Small Business Investment Expansion Act of 2007

Mr. Chairman, I rise in reluctant opposition to the Small Business Investment Expansion Act of 2007, H.R. 3567. The non- partisan Congressional Budget Office, CBO, estimates that this bill will cost $102 million over the next 5 years. Thus far this year, the CBO estimates that the Democrat-controlled House Small Business Committee has authorized $5.9 billion in new spending over the next 5 years--$1.55 billion in fiscal year 2008 alone. To put this massive spending increase in perspective, the Fiscal Year 2008 Financial Services Appropriations bill, H.R. 2829, provides $582 million in total spending on the SBA in FY 08.

In the past, legislation dealing with programs in the Small Business Investment Act operated under the assumption that the bill should not cost the taxpayer any new money. I am proud that the Republican-led Congress took the Small Business Investment Company, SBIC, program to ``zero-subsidy,'' funded solely by user-fees, first with the debenture program in 1996 and then the participating securities program in 2001. I regret that because of the downturn in the markets earlier this decade, the participating securities component of the SBIC program, which targeted equity investments in early stage small businesses, has become essentially insolvent and defunct since 2005. During the 109th Congress, I tried numerous ways in my capacity as chairman of the House Small Business Committee, to thread the needle to reopen the participating securities program while still keeping it at ``zero subsidy.'' However, H.R. 3567 abandons fiscal restraint by creating yet another new program to promote equity investments in early stage small businesses.

First, CBO estimates that the creation of the Angel Investment Program in Title III of H.R. 3567 will cost $57 million over the next 5 years. While there is a provision that requires an angel group repay any investment it receives, the repayment comes solely out of any profit the group receives. But what if the angel group makes no money? Then the taxpayer is left holding the bag. This is a departure from the regular SBIC program where upfront fees are also charged, in addition to retaining a share of the profits, to help offset the cost of the program.

The bill creates yet another new office and more bureaucracy at the Small Business Administration, SBA, to promote angel investments in early stage small firms. It also spends $1 million to create a Federal angel network to collect and maintain information on local and regional angel investors that is readily available over the Internet, e.g., www.bandofangels.com. H.R. 3567 also spends $1.5 million to create yet another grant program to increase awareness and education about angel investing, heaping potentially yet another mission upon the already stretched Small Business Development Center, SBDC, program. Earlier this year, the House passed three SBDC-related bills that created nine new programs for them to implement.

Last year, I held a hearing on the Small Business Committee to listen to the leading experts on the angel movement. At the time, the committee debated similar angel legislation, H.R. 4565, offered by Democrats to what is on the floor today. All the witnesses except the one called by the Democrats testified that because of the decentralized and informality of angels, a tax credit modeled after what exists in many states is far more preferable to creating yet another office and program at the SBA to promote angel investments. This is what the leading experts in the angel movement said about the ideas contained in H.R. 4565, which is now Title III of H.R. 3567, at the May 10, 2006, Small Business Committee hearing:

Dr. Ian Sobieski, founder and managing director of the Band of Angels: ``I would be wary of any kind of government interaction with angel groups because of the danger of perturbing a natural market process that is still good for it. The tax credit changes the environment in which capital decisions are being made . . . The danger in . . . data collection is the implied authority by which it is collected. If the Federal Government gets involved in collecting data (on angels) that has the imprimatur of the United States Government, that speaks with great weight.''

Susan Preston of Davis, Wright Tremaine LLP: ``. . . the vast majority of investments by angels are done by individuals, not members of angel groups. These are highly independent autonomous anonymous individuals that don't want their name in databases and aren't interested, for the most part, in joining groups.''

I simply don't understand why this Democratic-led Congress ignores the advice of angel experts to direct the SBA to provide capital to extremely wealthy individuals to support investments they probably would make anyway. I'm also surprised that this Democratic-led Congress, which routinely criticizes the SBA for its alleged incompetence, would add another yet another mission to its responsibilities. That's why I was proud to join Representative Earl Pomeroy of North Dakota in reintroducing the alternative to this government-run approach--the Access to Capital for Entrepreneurs, ACE, Act of 2007, H.R. 578--to keep decisions on angel investments at the individual and local level.

