50, 000. 00 40,200. 00 4 64, 000. 00 52, 800. 00
Guarantee 1 6,000.00 4,500.00 1 6,000.00 4,500.00
Displaced business loans: Part_ 0 0 0 1 38, 000. 00 34, 200. 00
Disaster loans: Direct 1 2, 500. 00 2, 500. 00 4 8, 500. 00 8, 500. 00
Development company loans:
Direct 0 0 0 1 266, 000. 00 266, 000. 00
Guarantee 1 10, 000. 00 9, 000. 00 1 10, 000. 00 9, 000. 00
PAGENO="0382"
378
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
SBA
ber of
share
Total amount
Num-
SBA share
loans
ber of
loans
Total amount
amount
SOUTH DAKOTA-Continued
STATE TOTALS
Business loans:
Direct
Participation
Guarantee
Economic ~pportunity loans:
Direct
Participation
Guarantee
EOL II:
0
27
20
0
2
1
0 0
1, 430, 000. 00 1, 131, 875. 00
804, 000. 00 619, 300. 00
0 0
22, 000. 00 19, 800. 00
14, 000. 00 10, 500. 00
8
74
39
3
5
3
161,300.00
3, 578,700. 00
1, 372, 500. 00
23, 000. 00
55,400. 00
37 000. 00
161,300.00
2, 755, 600. 00
1, 101, 250. 00
23, 000. 00
44, 850. 00
32 000. 00
Direct
Participation.
Guarantee
Displaced business loans:
Direct
Part
Disaster loans: Direct
Development company pans:
Direct
Part
Guarantee
3
5
2
0
0
1
*
0
0
1
25, 000. 00 25, 000. 00
65, 000. 00 52, 950. 00
12, 000. 00 9, 900. 00
0 0
0 0
2, 500. 00 2, 500. 00
0 0
0 0
10,000. 00 9, 000. 00
8
6
5
1
1
5
2
1
1
82,000. 00
79, 000. 00
49, 000. 00
120, 000. 00
38, 000. 00
15, 000. 00
286, 350. 00
203,000.00
10, 000. 00
82 000. 00
65, 550. 00
43,950. 00
120, 000. 00
34,200. 00
15, 000. 00
286, 350. 00
182,700.00
9, 000 00
TENNESSEE
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
1
3
0
0
0
5, 700. 00 5, 700. 00
133, 000. 00 99, 750. 00
0 0
0 0
0 0
3
6
2
1
2
19, 200. 00
294, 500. 00
160, 000. 00
800.00
23, 500. 00
19, 200. 00
227, 100. 00
117, 900. 00
800.00
23, 500. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Guarantee
Disaster loans: Direct
Development company loans:
Direct
1
2
3
0
0
1
1
2, 500. 00 4, 500. 00
37, 000. 00 29, 900. 00
143, 800. 00 127, 170. 00
0 0
0 0
8, 000. 00 8, 000. 00
165, 000. 00 165, 000. 00
6
8
7
2
1
9
1
64, 700. 00
263, 000. 00
340, 800. 00
18, 100. 00
7, 000. 00
32, 500. 00
165, 000. 00
64, 700. 00
195, 900. 00
267, 420. 00
18, 100. 00
7, 000. 00
32, 500. 00
165,000. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Participation
Guarantee
Displaced business loans:
Direct
0
1
1
0 0
35, 000. 00 26,250. 00
8, 000. 00 8, 000. 00
6
3
1
252, 000, 00
61, 000. 00
134,750. 00
45, 750. 00
Development company loans:
Direct
0
0 0
1
8,000. 00
350,000. 00
8, 000. 00
350, 000. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 15, 000.00 15, 000. 00
Participation 6 262, 500.00 184,095. 00 22 1, 798,200. 00 1, 283, 750. 00
Guarantee 3 345, 000. 00 291, 750. 00 7 670, 000. 00 537, 500. 00
Disaster loans: Direct 0 0 0 1 46, 500.00 46, 500. 00
Development company loans:
Direct 0 0 0 1 324, 000.00 324, 000. 00
Participation 0 0 0 1 288,000.00 259,200.00
PAGENO="0383"
379
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
share
Num- SBA share Num-
ber of Total amount amount ber of Total amount amount
loans
loans
TEN NESSEE-Continued
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 3 70,000.00 70,000.00
Participation 3 367, 000. 00 200, 250. 00 8 676, 000. 00 415, 750. 00
Economic Opportunity Loans II:
Direct 0 0 0 2 25, 500.00 25 500. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct_ - - - 0 0 0 1 8, 500. 00 8, 500. 00
Participation 4 132, 500. 00 77, 500. 00 12 575, 500. 00 348, 150. 00
Guarantee 3 202, 000. 00 108,900. 00 3 202, 000.00 108, 900. 00
Economic opportunity loans:
EOL I:
Direct 0 0 0 1 10, 000. 00 10, 000. 00
Participation 0 0 0 1 21,000.00 14,700.03
Disaster loans: Participation~_~ - 1 25, 000.00 18, 750. 00 1 25, 000. 00 18, 750. 00
Development company loans:
Direct 0 0 0 2 122, 475.00 122, 475.00
Participation 0 0 0 1 90, 000.00 81, 000. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 25, 000.00 25, 000. 00 2 40, 000. 00 40, 000. 00
Participation 3 88,000. 00 66, 000. 00 4 143, 000. 00 101, 750. 00
Guarantee 1 25,000.00 18,750.00 2 40,000.00 30,000.00
Distaster loans: Direct 2 79, 600.00 79, 600. 00 2 79, 600. 00 79, 600. 00
Development company loans:
Direct 0 0 0 1 157,500.00 157,500.00
~ --
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 34, 000. 00 29, 500. 00
Participation 6 435, 000. 00 308, 250. 00 12 1, 010, 000. 00 743,900.00
Guarantee 2 108,000.00 71,000.00 4 263,000.00 187,250.00
Economic opportunity loans:
EOL I; Participation 0 0 0 1 15, 000.00 12,750.00
EOL II: Direct 1 3, 000. 00 3, 000. 00 1 3, 000. 00 3,000.00
Development company loans:
Participation 0 0 0 0 52, 433.00 47, 190.00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 15, 000. 00 15, 000. 00 4 103, 500. 00 103, 500. 00
Participation 1 60, 000. 00 45, 000. 00 8 515, 000. 00 372, 500. 00
Guarantee 0 0 0 1 19,000.00 14,250.00
Economic opportunity loans:
EOL I:
Direct 0 0 0 1 6,200. 00 6,200. 00
Guarantee 0 0 0 1 10, 000. 00 10, 000. 00
