Small Business Committee Democratic Site

STATEMENT
by the
Honorable Nydia M. Veláquez
Ranking Member, Small Business Committee
Hearing on Size Restrictions Calculations
February 27, 2002

In the aftermath of September 11, small businesses across the country have borne a heavy burden in responding to this national tragedy and working to rebuild their community.

In Chinatown, which is in my district on the Lower East Side in Manhattan, commerce dropped by as much as 80 percent for some businesses. Businesses across New York couldn't help but feel effects like that when 100,000 jobs and 20 percent of Manhattan's office space evaporated in two instants.

Thousands of businesses have sought disaster recovery assistance from the SBA. Unfortunately, we know that many of those companies have been turned away because they are, according to current SBA size standards, too big. We don't know how many small businesses never bothered because they THOUGHT they were too big, but the number could be considerable.

How the SBA determines what business is "small" and "not small" is a critical distinction. It often means the difference between survival and collapse as divided by a very thin line. The current size standards are like a lottery, picking winners and losers based on often arbitrary distinctions --- which we must now change.

We have known for a long time that SBA's size standards need to be updated. September 11 has only forced the issue. This unprecedented event has flooded the disaster loan program with applicants seeking recovery aid.

In December, we included in the Defense Department Appropriations bill a provision asking SBA to update its size standards. SBA did so, but the Office of Management and Budget refused to accept those changes. While OMB obstinately ignores our wishes, countless businesses are suffering without assistance or remain caught in arbitrary bureaucracy.

OMB has complained that adjusting new size standards would be burdensome and complex. It is difficult, they say, to determine what is small and what is not small.

Well, this Administration had no difficulty determining what constituted an airline or an insurance company to qualify for disaster assistance after September 11. They made that decision in a matter of weeks. We have known for years that our size standards need to be revised, and we have given OMB at least the past two months to come up with a plan.

We need to adjust the size standards to make more small businesses like those in New York City eligible for recovery aid. It follows the good choice made by Administrator Barreto to open up the Economic Injury Disaster Loan program to any small business affected by September 11 while expanding these services to non-profits and small financial institutions.

Whether we adjust the standards for inflation, or region, or to respond to a disaster like September 11, the goal is the same. The Disaster Loans are designed to help small businesses survive and rebuild after a calamity. By sweeping aside the various existing size standards, this proposal will go further to accomplishing the core mission of the SBA --- aiding and assisting small business.

It goes without saying that what constitutes a small restaurant in Midtown Manhattan is not the same thing for a small restaurant in Wamsutter, Wyoming. But right now, they are treated as if they were the same thing. As a result, one may benefit from disaster assistance while the other does not. That needs to change.

Working together with OMB, I am confident we CAN change those arbitrary distinctions that keep more small businesses from receiving needed disaster recovery assistance.