Second, I also have concerns about Title II of H.R. 3567 that dramatically expands the New Markets Venture Capital, NMVC, program and opens up the Federal Government to more exposure. The CBO estimates that Title II raises the subsidy or exposure rate to 17 percent and will cost the taxpayer $11 million over the next 5 years. The mission of the

NMVC is to promote venture capital investments in economically distressed communities in both urban and rural America. However, I believe the NMVC program is already a triplicate of two other programs that already exists--the regular SBIC program and the Rural Business Investment, RBIC, program at the U.S. Department of Agriculture, USDA. Of the 2,299 U.S. small businesses that received SBIC financing in fiscal year 2005, 23 percent were located in Low- and Moderate-Income (LMI) areas of the country. Those LMI-district companies received $543 million or 19 percent of the total $2.9 billion invested by SBICs in FY 2005. Also, 30 percent of SBIC investments were made in small U.S. manufacturers. For the period FY 2001 through FY 2005, SBIC investments in small manufacturing companies totaled $4.3 billion. In addition, the USDA runs the RBIC program in cooperation with the SBA to promote equity investments in rural areas. Thus, I see no need expand a program to help small businesses that are already being assisted by two other government programs.

Third, I object to reinstating taxpayer funding for the surety bond program. This program is important to help small businesses, primarily small construction firms, win federal government contracts by offering a bond to guarantee that the work will be completed. To cover the costs of those guarantees, fees are paid to the SBA by both the contractor receiving the guarantee and the surety or insurance company that issues the bond for the contractor's performance. In fiscal year 2006, the SBA provided guarantees under the surety bond program for about 5,000 small businesses and collected about $7 million in fees. Section 405 of H.R. 3567 eliminates fees that are currently charged to contractors and sureties. That's why the CBO estimates Section 405 will cost the taxpayer over the next 5 years.

Mr. Chairman, there is no need to do this. During my tenure as chairman of the Small Business Committee, I never heard from a small business complaining about fees charged in the surety bond program. This could develop into a problem for the Federal Government when small businesses, which have no financial stake in their surety bond and thus have nothing at risk if they default, do not complete the contract. I predict that there will be more broken contracts and uncompleted work. Section 405 also sets a precedent to do away with the ``zero'' subsidy policy in other SBA programs, such as in the 7(a) loan guarantee program.

But the most egregious provision in H.R. 3567 is the revamping of small business size standards in Title V. This provision allows companies not independently-owned and operated but controlled by venture capital, VC, investors to still be considered as a small business in the eyes of the Federal Government. Title V will allow large businesses and universities that establish a VC to potentially game the system to benefit from not just various SBA technology programs but every other SBA loan and procurement assistance program. It could even complicate the Regulatory Flexibility Act, which requires Federal agencies to take into account the interests of small businesses during the development of new regulations. When I was chairman of the Small Business Committee, I was proud of the bipartisan support I received in eliminating big businesses from participating in various federal small business programs. This led the SBA to finally clamp down on this abuse and issue new regulations and policies to do away with this practice. However, I fear that many of my colleagues have not fully thought through the implications of this provision. Title V would undo all the bipartisan work done on this issue over the past five years.

In particular, I spent a lot of time and effort trying to solve the specific problem of the eligibility of some small businesses with venture capital investments to participate in the Small Business Innovative Research, SBIR, program at the National Institutes of Health, NIH. The SBIR program guarantees that at least 2.5 percent of Federal research and development, R&D, dollars must go to small businesses. After the Defense Department, the NIH is the second-largest spender of R&D funding in the Federal Government.

Title V tries to solve a problem that is grossly exaggerated. It is a myth that small businesses with VC investments are unable to participate in the SBIR program at NIH because of a misinterpretation of the law by the SBA. In an impartial Government Accountability Office, GAO, study that I requested, they discovered that 17 percent of NIH SBIR awards, accounting for 18 percent of the dollar value, went to small business with VC investments in fiscal year 2004. These small firms had no problem in complying with SBA guidelines. Nevertheless, I tried to proffer a compromise that would have established a 2-year pilot program to set-aside 0.5 percent of NIH R&D funding, over-and- above the 2.5 percent currently set-aside for small businesses, for these firms that receive a preponderance of their funding from VCs and do not own or control their company. Unfortunately, my compromise was rejected by NIH and by the biotech and VC industries. However, the solution contained in Title V is a dramatic overreach in the effort to solve this specific problem with NIH.