Displacedbuslnessloaflsdirect_ 0 0 0 1 7,500.00 7,500.00
ADDITIONAL
Development company loans:
Direct 1 198,115.00 198,115.00 1 198,115.00 198,115.00
PAGENO="0384"
380
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
TENNESSEE-Continued
STATE TOTALS
Business loans:
Direct 4 48,200. 00 50,200. 00 22 354,900. 00 350,400. 00
Participation 28 1, 515, 000. 00 1, 010, 745. 00 86 5, 527,200. 00 3,823, 550. 00
Guarantee 53 858, 800. 00 643,820. 00 29 1,755,800. 00 1,308,970. 00
Economic opportunity loans:
EOL I:
Direct 0 0 0 5 35, 100. 00 35, 100. 00
Participation 0 0 0 2 36, 000. 00 27,450. 00
Guarantee 0 0 0 1 10,000.00 10,000.00
EOL II:
Direct 1 3,000. 00 3, 000.00 5 52,000. 00 52, 000. 00
Guarantee 0 0 0 1 7, 000. 00 7, 000. 00
Displacecjbusinessloans:Direct 1 8,000.00 8,000.00 -2 15,500.00 15,500.00
Disaster loans:
Direct 3 87,600. 00 87, 600. 00 12 158,600. 00 158, 600. 00
Participation 1 25, 000. 00 18, 700. 00 1 25, 000. 00 18, 750. 00
Development company loans:
Direct 2 363,115.00 363,115.00 7 1,317,090.00 1,317,090.00
Participation 0 0 0 2 430,433. 00 387, 390. 00
TEXAS
Business loans: Guarantee 1 20, 000. 00
18, 000. 00 1 20, 000. 00 18, 000. 00
1ST CONGRE$5lO
NAL DISTRICT
Business loans:
Direct 0 0 0 4 48, 800. 00 48,800. 00
Participation 3 120, 000. 00 90, 000. 00 8 269, 500. 00 220, 775. 00
Guarantee 1 35, 000. 00 31, 500. 00 4 156, 500. 00 127, 575. 00
Economic opportunity loans:
Direct 2 6, 500. 00 6, 500, 00 3 21, 500. 00 21, 500. 00
Guarantee 0 0 0 1 18,500.00 14,800.00
20 CONGRESSIONAL DISTRICT
Business loans:
Direct 1 30, 000. 00 30, 000. 00 2 35, 000. 00 34, 500. 00
Participation 0 0 0 5 93, 000. 00 72, 300. 00
Guarantee 7 301, 000. 00 219, 500. 00 13 637, 000. 00 478, 150. 00
Economic opportunity loans:
EOL I guarantee 2 31, 500. 00 29, 850. 00 2 31, 500. 00 29, 850. 00
EOL II:
Direct 1 23, 000. 00 23, 000. 00 2 27, 000. 00 27, 000. 00
Participation 0 0 0 1 22, 000. 00 16, 500. 00
Gurantee 0 0 0 1 6, 000. 00 5, 400. 00
Development company loans: 0 0 0 1 225, 000. 00 225, 000. 00
Direct
*.
-- .*.__
*.
._.*____
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
Disaster loans: Direct
0
0
2
0
0
0
0 0
0 0
215,000.00 161,250.00
0 0
0 0
0 0
1
1
7
1
1
1
6, 000. 00
15, 000. 00
1,154,000.00
2 450. 00
5,000.00
3,600.00
6, 000. 00
11,250. 00
804,400.00
2, 450. 00
5,000. 00
3,600. 00
PAGENO="0385"
3S1
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
SBA share
Num-
SBA share
ber of
Total amount amount
ber of
Total amount
amount
loans
loans
TEXAS-Continued
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL II: Direct
Development company loans:
Direct
0
2
4
1
1
0 0
56,000.00 50,400.00
87,000.00 69,600.00
8,000.00 8,000.00
157, 500. 00 157, 500. 00
4
3
7
1
1
57, 200. 00
86,000.00
245,000.00
8,000.00
157,500.00
57, 200. 00
70,400.00
211,050.00
8,000.00
157,500.00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Econ~-n c opportunity loans:
EOL I: Diiuct
EOL II: Direct
0
0
2
0
1
0 0
0 0
55,000.00 44,250.00
0 0
15, 000. 00 15, 000. 00
4
3
6
2
4
125,000.00
375,000.00
130,000.00
4,250.00
50, 900. 00
121,500.00
265,750.00
103,200.00
4,250.00
50, 900. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Participation
Guarantee
Development company loans:
Direct
Guarantee
0
1
0
1
0 0
30,000.00 21,600.00
0 0
23, 375. 00 21, 037. 50
3
4
1
1
143,000.00
228,000.00
120, 000. 00
23, 375. 00
122,250.00
166,740.00
120, 000. 00
21, 037. 50
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 3 115,000.00 115,000.00
Participation 0 0 0 2 165, 000. 00 88, 500. 00
Guarantee 4 280,000.00 230,000.00 12 524,700.00 419,675.00
Economic opportunity loans:
EOL I;
Direct 0 0 0 2 14, 000. 00 14, 000. 00
Guarantee 0 0 0 1 18,000.00 18,000.00
EOL II:
Direct 2 21,000. 00 21, 000. 00 2 21, 000. 00 21,000. 00
Participation 0 0 0 1 6, 000. 00 5,400. 00
Development company loans:
Direct 0 0 0 1 191,246.00 191,246.00
8TH CONGRESSIONAL DISTRICT
Business loans:
Participation 1 95,252.00 71,964.00 1 95,252.00 71,964.00
Guarantee 1 6, 000. 00 5,400. 00 4 266, 000. 00 200, 400. 00
Economic opportunity loans:
EOLII:
Direct 0 0 0 1 14, 000. 00 14, 000. 00
Participation 1 20, 000. 00 18, 000. 00 1 20, 000. 00 18, 000. 00
9TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 1 18,000.00 18,000.00
Participation 1 35, 000. 00 30,625. 00 2 55, 000. 00 45,625. 00
Guarantee 5 213,000.00 179,700.00 23 1,478,500.00 1122,375.00
Economic opportunity loans,
EOL II: Direct 0 0 0 3 39, 500. 00 39,500.00
95-1O3--G8--~
PAGENO="0386"
382
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num- SBA share Num-
ber of Total amount amount ber of
loans loans
Total amount
SBA share
amount
TEXAS-Continued
9TH CONGRESSI ONAL DISTRICT----Continued
Disaster loans:
Direct
Participation
Development company loans:
Direct
2 3, 500. 00 3, 500. 00 5
1 7, 500. 00 5, 625. 00 1
0 0 0 0
22, 290. 00
7, 500. 00
14,660. 00
22, 290. 00
5, 625. 00
14, 660. 00
10TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participatian.
