Congressional Republicans pushed Small Business Administration director Isabel Casillas Guzman for answers about a first-of-its-kind agreement between the agency and the Michigan state government aimed at promoting voter registration and civic engagement.
Lawmakers touched on several critical issues facing the SBA's flagship 7(a) loan guarantee program Wednesday during a House Small Business Committee hearing, including an uptick in problem loans and Administrator Isabel Casillas Guzman's plan to open 7(a) to more non-depository lenders.
But a significant portion of the hearing was devoted to the agreement between the SBA and Michigan, which centers on voter registration — an issue not generally associated with either the SBA or 7(a).
In March, the SBA signed a 12-year
"We have no problem registering people to vote," said Rep. Eli Crane, R-Ariz. "What we have a problem with is this administration and [Guzman] in particular using the full weight of the federal government and your agency and tax dollars to focus these registration efforts to acquire more Democrat votes."
Guzman said the online link — despite being active nearly two months now — has yet to add a single new voter to the rolls.
"Unfortunately this has not been effective and there have been zero registrations as a result," Guzman said, adding that SBA officials have played no role in voter-registration efforts.
"We don't register voters," Guzman said. "We don't have registration events at the SBA. We meet with small businesses about access to capital and contracting."
Guzman's admission regarding the Michigan MOU's ineffectiveness may do little to quiet GOP fears since the SBA is seeking to expand its registration campaign.
"We've been reaching out to dozens of states to try to ensure that they are part of this," Guzman said. "There's still an interest in making sure small businesses have the information if that's their preference."
On Wednesday, committee Chair Roger Williams and Rep. Beth Van Duyne, both Republicans representing Texas districts, sent a letter criticizing the SBA for failing to deliver a strategic plan for the voter-registration effort despite repeated requests from GOP lawmakers.
"Involving the SBA in voter-registration efforts creates serious concerns regarding potential political influence by the SBA or its staff on small business owners and inherently strains constitutional principles," the letter said.
For their part, Democrats made it clear they considered probing voter registration a dead end and that the committee's time was better spent elsewhere.
"Instead of sitting down to negotiate programmatic policies that serve entrepreneurs as they start up, create jobs and serve their local economies, we waste precious time on messaging," said Rep. Nydia Velazquez, D-N.Y., the committee's ranking member.
"This is a democracy," said Rep. Dean Phillips, D-Minn. "I can't imagine what our adversaries are thinking right now when we're holding a hearing investigating the notion of getting people registered to vote. We have a crisis of participation in this country — in no small part because of the way we act in this institution. I think it is a responsibility of administrations, Democratic and Republican, to encourage people to participate."
Beyond the voter-registration initiative, Guzman was criticized for her recent decision to reopen the application window for non-depository small business lending companies. Last year, SBA implemented a rule ending a four-decade moratorium on new nonbank, non-credit union lenders that had capped the number of small business lending companies participating in 7(a) at 14. The SBA granted licenses to three new SBLCs but came under fire when the CEO of one, London-based Funding Circle,
Funding Circle "never made one SBA loan," said Rep. Pete Stauber, R-Minn. "Despite this most recent debacle, SBA is doing it again."
While representatives noted an apparent uptick in problem loans within the 7(a) portfolio, Guzman characterized the trend as a "normalization," mirroring the experiences of banks and other lenders. It should be alleviated by the Federal Reserve's decision to reduce interest rates, Guzman said. "We are seeing challenges in our portfolio … but these are within reason."
The 7(a) program, which guarantees loans made by private sector lenders, is the SBA's largest. With two weeks remaining in its 2024 fiscal year, participating lenders, most of them banks, have made more than 67,000 loans totaling $29.4 billion.