The amendment offered by my good friend and colleague, Representative Steve Chabot of Ohio, is a good step forward. It prohibits any one single VC from owning a small business that wishes to benefit from a SBA program. However, I can easily envision a situation where two VCs with common ownership but with different board of directors could game the system and still be eligible for SBA programs. Because even the largest VCs have less than 500 employees, Title V--even as changed by the Chabot amendment--would open up SBA programs to large businesses and universities.

In particular, I am concerned about the future of the SBIR program. It's important to remember that when the SBIR program was created 25 years ago, it was because of the frustration that federal research and development dollars went only to large businesses and universities. Even under current law, only 2.5 percent of all Federal R&D dollars is set-aside for small business. But Title V allows large universities that establish a VC to participate in the SBIR program. This provision will further decrease Federal R&D dollars going to independently owned and operated small high technology firms.

Mr. Chairman, I enclose for the record the Statement of Administration Policy in opposition to this bill plus two letters from the oldest small business association in America--the National Small Business Association; a letter from the nation's only association that represents small high technology firms--the Small Business Technology Council; and a letter from the world's largest business federation--the U.S. Chamber of Commerce. I urge my colleagues to heed the recommendations of the administration and these business associations by voting against H.R. 3567.

Executive Office of the President, Office of Management

and Budget,

Washington, DC, September 26, 2007.

Statement of Administration Policy

H.R. 3567--small business investment expansion act of 2007

The Administration strongly opposes House passage of H.R.

3567.

The Administration strongly opposes the proposed ``Angel

Investor'' program. The Administration does not support

providing capital to high net worth individuals to support

their investments. The best way to strengthen small business

is through an economic framework that encourages investment

at all levels through broad-based and reasonable tax rates

and reduced regulatory impediments to the flow of capital.

This approach will have a more significant impact than any

targeted program.

The Administration also strongly opposes the proposed

change to the definition of a small business for the purposes

of venture capital investment. This redefinition strips the

elements of independent ownership and control that identify

small business ownership under current law. Not only would

this change be inequitable for actual small businesses, but

it would be a step backward from our recent progress in

addressing the misidentification of large firms as small

businesses for Federal procurement purposes. By eliminating

the concept of affiliation for venture capital operating

companies, the provision would allow large businesses, not-

for-profit organizations, and colleges and universities to

own and control small businesses and benefit from programs

designed for independent small businesses. The Administration

believes that the intent of this provision is to allow for

reasonable, non-controlling investment in small business.

Unfortunately, the current language is overly broad, and the

Administration strongly opposes this provision unless it is

amended to ensure that ownership and control rests positively

with the entrepreneur.

Mr. Chairman, I yield myself as much time as I may consume.

Mr. Chairman, venture capital is the life blood of our Nation's small businesses. Venture capital not only serves as the raw material for economic growth and job creation, but also acts as fuel for the pursuit of new ideas and innovation. Without it, businesses cannot expand, and even the best ideas wither and die in what has come to be known as the ``Valley of Death'' between setup and commercialization. Clearly, our Nation's 26 million entrepreneurs depend upon this resource, and yet despite its obvious importance, venture capital remains elusive to the vast majority of small businesses.

The Small Business Investment Expansion Act of 2007 is a bipartisan effort introduced by Mr. Altmire and Mr. Graves. This legislation signifies our commitment to helping small businesses receive the venture capital that is vital to economic growth, innovation and job creation; and I rise in support of this bill.

Perhaps no Federal agency is better positioned to meet the challenges of small business investment than the Small Business Administration. Since 1958, the SBA's investment programs have helped hundreds of small businesses and have contributed to the success of several of our Nation's notable companies, including Apple Computer, Federal Express, Staples, and Costco. Unfortunately, the SBA's programs have suffered the effects of mismanagement, flat funding and neglect in recent years. By the SBA's own estimates, the total unmet need for early-stage equity financing for small businesses is approximately $60 billion each year. Additionally, it has been identified that the greatest equity capital financing need of small businesses is financing in the amount of $250,000 to $5 million.

While new investment strategies possess the potential to make a significant

impact on unmet capital needs of start-up businesses, they have not been fully leveraged for the benefit of our Nation's entrepreneurs. The new market's venture capital program has also not achieved its full potential. And perhaps most notably, unreasonable and outdated policies are still in use, and they restrict the free flow of venture capital and other forms of investment to small firms.