Guarantee
Economic opportunity loans,
EOL II: Direct
Displaced business loans:
Direct
0 0 0 2
0 0 0 5
1 69,000.00 51,750.00 5
1 3,500.00 3,500.00 2
0 0 0 1
32,100.00
322,400.00
283,500.00
12,000.00
115,000.00
32,100.00
246,075.00
217,050.00
12,000.00
115,000.00
11TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans,
EOL: Direct
Disaster loans: Direct
0 0 0 3
1 15, 000. 00 11,250.00 1
1 40,000.00 36,000.00 4
0 0 0 1
0 0 0 1
29,000.00
15, 000. 00
670,000.00
4,500.00
1,440.00
29,000.00
11,250. 00
510,750.00
4,500.00
1,440.00
12TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
0 0 0 3
2 240,000.00 216,000.00 9
0 0 0 1
0 0 0 1
54,000.00
432,500.00
6,000.00
14,000.00
54,000.00
384,000.00
6,000.00
14,000.00
13TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Guarantee
Economic opportunity loans:
EOL I:
0 0 0 1
3 50, 000. 00 36, 500. 00 10
3, 000. 00
648, 500. 00
3, 000. 00
498, 625. 00
Direct
Guarantee
EOL II:
1 2, 500. 00 2, 500. 00 3
0 0 0 1
15, 000. 00
9,800.00
15, 000. 00
6,860.00
Direct
Guarantee
Disaster loans: Direct
4 40, 500. 00 40, 500. 00 10
1 22, 000. 00 19, 800. 00 3
0 0 0 8
130, 500. 00
36, 000. 00
63,500.00
130, 500, 00
29, 200. 00
63,500.00
14TH CONGRESSIONAL DISTRICT
BUsiness loans:
Direct 2 40 000. 00 40, 000. 00 4 55, 950, 00 55, 950. 00
Participation 4 p62, 500.00 196,875.00 8 539,000.00 339,125.00
- Guarantee 1 100, 000. 00 90, 000. 00 6 640, 500. 00 564, 525. 00
Eonomic opportunity loans:
EOL I: Direct 0 0 0 1 17,500.00 17,500.00
EOL II:
Direct 1 8 000. 00 8 000. 00 5 60 200. 00 60, 200. 00
Guarantee - 0 0 0 2 39, 000. 00 37, 000. 00
Disaster loans: Direct 451 1,360, 497. 00 1, 360,497. 00 1,331 4,772, 852. 00 4,772,852. 00
PAGENO="0387"
383
~SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Tot,l amount amount
Num-
ber of
loans
Total amount
SBA share
amount
TEXAS-Continued
15TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 2 110, 000. 00 109, 000. 00
Participation 0 0 0 2 41,000. 00 35, 000. 00
Guarastee 7 112,600. 00 98, 440. 00 15 449, 500. 00 395, 740. 00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 20, 000. 00 20, 000. 00
Disaster loans: -
Direct 2,287 6,541,858.00 6,547,158.01 6,511 24,343,907.00 24,343,907.01
Participation 2 21, 900. 00 16, 900. 00 2 21, 900. 00 16, 900. 00
16TH CONGRESSIONAL DISTRICT
C8isiness loans:
Direct
Participation
Guarantee
`Economic opportunity loans:
EOL I: Direct
1
0
1
0
22,000.00
0
12,000.00
0
22,000.00
0
10,800.00
0
6
3
4
1
131,300.00
160,000.00
232,000.00
15, 000. 00
131,300.00
120,000.00
165,800.00
15, 000. 00
EOL II:
Diroct
Guarantae.
0
1
0
9,000. 00
0
8,100. 00
3
1
25, 500. 00
9,000. 00
25, 500. CO
8, 00. tO
17TH CONGRESSI
ONAL DISTRICT
rBusiness loans:
Direct 1 20,000.00 20,000.00 3 67,000.00 67,000.00
Participation 1 30,000.00 15,000.00 4 107,000,00 82,500.00
Guarantee 6 421,000.00 370,050.00 8 681,000.00 562,133.00
tEconomic opportunity loans:
EOL II:
Direct 1 13,000.00 13,000.00 6 81,850.00 81,850.00
Guarantee 1 5,000.00 5,000.00 2 17,000.00 17,000.00
18TH CONGRESSIONAL DISTRICT
SBusiness leans:
Direct 1 10,000. 00 10, 000. 00 6 99, 800. 00 99,800. 00
Participation 2 325, 000. 00 262, 500. 00 14 754, 000. 00 582, 550. 00
Guarantee 3 380,000. 00 247, 500. 00 8 913, 800. 00 668, 850. 00
CEconomic opportunity loans:
EOL I: Direct 0 0 0 1 7, 000. 00 7, 000. 00
EOL II;
Direct 0 0 0 2 18, 500. 00 18, 500. 00
Participation 0 0 0 1 20, 000. 00 15, 000. 00
~Development company loans:
Guarantee 1 135,000.00 121,500.00 1 135,000.00 121,500.00
19TH CONGRESSIONAL DISTRICT
FBusiness loans:
Direct 1 10, 000. 00 10,000. 00 7 192, 500.00 182, 500. 00
Participation 1 36, 000. 00 24, 000. 00 8 285, 000.00 222, 050. 00
Guarantee 6 310,000. 00 248, 500. 00 15 764, 300, 00 607,225. 00
~Economic opportunityIclans:
EOL I: Direct 1 6,200. 00 6,200.00 2 11,200. 00 11,200. 00
EOL II:
Direct 3 12, 150. 00 12, 150. 00 4 16, 250. 00 16, 250.00
Guarantee 0 0 0 1 15,000.00 13,500.00
`Development company loans:
O~rect 0 0 0 3 763, 100. 00 763, 100. 00
PAGENO="0388"
J84
SUMMARY OF SBA LOAN APPROVAL ACTIVITY---Continued~
April-June 1968
July 1967-March
1968
Mum-
ber of
loans
SBA share
Total amount amount
Mum-
bar of
loans
Total amosnt
SBA share
amount
.
TEXAS-Continued
20TH CON8RESSIONAL DISTRICT
Business loans:
Direct 2 19,000.00 19,000.00 7 115,000.00 115, 000.00
Participation 1 150,000.00 135,000.00 1 150,000.00 135,000.00
Guarantee. 1 15,000.00 13,500.00 5 80,500.00 69,400.00
Economic opportunity loans:
EOL I: Direct 0 0 0 2 8, 300. 00 8,300.00
EOL II: Direct 1 8,800.00 8,800.00 2 21,300.00 21,300.00
Disaster loans: Direct 18 33, 770. 00 33,770.00 19 36,970.00 36,970.00.
21ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
4
3
2
0
67,300.00 64,175.00
248,000.00 168,500.00
35, 500. 00 26, 625. 00
0 0
8
10
7
2
120,550.00
399.000,00
469, 500. 00
5, 500. 00
111,493.00
279,150.00.
415, 125. 00
5, 500. 00
EOL II:
Direct
Participation
Disaster loans: Direct
3
0
6
50, 000. 00 50, 000. 00
0 0
26, 000. 00 26, 000. 00
16
2
8
222, 250. 00
22, 500. 00
47, 300. 00
222, 250. 00
18, 000. 00
47, 300. 00
22D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I:
3
5
3
58, 500. 00 58, 500. 00
165, 000. 00 129, 750. 00
110, 000. 00 86,250. 00
5
7
12
69, 500. 00
335, 000. 00
380, 000. 00
69. 500. 00
252, 250. 00
296, 100. 00.