This policy has had an obvious impact on the ability of new businesses to access venture capital. Over the past 5 years, there has been a steady shift of venture capital away from newly formed businesses toward later-stage businesses. In 2002, the SBA licensed 41 new SBIC funds, more than half of which focus on investment in early- stage businesses. By contrast, in 2006, the SBA licensed only 10 new SBIC funds, none of which were for investment in early-stage businesses.

The Small Business Investment Expansion Act of 2007 represents an important step toward revitalizing SBA's investment mission. This legislation features a renewed focus on providing equity capital to startup firms and businesses in low-income areas, two key sectors of the small business community that have continued to face particularly high barriers to securing venture capital. The bill will also establish a new Angel Investment Program to fill the gap in seed capital that was created by the elimination of the participating securities program.

H.R. 3567 touches on all aspects of the SBA's investment mission, including the SBA's surety bonding program. This bill will provide much-needed updates to this program and will introduce initiatives aimed at increasing the number of businesses and bonding companies that participate in the program. Our small businesses have always been the incubators of innovation, and investment has been the fuel for this great engine of American economic development. As we continue to rely on entrepreneurs to spur economic growth and create jobs, the need for venture capital will only continue to grow. This legislation ensures that small businesses will have the resources they need to remain competitive and successful while ensuring that SBA's programs are the premier source for small business capital.

For these reasons, H.R. 3567 has the support of the National Venture Capital Association, the Value Technology Industry Organization, the Surety and Fidelity Association of America and the American Insurance Association.

Mr. Chairman, I strongly urge my colleagues to vote for the Small Business Expansion Act of 2007, and I reserve the balance of my time.

Mr. Chairman, I yield 5 minutes to the gentleman from Pennsylvania (Mr. Altmire). He is the chairman of the Small Business Subcommittee on Investigations and Oversight and the leading sponsor of this bill.

I yield 2 minutes to the gentlewoman from Pennsylvania (Ms. Schwartz).

Mr. Chairman, I would like to say to the gentleman, Mr. Graves, thank you so much for the work that you have done with the committee to work in a bipartisan manner to address the issues that are important to small businesses in this country. Your input and collaboration in putting together this legislation is greatly appreciated.

Mr. Chairman, I yield 2 minutes to the gentleman from Ohio (Mr. Ryan).

Mr. Chairman, I yield such time as she may consume to the gentlewoman from California (Ms. Woolsey) for the purpose of entering into a colloquy.

Mr. Chairman, I thank the gentlewoman from California for bringing up these concerns. The Small Business Committee is a champion of small business and, as such, has strong protections built into this bill to prevent large corporations and venture capital firms from unfairly benefiting from Federal small business contracts.

You will be pleased to know that eligible VCs cannot have more than 500 employees, they cannot be controlled by a large corporation, and they must be based in the United States. In addition, an amendment by Mr. Chabot has been made in order under the rule that will even further strengthen these protections by adding a requirement that no VC can own more than 50 percent of any eligible small business.

I am confident that these provisions will protect the intent of this bill and prevent large corporations or venture capital firms from taking advantage of these programs.

I yield 2 minutes to the gentleman from Washington (Mr. Inslee).

Mr. Chairman, I just would like to take this opportunity to thank the staff that worked on this bill. From Mr. Altmire's office, Cara Toman; from Mr. Graves' office, Paul Sass; and from the minority staff, Barry Pineless. From the majority, I would like to thank Adam Minehardt and Andy Jiminez.

Mr. Chairman, I strongly urge my colleagues to vote for the Small Business Investment Expansion Act of 2007.

Mr. Chairman, while not opposed to the amendment, I ask unanimous consent to claim the time in opposition.

Mr. Chairman, in developing this legislation, we worked very closely with the ranking member to try and address his concerns with this bill. I understand that he has some remaining concerns with title V of the bill. I am confident, however, that the legislation we have reported includes adequate safeguards.

The ranking member's amendment will provide further protections. I thank him for working with us to perfect this bill. I am willing to accept his amendment, which provides an additional level of clarification and direction for the agency. I appreciate his time and patience in working through this complicated issue with us.

Mr. Chairman, I would yield such time as he may consume to the gentleman from Pennsylvania (Mr. Altmire), the main sponsor of the bill.

Mr. Chairman, I thank the gentleman from Ohio, and I urge adoption of his amendment.

Mr. Chairman, I yield back the balance of my time.

Mr. Speaker, I rise to claim the time in opposition to the motion to recommit.

Mr. Speaker, I would like to ask the gentleman from Michigan: What bill did you read? Did you read H.R. 3567? Did you? Because if you read the bill, I want to ask you, show me in this bill where one single penny will go to millionaires? Show me in the bill where that happens?

It goes to small businesses in low-income communities. It goes to veterans. It goes to small businesses. If the goal is to cut access to capital, that is what this motion will do.

One of the primary goals of this program is to put capital in the hands of veterans and entrepreneurs. This amendment will bar entrepreneurs from such funds. It will invest in startups that could become the next Microsoft. They are not there yet. They are small, small businesses.

We always hear how we need to be doing more to encourage investment. This program does exactly that. This is not a new program, it merely fixes an old program that has been badly mismanaged by this administration. The total cost of this program is half of what the other party said when it was in charge. This is a 3-year pilot program, and all funding remains subject to the application. The Federal Government will actually have less risk under the angel investment program than any other current government programs. And when we talk about being stewards of the taxpayers' money, profits from this investment go right back to the taxpayers.

Mr. Speaker, I ask Members to oppose the motion to recommit.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 682 and ask for its immediate consideration.

Mr. Speaker, for the purposes of debate only, I yield the customary 30 minutes to the gentleman from Washington (Mr. Hastings). All time yielded during consideration of the rule is for debate only.

I yield myself such time as I may consume and I ask unanimous consent that all Members have 5 legislative days within which to revise and extend their remarks on House Resolution 682.

Mr. Speaker, House Resolution 682 provides for consideration of H.R. 3567, the Small Business Investment Expansion Act of 2007, under a structured rule. As the Clerk reported, the rule provides for 1 hour of general debate equally divided and controlled by the chairman and ranking minority member of the Committee on Small Business. The rule waives all points of order against consideration of the bill except for clause 9 and 10 of rule XXI. The rule makes in order all three amendments that were submitted for consideration that are printed in the Rules Committee report accompanying this resolution. Finally, the rule provides for one motion to recommit with or without instructions.

Mr. Speaker, the Small Business Administration states that it ``helps Americans start, build, and grow businesses.'' Lately, however, the Small Business Administration's actions have spoken louder than their words. And, unfortunately, SBA's actions have not spurred innovation and development but stifled them.

Given the high cost of purchasing additional capital assets, small businesses are dependent upon financing, which typically comes in the form of venture capital or angel investments. Despite the SBA's intent, its investment programs have fallen short and the needs of small business have gone unmet. In fact, due to SBA's ineffective investment programs, small businesses are now faced with more than $60 billion in unmet capital needs.

This is a tragedy. Small businesses form the backbone of our economic growth. In fact, they are responsible for creating three out of every four jobs in the United States. Imagine how many businesses could grow and how many jobs could be created if we could deliver even a fraction of that unmet need.

Small businesses are vital to our economy, and we cannot afford for our budding entrepreneurs to be denied the opportunity to succeed. By making the SBA an efficient partner in business development, small businesses will have better and more widespread access to venture capital and angel investments that they need.

Mr. Speaker, the bill before us today, H.R. 3567, has strong bipartisan support. It passed the Small Business Committee by a voice vote.

Among other things, H.R. 3567 streamlines the Small Business Investment Company program. Last year this public/private partnership leveraged more than $21 billion to over 2,000 small businesses. However, the current leverage limits are overly complex and the heavy reliance on debt-based lending programs has hampered the investment in veteran-, minority-, and women-owned businesses. H.R. 3567 will simplify how leverage caps are calculated and revise the limitations on aggregate investments to increase small business investment opportunities. In addition, it provides incentives to target veteran-, minority-, and women-owned businesses.

Second, the bill updates the New Markets Venture Capital program. This program was established specifically to address the unmet equity needs of low-income communities. However, this program has been woefully underfunded, and as a result, investment in low-income communities has suffered. H.R. 3567 expands the New Markets Venture Capital program and provides additional incentives for small manufacturing companies in low-income areas. This will be especially important to areas like those in my district in Merced County.

Third, the bill establishes a new Office of Angel Investment to focus on increasing equity investments in small businesses. Angel investors are high net-worth individuals who invest in and support start-up businesses in their early stages of growth and currently account for the creation of more than 51,000 new businesses every year.