Direct
Guarantee
EOL II:
0
0
0 0
0 0
1
1
20, 000. 00
9,000.00
20, 000. 00
8,100.00
Direct
Guarantee
1
1
25,000.00 25,000.00
7,700. 00 5, 775. 00
6
2
86,500.00
13, 700. 00
86,500.00
11, 175. 00
23D CONGRESSIONAL DISTRICT
Business loans:
Participation 1 113, 000. 00 101, 700. 00 2 125, 000. 00 110, 700. 00
Guarantee 1 125, 000. 00 86, 250. 00 3 195, 000. 00 145, 500. 00
Economic opportunity loans,
EOL II: Guarantee...... 0 0 0 1 8, 832. 00 7, 949. 00
Disaster loans: Direct 31 70,300. 00 70, 300. 00 90 217, 120. 00 217, 120. 00
ADDITIONAL
Business loans: Participation 1 115, 000. 00 86, 250. 00
Disaster loans: Direct 3 2, 100. 00 2, 100. 00
Economic opportunity loatis,
EOL I: Direct 1 3, 000. 00 3, 000, 00
Business loans: Parti~ipation_ -- 1 105,000.00 78,750.00 1 105, 000. 00 78, 750. 00
Development company loans:
Direct 1 252, 000. 00 252, 000. 00 1 252, 000. 00 252, 000. 00
Disaster loans: Direct 1 1,400. 00 1,400. 00 1 1, 400. 00 1, 400. 00
STATE TOTALS
Business loans:
Direct 16 276, 800. 00 273, 675. 00 76 1, 484, 700. 00 1, 460,643. 00
Participation 27 1, 755, 752. 00 1, 366, 314. 00 95 4, 749, 152. 00 3, 549, 464. 00
Guarantee 66 3, 262, 100. 00 2, 598, 965. 00 192 11,680,300. 00 9, 152, 388. 0O~
PAGENO="0389"
383
-SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
her of Total amount amount her of Total amount amount
loans loans
TEXAS-Continued
STATE TOTALS-Continued
Economic opportunity loans:
EOL I:
Direct 4 15, 200. 00 15, 200. 00 23 150, 700. 00 150, 700. 00
Guarantee 2 31,500.00 29,850.00 6 86,800.00 77,610.00
EOL II:
Direct 20 227, 950. 00 227, 950. 00 73 878, 750. 00 878, 750. 00
Participation 1 20, 000. 00 18, 000. 00 6 90, 500. 00 72, 900. 00
Guarantee 4 43, 700. 00 38, 675. 00 13 144, 532. 00 129, 324. 00
Displacedbusinessloans:Direct_ 0 0 0 1 115,000.00 115,000.00
~Oisaster loans:
Direct 2, 796 8, 037, 325. 00 8, 042, 625. 01 7,978 29, 512, 479. 00 29, 512, 479. 01
Participation 2 29. 400. 00 22, 525. 00 3 29, 400, 00 22, 525. 00
Development comoany loans:
Direct 2 409, 500. 00 409, 500. 00 8 1, 723, 506. 00 1, 723, 506. 00
Guarantee 2 158, 375. 00 142, 537. 50 2 158, 375. 00 142, 537. 50
UTAH
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 3 112, 500. 00 112, 500. 00 10 293, 500. 00 293, 500. 00
Participation 5 371, 200. 00 288, 450. 00 11 743, 200. 00 589,950. 00
Guarantee 15 1, 305, 800. 00 1, 151,620. 00 30 2, 204, 300. 00 1, 940, 570. 00
~Economic opportunity loans:
EOL I: Direct 0 0 0 1 15, 000. 00 15, 000. 00
EOL II: Direct 0 0 0 3 46,500.00 46,500.00
Development company loans:
Direct 0 0 0 1 56,000.00 56,000.00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 8, 000. 00 8, 000. 00 5 148,660. 00 140,660. 00
Participation 6 194,500.00 127,650.00 21 1,527,500.00 1,110,570.00
Guarantee 5 340, 800. 00 305, 100. 00 24 1, 446,680. 00 1, 225, 560. 00
~Economic opportunity loans:
EOL I: Direct 2 8, 500. 00 8, 500. 00 4 25, 000. 00 25, 000. 00
EOL II:
Direct 3 40, COO. 00 40, 000. 00 3 40, 000. 00 40, COO. 00
Participation 0 0 0 1 50, 000. 00 25, 000. 00
ADDITIONAL
Business loans: Guarantee 1 40, 000. 00 30, 000. 00 1 40, 000. 00 30, 000.00
STATE TOTALS
Business loans:
Direct 4 120, 500. 00 120, 500. 00 15 442, 160. 00 434, 160. 00
Participation 11 565, 700. 00 416, 100. 00 32 2,270, 700. 00 1, 700, 520. 00
Guarantee 21 1, 686, 600. 00 1, 486, 720. 00 55 3,690,980. 00 3, 196, 135. 00
~Economic opportunity loans:
EOL I: Direct 2 8, 500. 00 8, 500. 00 5 40, 000. 00 40, 000. 00
EOL II:
Direct 3 40, 000. 00 40, 000. 00 6 86, 500. 00 86, 500, 00
Participation 0 0 0 1 50, 000. 00 25, 000. 00
Development company loans:
Direct 0 0 0 1 56, 000. 00 56, 000. 00
PAGENO="0390"
~83
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
VERMONT
AT LARG
E CONGRESSIONAL DISTRICT--ST
ATE TOTALS
Business loans:
Direct 0 0 0 11 272,000.00 272, 000. 00;
Participation 10 360, 500. 00 266, 925. 00 26 936, 700. 00 717, 745. 00
Guarantee 4 170,000.00 138,700.00 12 724,003.00 594,420.00
Economic opportunity loans:
EOL I:
Direct 0 0 0 1 8,500.00 8,500.00
Participation 1 9,500.00 7,125.00 1 9,500.00 7,125.00
EOL II: Participation 0 0 0 1 22, 000. 00 19, 800. 00
VIRGIN IA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 1 3, 500. 00 3, 500. 00 5 99, 000. 00 99, 000. 00.
Participation 2 180, 000. 00 110, 000. 00 14 888, 000. 00 657, 430. 00
Guarantee 1 75, 000. 00 50, 000. 00 1 75, 000. 00 50, 000. 00..
Economic opportunity loans,
EOL II: Direct 0 0 0 3 28,500.00 28, 500. 00.
Displaced business loans:
Direct 1 124,000.00 124,000.00 2 244,000,00 244, 000. 00.
2D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EUL I: Direct
EOL II: Direct
Displaced business loans:
Direct
3
1
2
0
0
0
39, 700. 00
36, 000. 00
125, 000. 00
0
0
0
39, 700. 00
18, 000. 00
99, 000. 00
0
0
0
5
9
6
1
3
2
139, 700. 00
661, 000. 00
885, 000. 00
2, 500. 00
16,800.00
503, 000. 00
134, 700. 00
547, 020. 00
577, 749. 65
2, 500. 00.