H.R. 3567 promotes this crucial source of financing for entrepreneurs through the creation of an Angel Investment program within SBA's investment division. This new program provides matching financing leverage to eligible angel groups with 10 or more investors. The bill also directs the SBA to create a Federal angel network, a searchable directory of angel groups on the SBA Web site to better match up angel investors with small businesses seeking financing.

The bill also addresses many deficiencies in the Surety Bond program to assist small businesses in obtaining the backing they need to compete for construction contracts.

Mr. Speaker, this bill reflects Democrats' commitment to providing real solutions to remove the obstacles facing America's small business owners, innovators, and entrepreneurs. I would like to thank the Small Business Committee for their hard work and thoughtful work in bringing this legislation to the floor today. In particular, I extend my thanks to my good friend from Pennsylvania (Mr. Altmire) and Chairwoman Velazquez.

Mr. Speaker, we all recognize the importance of small business to our economy, and we must act on this bipartisan bill without further delay.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, the gentleman discusses the question of an open rule. In fact, we adopted every amendment that was presented to the Rules Committee and brought it to the floor today. There were three amendments offered. All three amendments will be before the House today.

And the question on a Small Business Committee bill that deals with the wide diversity that small businesses can impact really allows, under the House rules, under the germaneness rules, that almost any measure, not related to this bill, but almost any measure could be brought to the floor under an open rule. It's much more appropriate for the Rules Committee to manage the debate and the time spent on this House floor by asking all Members to submit their amendments that they might want to put forward on this particular bill and debate them in an orderly fashion on the floor. And that is why the committee adopted the rule that it did, a structured rule, to manage the rule in an appropriate rule way.

The second question is on the question of earmarks that the gentleman raised. And I would just like to refer to page 24 of the report submitted to the House that accompanies this bill, and title XIV is a statement of no earmarks. I should read that to the House at this time.

It says: ``Pursuant to clause 9 of rule XXI, H.R. 3567 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.'' The statement is very clear that there are no earmarks in this bill.

Mr. Speaker, the Democrats believe that small businesses are a fundamental part of our Nation's economic growth and that government has a responsibility to provide increased investment opportunities to ensure their long-term successes. H.R. 3567 creates a renewed focus on minority-owned small businesses and small businesses in low-income areas, both of which have been traditionally faced with difficulty in gaining access to equity investment. It also paves the way to better serve thousands of small businesses and give a much-needed jolt to our economy.

Mr. Speaker, we must continue to shepherd our small businesses to give them every opportunity to succeed for today and for tomorrows yet to come. This bill will move us in that direction, and small businesses will be that much closer to making their dreams of prosperity a reality with the passage of this bill.

I urge a ``yes'' vote on the rule and on the previous question.

The material previously referred to by Mr. Hastings of Washington is as follows:

Amendment to H. Res. 682 Offered by Mr. Hastings of Washington

At the end of the resolution, add the following:

Sec. 3. That immediately upon the adoption of this

resolution the House shall, without intervention of any point

of order, consider the resolution (H. Res. 479) to amend the

Rules of the House of Representatives to provide for

enforcement of clause 9 of rule XXI of the Rules of the House

of Representatives. The resolution shall be considered as

read. The previous question shall be considered as ordered on

the resolution to final adoption without intervening motion

or demand for division of the question except: (1) one hour

of debate equally divided and controlled by the chairman and

ranking minority member of the Committee on Rules; and (2)

one motion to recommit.

Mr. Speaker, I yield back the balance of my time, and I move the previous question on the resolution.

I yield myself such time as I may consume.

Mr. Chairman, today I rise in support of H.R. 3567, the Small Business Investment Expansion Act of 2007. Risk-taking and entrepreneurship have been part of the American fabric since this country's founding, whether it was emigres from France founding a munitions company in the early years that would later become DuPont or an immigrant peddler who would go on to create Lazarus stores in my district, Cincinnati, now Macy's, or two Dayton, Ohio bicycle mechanics who invented the airplane. The rise of America is replete with stories of entrepreneurs taking risks to change the economy and ultimately the world.

Recent history continues that trend. The most powerful computer software company in the world, Microsoft, was created by two college dropouts working out of a Seattle garage. Steven Jobs was tinkering in his garage when he developed the computer that would lead to the creation of the Apple. Fred Smith created Federal Express based on a paper written for an undergraduate class at Yale. All of these entrepreneurs succeeded because they had an idea and were able to raise the money they needed to perfect and market that idea.

Yet, America has changed. Investors, venture capitalists, hedge funds, and private equity firms use sophisticated global investment strategies to maximize their returns. The budding entrepreneur with a great idea today might get lost in the search by investors for a company with a significant business history and record of returns. To maintain America as the leader of innovative entrepreneurial firms, we must ensure economic and fiscal policy that provides capital to entrepreneurs.

There is little doubt that efforts of Congress, when Republicans controlled it, to adopt tax policies that spurred investment and growth provided significant incentives to invest in businesses. That is why I would very much like to see those tax policies ultimately made permanent, so we don't go back and raise taxes. But the Committee on Small Business has heard that the market does not provide adequate equity funding to the smallest of startup businesses, including those that will become the next Dell Computer, Nike, Outback Steakhouse or Callaway Golf Clubs. H.R. 3567 takes, in my view, a balanced approach to ensure that these new businesses have access to capital. It balances the need for limited Federal funding with fiscal restraint and protects the Federal taxpayers.

Now, during the markup of this bill, I did voice strong objections to title V as it was introduced. There are five titles in this particular piece of legislation. Since markup of the legislation, however, to the credit of the gentlewoman from New York, Nydia Velazquez, we worked together and we negotiated in good faith and reached a bipartisan agreement to address the concerns that we voiced. I believe that the compromise that we reached adequately addresses my concern. I want to again compliment the chairwoman for her leadership in that effort. It eliminates some of the more egregious decisions of the SBA concerning venture capital investment in small businesses while maintaining the integrity of the Federal procurement process for small business by preventing conglomerations of venture-owned firms to bid as small businesses.

Mr. Chairman, in closing, I would again like to thank the chairwoman for working in a bipartisan manner on this bill. I would also like to thank her staff, particularly Michael Day and Adam Minehardt, for their work on this important piece of legislation. I also want to thank Barry and Kevin Fitzpatrick for their help, as well, on this bill.

Mr. Chairman, I reserve the balance of my time.

I yield 4 minutes to the gentleman from Missouri (Mr. Graves) who has been one of the two principal sponsors of this important legislation.

Mr. Chairman, I continue to reserve my time.

Mr. Chairman, I have no further speakers.

I just want to again thank the chairwoman for her cooperation in drafting what is essentially, I believe, a very good bill, which will improve small business' ability to have access to capital all across the country.

Without further ado, I yield back the balance of my time.

Mr. Chairman, I offer an amendment.

Thank you, Mr. Chairman. And I won't use the full 5 minutes.

I yield myself such time as I may consume.

As I have already explained when discussing the underlying bill, this amendment adopts a bright-line test for determining whether a business that receives funding from a venture capital company is considered affiliated with that firm and any other firms that the venture capital company may own.

The test is simple and sensible and I think easily applied. In my view, it strikes the correct balance between allowing needed venture capital funding for small businesses, while protecting against the possibility that venture capital firms will be able to create conglomerates that would have an unfair competitive advantage against independently owned and operated small businesses. As the chairwoman already mentioned, so I won't go into great detail, the venture capital company can't have more than 50 percent.

As a result, I believe that this amendment alleviates many of the concerns that the Small Business Administration has, although maybe not all, with title V. I ask that Members support the amendment.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I would like to thank the gentleman for his kind remarks and also note that the gentleman also worked in a bipartisan manner with Mr. Graves from Missouri in drafting the bill and moving forward in the first place.

As he mentioned, the Small Business Committee, I think, has been a model in many ways for the entire Congress in the way a committee can work together. We have philosophical disagreements at times. We work together, and we are not going to agree on everything, but, in general, we try to work things out for the benefit of the small business community.

There are Republicans, there are Democrats, there are independents that benefit from the small business community thriving in this country. I think we are trying to work altogether to make it a healthier situation. I wish all committees around here were able to do the same thing.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I rise to claim the time in opposition, but I am not opposed and we are prepared to accept the gentleman's amendment.

Thank you. And we are prepared to accept the gentleman's amendment.

Mr. Chairman, I yield back the balance of my time.

I will claim the time in opposition, Mr. Chairman.

Mr. Chairman, we have heard the gentleman's amendment and we are prepared to accept the amendment.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 3866) to reauthorize certain programs under the Small Business Act for each of fiscal years 2008 and 2009, as amended.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, our economy is constantly evolving and changing. For this Nation's 27 million small firms to be successful, our economic policies must be adjusted accordingly.