16, 800. 00.
503, 000. 00.
3D CONGRESSIO
NAL DISTRICT
Business loans:
Direct 1 25, 000. 00 25, 000. 00 4 93, 000. 00 93, 000. 00'
Participation 5 187, 000. 00 145, 250. 00 10 682, 000. 00 489, 750. 00
Economic opportunity loans:
EOL I:
Direct 0 0 0 1 1,200.00 1,200.00
Guarantee 1 5, 000. 00 5, 000. 00 1 5, 000. 00 5, 000. 00
EOLII:
Direct 0 0 0 5 64, 000. 00 64, 000. 00~
Participation 0 0 0 1 20, 000. 00 15, 000. 00
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 21,500.00 21,500.00 4 56,500.00 56,500.00;
Participation 2 103,000.00 86,700.00 7 772,000.00 544,850. 00.
Guarantee 1 40, 000. 00 30, 000. 00 1 40, 000. 00 30, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 15, 000. 00 15, 000. 00
EOL II: Direct 1 3, 800. 00 3, 800. 00 1 3, 800. 00 3, 800. 00
Developme tcompanyloans:
Direct 1 105,900.00 105,900.00 1 105,900.00 105,900.00-
Participation 2 213, 500. 00 192, 150. 00 2 213, 500. 00 192, 150. 00
PAGENO="0391"
387
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
VIRGINIA-Continued
5TH CONGRESSIONAL DISTRICT
Business loans:
Participation 3 460, 000. 00 295, 000. 00 11
Guarantee 3 124,000.00 96,200.00 4
Economic opporlunity loans:
EOL I: Guarantee 1 10,000.00 7,500.00 1
EOL II:
Direct 0 0 0 1
Guarantee 0 0 0 1
Development company loans:
Direct 1
Participation 1
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
0
4
2
0
390,000.00
97,000.00
0
251,750.00
78,750.00
1
7
3
9,000.00
525,000.00
107,000.00
9,000.00
344,170.00
87,750.00
7TH CONGRESSI
ONAL DISTRICT
Business loans:
Direct 1 35,000.00 35,000.00 1 35,000.00 35,000.00
Participation 6 549,000.00 374,750.00 30 1,972, 100.00 1,415,495.00
Guarantee 2 45,500.00 66,000.00 5 460,500.00 346,500.00
Economic opportunity loans:
EOL I: Direct 1 4,000.00 4,000.00 1 4,000.00 4,000.00
EOL II: Direct 0 0 0 2 24,000.00 24, OLO. 00
8TH CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans, EOL
II: Direct
Developrnentcompany loans:
Participation
1
0
2
0
0
19, 000. 00 19, 000. 00
0 0
334, 000. 00 242, 800. 00
0 0
0 0
4
8
3
3
1
57, 000. 00
685, 000. 00
355, 000. 00
31,000.00
394, 200. 00
57, 000. 00
455, 200. 00
255, 190. 00
31,000.00
346, 896. 00
.
9TH CONGRESSIONAL DISTRICT
.
Business loans:
Participation
Guarantee
Economic opportunity loans,
EOL II: Direct
1
0
0
96, 000. 00 48, 000. 00
0 0
0 0
10
1
1
395, 500. 00
150,000.00
5,000. 00
285, 800, 00
75,000.00
5,000. 00
10th CONGRESSIONAL DISTRICT
Business loans:
Direct 2 25,000.00 25,000.00 7 114,000.00 114,000,00
Participation 6 576, 000. 00 243, 000. 00 8 796, 000. 00 358, 000, 00
Guarantee 1 15,000.00 13,500.00 2 215,000.00 193,500.00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 5, 000. 00 5, 000. 00
EOL II: Direct 0 0 0 3 17,000.00 17,000.00
Disolaced business loans:
Direct 1 320, 000. 00 320, 000. 00 1 320, 000. 00 320, 000. 00
940,000. 00 641, 307. 00
479,000. 00 362, 450. 00
10,000. 00 7, 500. 00
3, 500. 00 3, 500. 00
2, 400. 00 2, 400, 00
10,000.00 10,000.00 2 180,100.00 180,100.00
76, 300. 00 68, 670. 00 1 76, 300. 00 68, 670. 00
PAGENO="0392"
388
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
VIRGINIA-Continued
STATE TOTALS
Business loans:
Direct 11 168, 700. 00 168, 700. 00 42 875, 200. 00 870, 200. 00
Participation 40 2,937, 500. 00 1, 839, 375. 00 140 9, 253, 300. 00 6, 456, 767. 00
Guarantee 18 934, 500. 00 682, 950. 00 38 3, 460, 500. 00 2, 572, 559. 65
Economic opportunity loans:
EOLI:
Direct 1 4, 000. 00 4, 000. 00 6 36, 200. 00 36,200. 00
Participation 1 9, 500. 00 7, 125. 00 1 9, 500. 00 7, 125. 00
Guarantee 2 15, 000. 00 12, 500. 00 2 15, 000. 00 12, 500. 00
EOL II:
Direct 1 3, 800. 00 3, 800. 00 22 193, 600. 00 193, 600. 00
Participation 0 0 0 2 42, 000. 00 34, 800, 00
Guarantee 0 0 0 1 2, 400. 00 2, 400. 00
Displaced business loans:
Direct 2 444, 000. 00 444, 000. 00 5 1, 067, 000. 00 1, 067, 000. 00
Development company loans:
Direct 2 115, 900. 00 115, 900. 00 3 286, 000. 00 286, 000. 00
Participation 3 289, 800. 00 260, 820. 00 4 684, 000. 00 607, 716. 00
WASHINGTON
1ST CONGRESSIONAL DISTRICT
Busin~ss loans:
)irect 3 39,900.00 39,900.00 10 143, 500. 00 143, 500. 00
Participation 0 1, 000. 00 750. 00 8 341, 500. 00 291, 025. 00
Guarantee 9 739,500.00 634,920.00 14 903,500.00 771,270.00
Econmic opportunity loans:
EOL I: Direct 1 12, 000. 00 12, 000.00 1 12, 000. 00 12, 000. 00
EOL II: Direct 2 12,700.00 12,700.00 2 12,700.00 12,700.00
2D CONGRESSIONAL DISTRICT
Busin'ss loans:
Direc~ 1 72, 300. 00 72, 300. 00 6 279, 300. 00 279, 300. 00
Parti :ipation 4 215, 000. 00 193, 500, 00 11 542, 800. 00 484, 545. 00
Guarantee 6 973,000.00 810,750.00 9 1,338,000.00 1,125,000.00