While we have made great strides in this Congress to make sure the needs of small business owners are met, H.R. 3866 is the final step in reauthorizing small business assistance programs, ensuring the success and growth of small firms.

Today, entrepreneurs are faced with many challenges. They must compete in a global marketplace, deal with rising energy and health care costs, and find ways to access affordable capital. To alleviate many of these burdens, we have passed initiatives in this Congress that provide the overall tools for entrepreneurial success. We have passed legislation that lowers the cost of loans and gives minorities greater access to SBA programs.

Through H.R. 3567, SBA's investment programs were improved and a new source of equity capital was open to entrepreneurs through angel investment. Also, small business contracting programs has been modernized, accountability has been increased, and fraud has been reduced. This makes sure small firms have fair access to the Federal marketplace and allows them to continue growing their companies and creating jobs.

In the aftermath of Hurricane Katrina, entrepreneurs were faced with delays in disaster loans, overwhelming amounts of paperwork, and a lengthy application process leaving them frustrated and discouraged. The RECOVER Act ensures that the SBA is prepared, has a large, well- trained disaster response workforce, and that delays and poor service encountered by victims of hurricanes do not happen again.

While critical, these initiatives are just the first step. The Small Business Programs Act of 2007 provides the vehicle for SBA's small business assistance programs to run and meet the needs of entrepreneurs in our changing economy. Most importantly, it gives the SBA the necessary resources to continue helping small businesses start and expand.

H.R. 3866 extends SBA's small business assistance programs for the next 2 years. Also, this bill provides the necessary authority for the SBA to carry out its lending and venture capital programs, ensuring SBA's initiatives are

the premier lending tools for entrepreneurs.

The SBA and its programs are vital to assisting small businesses across this country. Along with the Small Business Development Centers, Women Business Centers, and SCORE, the SBA has worked to meet the rising demand for services at a time when their budget continues to decrease.

These programs have a proven track record of success, but they require sufficient resources to be able to evolve and modernize. Clearly, in order for small firms to adapt to changing economic conditions, small business assistance programs must be adjusted. There is no larger job creator or greater impact on local communities in this country than small firms.

H.R. 3866 arms small business assistance programs with the tools that allow entrepreneurs to continue spurring economic growth.

I strongly urge my colleagues to vote for the Small Business Programs Act of 2007.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I have no further speakers, and I am prepared to close if the gentleman is prepared to close.

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, there is no question that today's economic environment is increasingly difficult for small firms to thrive in. We have seen record highs in gas prices, unmanageable health care costs and barriers in the way of accessing affordable capital. Now, more than ever, small businesses need assistance programs they can rely on that are well- equipped to meet their needs. With the Small Business Programs Act of 2007 that is exactly what we are giving entrepreneurs.

This legislation ensures that our Nations's 27 million entrepreneurs have access to the business development assistance that they need and deserve. These firms employ one half of our workforce, spur economic development and revitalize our communities. When their businesses are growing and flourishing, the benefits are felt across the country.

With the passage of H.R. 3866, we set program levels for SBA's entrepreneurial assistance initiatives, updating and modernizing them. The primary role of the SBA is to help entrepreneurs who have the drive but need assistance. It is clear that small firms play a crucial role in our economy. By ensuring that these businesses have current and sufficient assistance, we are investing in our communities, helping to create jobs, and benefiting the Nation as a whole.

I would like to take this opportunity to thank Ranking Member Chabot for

your collaboration for us to work together in a responsible way, to follow regular order, and I am very proud that every time that we have considered legislation, we have done so in a very inclusive, open way and we can show results. With the passage of this bill, we have passed 15 bills through the House of Representatives. I am very proud of that product. It shows the things that can be done when we respect each other despite our differences. But we show the American public that we are willing to work together on their behalf.

I also would like to take an opportunity to thank the staff that worked on this legislation from the Small Business Committee majority staff, Tim Slattery and Michael Day, and from the minority staff, Barry Pineles, Kevin Fitzpatrick and Mike Smullen. I strongly urge my colleagues to vote for H.R. 3866, the Small Business Programs Act of 2007.

General Leave

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on H.R. 3866, as amended.

Mr. Speaker, I yield back the balance of my time.