Econ,mic opportunity loans:
EOL I: Direct 0 0 0 2 10, 000. 00 10, 000. 00
EOL II:
Direct 1 17,000.00 17,000.00 1 17,000.00 17,000.00
Guarantee 0 0 0 1 14,500.00 13,050.00
Development company loans:
Direct - - - 0 0 0 10 347, 080. 00 347, 080. 00
3D CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
2
1
0
60, 000. 00
60, 000. 00
0
60, 000. 00
54, 000. 00
0
6
3
3
319, 500. 00
204, 000. 00
725,000.00
319, 500. 00
183, 600. 00
615,000.00
Economic opportunity loans,
EOL II: Direct
0
0
0
1
17, 000. 00 17, 000. 00
4TH CONGRESSIO
NAL DISTRICT
Business loans:
Direct 0 0 0 9 252, 000. 00 252,000. 00
Participation 4 258, 000. 00 217,200. 00 9 605, 000. 00 523, 050. 00
Guarantee 7 643,500.00 494,620. 00 17 1, 088, 000. 00 834,745. 00
Economic opportunity loans:
EOL I: Direct 2 8, 000. 00 8, 000. 00 2 8 000. 00 8,000. 00
EOL II: Direct 0 0 0 2 6,000. 00 6,000. 00
PAGENO="0393"
389
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
WASHINGTON-Continued
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 59,396. 00 59,396. 00 6 126, 296. 00 125, 556. 00
Participation 3 180, 500. 00 100, 400. 00 15 869, 500. 00 629, 345. 00
Guarantee 1 16, 500. 00 14, 850. 00 6 335, 500. 00 292, 560. 00
Displaced business loans:
Direct 1 14,500.00 14,500.00 2 224,500.00 224,500.00
Development company loans:
Direct 1 60, 000. 00 60, 000. 00 2 380, 000. 00 380, 000. 00
6TH CONGRESSIONAL DISTRICT
Business loans:
Direct 3 57, 400. 00 57, 400, 00 8 135, 400. 00 135, 400. 00
Participation 1 85, 000. 00 76, 500. 00 4 210, 000. 00 180, 000. 00
Guarantee 3 671, 400. 00 582, 200. 00 7 1, 346, 400. 00 1, 163, 450. 00
Economic opportunity loans,
EOL II: Direct 1 25, 000. 00 25,000.00 1 25, 000. 00 25, 000. 00
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1
Participation 1
Guarantee 1
Economic opportunity loans:
EOL I: Direct 1
EOL II: Direct 0
Development company loans:
Direct 0
8, 000. 00 8, 000. 00 7 252, 000. 00 252, 000. 00
50, 000. 00 45, 000. 00 7 427, 000. 00 384, 300. 00
50, 000. 00 45, 000. 00 11 505, 500. 00 432, 450. 00
5, 000. 00 5, 000. 00 2 12, 000. 00 12, 000. 00
0 0 1 6,000. 00 6, 000. 00
0 0 1 148,000.00 148,000.00
STATE TOTALS
Business loans:
Direct 11 296, 996. 00 296 996. 00 52 1 507,996. 00 1, 507, 256. 00
Participation 14 849, 500. 00 687, 350. 00 57 3, 199,800. 00 2,675, 865. 00
Guarantee - 27 3, 093, 900. 00 2, 582, S40. Oo 67 6,241,900. 00 5, 234, 475. 00
Economic opportunity loans:
EOL I: Direct 4 25, 000. 00 25, 000. 00 7 42,000. 00 42, 000. 00
EOLII:
Direct 4 54, 700. 00 54, 700. 00 8 83,700. 00 83, 700. 00
Guarantee 0 0 0 1 14, 500. 00 13, 050. 00
Displaced business loans:
Direct 1 14, 500. 00 14, 500. 00 2 224, 500. 00 224, 500. 00
Development company loans:
Direct 1 60, 000. 00 60, 000. 00 13 875, 080. 00 875, 080. 00
WEST VIRGINIA
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOLI:
Direct
Guarantee
EOLII:
Direct
Guarantee
Disaster loans: Direct
Development company loans:
Direct
1 50, 000. 00 50, 000. 00 5 92, 000. 00 92, 000. 00
0 0 0 8 464,040. 00 350,136.00
1 200, 000. 00 18, 00. 00 4 1, 485, 000. 00 1, 176, 500. 00
3 27,700.00 27,700.00 7 51,700.00 51,700.00
1 10, 500. 00 9, 450. 00 1 10, 500. 00 9, 450. 00
5 65, 500. 00 65, 500. 00 8 99, 000. 00 99, 000. 00
1 12, 000. 00 10,800. 00 1 12, 000. 00 10, 800. 00
0 0 0 1 10,000.00 10,000.00
1 297, 500. 1)0 297, 500. 00 1 297, 500. 00 297, 500. 00
PAGENO="0394"
390
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Nurn- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
WEST VIRGINIA-Continued
2D CONGRESSIONAL DISTRII~T
Business loans:
Direct 0 0 0
Participation 4 313,000.00 213,500.00
Guarantee 4 177,000.00 146,100.00
Economic npportunity loans:
EOLI:Djrect
EOL II: Direct 2
Disaster loans: Direct 0
3D CONGRESSIONAL DISTRICT
Business loans:
D;rect 1 8, 000. 00 8, 000. 00 2 58, 000. 00 58, 000. 00
Participation 3 225, 000. 00 135, 000. 00 6 420, 000. 00 300, 000. 00
Guarantee 1 250, 000. 00 132, 500. 00 4 331, 500. 00 205, 850. 00
Economic opportunity loans,
EOL II: Direct 1 9, 500. 00 9, 500. 00 4 41, 000. 00 41, 000. 00
Disaster loans: Direct 0 0 0 1 25, 500. 00 25, 500. 00
.
~--.
4TH CONGRESSIONAL DISTRICT
.~`,
Business loans: Participation_ --
Economic opportunity loans:
EOL I: Direct
EOL II:
Direct
Participation
Disasterloans: Direct
.....
2
1
1
1
0
..~,..--, ~ .~
300, 000. 00 212,500. 00
15, 000. 00 15, 000. 00
20, 000. 00 20, 000. 00
10, 000. 00 9, 000. 00
0 0
10
2
6
1
1
811, 000. 00
25, 000. 00
78, 500. 00
10, 000. 00
21,300.00
577, 300. 00
25, 000. 00
78, 500. 00
9, 000. 00
21,300.00
,.
..
~ -...,-,.,
5TH CONGRESSIONAL DISTRICT
.... -....
..~ .-.-
-
Business loans:
Direct
Participation
Guarantee
Economic opportunity loans:
EOL I: Direct
EOL II: Direct
0
1
0
0
3
0 0
15, 000. 00 13, 500. 00
135, 000. 00 99, 000. 00
0 0
59, 000. 00 59, 000. 00
1
2
1
1
7
60, 000. 00
25, 000. 00
150, 000. 00
15, 000. 00
155, 000. 00
60, 000. 00
22, 500. 00
112, 500. 00
15, 000. 00
155, 000. 00
STATE TOTALS
Business loans:
Dirbct 2 58, 000. 00 58, 000. 00 11 265, 000. 00 265, 000. 00
Participation 10 855, 000. 00 574, 500. 00 34 2, 305, 040. 00 1, 678, 936. 00
Guarantee 6 762, 000. 00 557, 600. 00 14 2, 243, 500. 00 1, 730, 950. 00
Economic opportunity loans:
EOL I:
Direct 4 42, 700. 00 42, 700. 00 11 100, 700. 00 100, 700. 00
Guarantee 1 10, 500. 00 9, 450. 00 1 10, 500. 00 9, 450. 00
EOL II:
Direct 12 187, 500. 00 187, 500. 00 30 466, 500. 00 466, 500. 00
Participation, 1 10, 000. 00 9, 000. 00 1 10, 000. 00 9, 000. 00
Guarantee 1 12,000.00 10,800.00 1 12,000.00 10,800.00
Disaster loans: Direct 0 0 0 4 57, 300. 00 57, 300. 00
Development company loans:
Direct 1 297, 500. 00 297, 500. 00 1 297, 500. 00 297, 500. 00
WISCONSI N
UNIDENTIFIED CONGRESSIONAL DISTRICT
Business loans: Guarantee 1 15,000.00 11,250.00
3 55, 000. 00 55, 000. 00
8 585, 000. 00 429, 000. 00
5 277, 000. 00 236, 100. 00
0 0 1 9, 000. 00 9, 000. 00
33, 500. 00 33, 500. 00 5 93, 000. 00 93, 000. 00
0 0 1 500. 00 500. 00
PAGENO="0395"
391
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
~
WISCONSI N-Continued
1ST CONGRESSIONAL DISTRICT
Business loans:
Direct 1 25,000. 00 25, 000. 00 0 0 0
Participation 0 0 0 3 173, 000. 00 136, 200. 00
Guarantee 2 129, 000. 00 100, 000. 00 4 184, 000. 00 149, 500. 00
Economic opportunity loans:
EOL I: Direct 1 10, 500. 00 10, 500. 00 1 10, 500. 00 10, 500. 00
EOL II: Direct 0 0 0 2 9, 000. 00 9, 000. 00
2D CONGRESSIONAL DISTRICT
Business loans:
Direct 1 3, 500. 00 3, 500.00 4 185, 500. 00 143, 900. 00~
Participation 1 17, 000. 00 15, 300.00 6 532, 000. 00 442, 300. 00
Guarantee 2 105, 000. 00 94, 500.00 4 725, 000. 00 607, 500. 00
3D CONGRESSIONAL DISTRICT
-- ._,._____ _.,_.*_* .__ --,--,.- -- ---- -,- -.
Business loans:
Participation 2 75, 000. 00 63, 332.00 7 339, 000. 00 264, 666. 00'
Guarantee 0 0 0 5 244,000.00 176,100.00
Disasterloans: Direct 0 0 0 2 7,000.00 7,000.00
Development company loans:
Direct 1 210, 000. 00 210, 000. 00 3 348, 360. 00 348. 360. 00
- -- ---- ---- --.-._ ----- --------- --- ----- -- -- --, -- -
4TH CONGRESSIONAL DISTRICT
Business loans:
Direct 1 5, 500. 00 5, 500. 00 1 5 500.00 5 000. 00~
Participation 1 50, 000. 00 37, 500. 00 1 50, 000. 00 37, 500. 00
Guarantee 1 9, 000.00 6, 000. 00 1 9, .000. 00 6, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 1, 000. 00 1 000. 00
EOL II: Direct 0 0 0 1 11,000.00 11,000.00
Displaced business Inane:
Participation 0 0 0 1 115, 000. 00 92, 000. 00
5TH CONGRESSIONAL DISTRICT
Business loans:
Direct 2 32, 500. 00 32, 500. 00 3 38, 500. 00 38 500. 00
Participation 1 55, 000. 00 49, 500. 00 5 450, 000. 00 409, 000.00
Economic opportunity loans:
EOL I: Direct 0 0 0 4 24, 000. 00 24, 000.00
EOL II: Direct 1 8, 500. 00 8, 500. 00 9 86, 000. 00 86, 000.00
Displaced business loans:
Direct 1 1,300,000,00 1,300,000.00 1 1,300,000.00 1,300,000.00
6TH CONGRESSIONAL DISTRICT
* -,- ---,-- -.- ,- --,-.-,..--------- -.- -------- --- ,- --
Business loans:
DirecL 0 0 0 1 2,500.00 2,500.00
Participation 0 0 0 3 370, 000. 00 276, 500. Q0~
Guarantee 6 254,000.00 228,000.00 7 269,000.00 241, 500.00
Economic opportunity loans,
EOL II: Guarantee 1 5, 000. 00 5, 000. 00 1 5, 000. 00 5, 000. 00
PAGENO="0396"
392
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount ber of Total amount amount
loans loans
WISCONSI N-Continued
7TH CONGRESSIONAL DISTRICT
Business loans:
Direct 0 0 0 3 90, 000. 00 90, 000. 00
Participation 1 39,000.00 35,100.00 4 99,000.00 87,600.00
Guarantee 0 0 0 2 370, 000. 00 280, 500. 00
Economic opportunity loans,
EOL II: Direct 0 0 0 1 5,000.00 5,000.00
Development company loans:
Participation 0 0 0 1 100, 000. 00 90, 000. CO
--
8TH CONGRESSIONAL DISTRICT
Business loans:
Participation 2 423, 000. 00 285, 660. 00 8 703, 000. 00 518, 160. 00
Guarantee 1 60, 000. 00 54, 000. 00 4 330, 000. 00 262, 000. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 12,500.00 12,500.00
EOL II: Participation 0 0 0 1 25, 000. 00 18, 750. 00
Development company loans:
Direct 0 0 0 0 12 500.00 12 500.00
Participation 0 0 0 1 105, 000. 00 94, 500. 00
.-- -----
9TH CONGRESSIONAL DISTRICT
--------~ --- ------- - ------~-- -- --- -- -- ~-~- --
Business loans:
Direct 1 10, 000. 00 10, 000. 00 2 14, 000. 00 14, 000. 00
Participation 0 0 0 1 80, 000. 00 60, 000. 00
10TH CONGRESSIONAL DISTRICT
--- -- -- -- -- -- -fl--- -~- -- --~ -- --~
`Business loans:
Participation 1 60, 000. 00 30, 000. 00 5 347, 000. 00 252, 750. 00
Guarantee 5 226, 200. 00 169,650. 00 7 291,200. 00 218, 400. 00
Economic opportunity loans:
EOL I: Direct 0 0 0 1 2 500.00 2 500.00
EOL II: Guarantee 0 0 0 1 13,000.00 11,700.00
Development company loans:
Participation 1 252, 000. 00 226, 800. 00 1 252, 000. 00 226, 800. 00
STATE TOTALS
`Business loans:
Direct 4 26, 500. 00 26, 500. 00 14 336, 000. 00 294, 400. 00
Participation 9 719, 000. 00 516, 392. 00 43 3, 143, 000. 00 2, 484, 676. 00
Guarantee 17 783, 200. 00 652, 150. 00 35 2, 437, 200, 00 1, 952, 750. 00
Economic opportunity loans:
EOL 1: Direct 1 10,500.00 10,500.00 8 50,500.00 50,500.00
EOL II:
Direct 1 8,500.00 8,500.00 13 111,000.00 111,000.00
Participation 0 0 0 1 25, 000.00 18,750.00
Guarantee 1 5, 000. 00 5, 000. 00 2 18, 000. 00 16, 700. 00
Displaced business loans:
Direct 1 1,300,000.00 1,300,000.00 1 1,300,000.00 1,300,000.00
Participation 0 0 0 1 115, 000, 00 92, 000. 00
Disaster loans: Direct 0 0 0 2 7, 000.00 7,000, 00
Development company loans:
Direct 1 210, 000. 00 210, 000. 00 3 360, 860. 00 360, 860. 00
Participation 1 252, 000. 00 226, 800.00 3 457, 000. 00 411, 300. 00
PAGENO="0397"
393
SUMMARY OF SBA LOAN APPROVAL ACTIVITY-Continued
April-June 1968
July 1967-March
1968
Num-
ber of
loans
SBA share
Total amount amount
Num-
ber of
loans
Total amount
SBA share
amount
WYOMING
AT LARGE
CONGRESSIONAL DISTRICT-S
TATE TOTALS
Business loans:
Direct 1 14,000.00 14,000.00 4 67,000.00 67,000.00
Participation 10 614,500.00 412,325.00 32 2,255,200.00 1,596,242.50
Guarantee 10 510,000.00 420,500.00 31 1,275,100,00 1,018,280.00
Economic opportunity loans:
EOL I: Direct 1 3, 300. 00 3, 300. 00 2 15, 300. 00 15, 300. 00
EOL II:
Direct 1 18, 000. 00 18, 000. 00 2 24,700. 00 24, 700. 00
Guarantee 2 36,500.00 36,500.00 3 51,500.00 51,500.00
Disasterloans: Direct 2 11,348.00 11,348.00 21 49,933.00 49,933.00
Development company loans:
Participation 0 0 0 1 220,000.00 220,000.00
COMMONWEALTH OF PUERTO RICO
PRELI MI NARY
Business loans:
Direct 21 361, 000. 00 385, 000. 00 282 3,227, 200. 00 3, 164, 700. 00
Economic opportunity loans:
EOL I:
Direct 22 105, 500.00 105, 500. 00 75 334,500.00 334,500.00
EOLII:
Direct 9 48,000.00 48,000.00 58 412,000.00 412,000.00
TOTALS
Business loans:
Direct 21 361,000.00 385,000.00 282 3,227,200.00 3,164,700.00
Participation 49 1,814,000.00 805,750.00 176 6,489,900.00 3,267,225.00
Guarantee 0 0 0 1 100,000. 00 75,000.00
Economic opportunity loans:
EOL I: Direct 22 105,500.00 105,500.00 76 337,000.00 337,000.00
EOL II: Direct - 9 48,000. 00 48,000.00 58 412,000. 00 412, 000. 00
VIRGIN ISLANDS
TOTALS
... ._ .____
Business loans:
Direct 0 0 0 2 30, 500. 00 30, 500. 00
Guarantee 0 0 0 1 21,000.00 13,440.00
GUAM
PRELI MINARY
Business loans:
Direct 2 30,000. 00 30, 000. 00 2 30, 000. 00 30, 000. 00
Participation 1 125,000.00 100, 000. 00 1 125, 000, 00 100, 000. 00
TOTALS
--. .-- .- .- .._--......_..._ -..- .. ....-.... ..- .- .. .. ....- -.-.-. ...._..,_. -.-.---- -~..-----.-
Business loans:
Direct 2 30,000. 00 30, 000. 00 4 60, 500. 00 60, 500. 00
Participation 1 125, 000. 00 100, 00~). 00 1 125, 000. 00 100,000. 00
Guarantee 0 0 0 1 21,000.00 13,440.00
PAGENO="0398"
394
SUMMARY OF SBA LOAN APPROVAL ACTIVITY--Continued
April-June 1968 July 1967-March 1968
Num- SBA share Num- SBA share
ber of Total amount amount her of Total amount amount
loans loans
GRAND TOTALS
Business loans:
Direct__ 413 8,182,369.92
Participation 695 43, 643, 801. 00
Guarantee 948 59,076,900.00
2, 056 110, 903, 070.92
Economic opportunity loans:
EOL I:
Direct 229
Participation 6
Guarantee 40
Displaced business loans:
Direct 77 17,017,275.00
Participation 5 427,000.00
Guarantee 0 0
Disaster loans:
Direct 3, 441 20,217, 641. 00
Participation 14 430, 400.00
3, 455 20, 648, 041. 00
Development company loans:
Direct
Participation
Guarantee
8, 220, 044. 92 2, 047 45, 512, 796. 78 45, 133, 519. 78
29, 567, 209. 40 2, 543 159, 547, 615. 00 112, 203, 462. 40
47, 366, 577. 50 2,439 157, 349, 175. 00 124, 711, 333. 95
85, 153,831.82 7,029 362,409,586.78 282, 048, 316. 13
1684, 140. 00
68, 500. 00
422, 900. 00
1, 678, 740, 00
57, 035. 00
377, 240. 00
849
18
86
6, 363, 541. 00
198, 950. 00
841, 400. 00
6, 356, 441. 00
160, 585. 00
748, 895. 00
275 2, 175, 540. 00
2, 113, 015. 00
953
7, 403, 891. 00
7,265, 921. 00
EOLII:
Direct 245 2,928,005. 00 2,926,355. 00 884 10,930,885.00 10,929,235. 00
Participation 15 183, 900. 00 155, 080. 00 43 705, 700. 00 561, 325. 00
Guarantee 62 865, 250. 00 813, 336. 00 124 1, 669, 682. 00 1, 565, 160. 00
322 3, 977, 155. 00 3, 894, 771. 00 1, 051 13, 306, 267.00 13, 055, 720. 00
82 17, 444, 275. 00 17, 394, 325. 00 252
17,101,275.00 230 29,925,214.00 29,870,514.00
293, 050. 00 21 3, 252, 200. 00 2, 675, 180. 00
0 1 115,000.00 103,500.00
33, 292, 414. 00 32, 649, 194. 00
20, 224, 141. 01 12, 478
340,370.00 25
20, 564, 511. 01 12, 503
97, 924, 997. 00 97, 745, 929. 01
1, 800, 570. 00 1, 659,363. 00
99,725, 567 0099,405,292. 01
37 5,359,492.00 5,588,312.00 147 21,277,153.00 21,407,193.00
25 5, 019, 056. 81 4, 262, 323. 00 81 16, 145, 427. 22 13, 672,268. 00
5 500,343. 00 488, 708. 70 30 1,457,705.00 1,389,654. 50
67 10,878,891. 81 10,339,343. 70 258 38, 880,285.22 36,469, 115.50
SBA total 6,257 166, 026, 973. 73 139, 459, 797.53 22, 106 555, 018, 011. 00 470, 893,558.64
0