Hearings, Reports and Prints of the Senate Select Committee on Small Business

OPENING STATEMENT OF HON. THOMAS J. MCINTYRE, A U.S. SENATOR FROM THE STATE OF NEW HAMPSHIRE, AND CHAIRMAN, SUBCOMMITTEE ON GOVERNMENT REGULATION AND SMALL BUSINESS ADVOCACY

Senator MCINTYRE. The subcommittee will come to order.

Today we open a 1-day hearing with the Small Business Administration's witnesses declaring and testifying as to the amount of paperwork required of the average citizen applying for a loan.

The Small Business Administration is one of the Nation's largest financial institutions. I am told that at the present time, as of August 31, there are 230,000 loans of a total of $6,316 million in its loan portfolio excluding disasters. These outstanding loans are either direct or guaranteed.

This year SBA will make or guarantee about another $2 billion in loans. By and large, these funds go to businessmen and women who have no other source of funds. SBA is the lender of last resort.

So this morning the Subcommittee on Government Regulation will examine the paperwork that is required of small businesses before they get one of these loans. To me it looks quiet copious, substantial, duplicative, and written in language that is so hard to understand that a small business owner is directed to a lawyer and an accountant for help in putting the information together.

A small businessman going into the SBA for a loan would probably get a packet of at least five forms. That packet would include the loan application, which is about 28 inches long; a form to list the collateral he would put up for the loan that is about 42 inches long; then personal financial statement; then a triplicate legal size piece of paper that the SBA sends to the FBI; and a request for counseling to help him run his business better.

These forms, all together, are 218 inches long or 18 feet 2 inches. The business owner would have to read and understand them as he fills them out. Many of the questions duplicate questions on other forms.

So this morning we will try to find out how the SBA can cut down the number of duplicative questions; how can we cut down the awesome nature of the forms, perhaps by changing from the legal size 811⁄2 inches by 14 inches paper generally used for court cases, generally found in legal matters, to the more normal 81⁄2 inches and 11 inches paper; and how SBA can train its personnel better to help small businessmen and women as they come in for help. After all, SBA's main reason for existing is to "aid, counsel, assist, and protect, insofar as is possible, the interests of small business concerns.

So I am very happy to welcome here today our witness, the Deputy SBA Administrator Patricia Cloherty, who joined SBA only last month. She has been placed in charge of SBA's paperwork management program which we will be pleased to hear about this morning.

I know that all the members of this committee wish her the best of luck in cutting down paperwork.

She is accompanied here this morning by Mr. Roger Jones, the Assistant Administrator for Administration; Mr. John E. Moore, Chief, Program and Systems Division; and Ms. Judy Baysinger, Attorney-Adviser, Office of Financing, all of the Small Business Administration.

So I am very happy to welcome Ms. Cloherty, and I think you can proceed to testify in any manner that you see fit.

STATEMENT OF PATRICIA M. CLOHERTY, DEPUTY ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION, ACCOMPANIED BY ROGER JONES, ASSISTANT ADMINISTRATOR FOR ADMINISTRATION; JOHN E. MOORE, CHIEF, PROGRAM AND SYSTEMS DIVISION; AND JUDY BAYSINGER, ATTORNEY-ADVISER, OFFICE OF FINANCING

Ms. CLOHERTY. Thank you.

Mr. Chairman and members of the committee, thank you very much for your invitation to appear here today.

We at the Small Business Administration are well aware of the weight of the paperwork burden imposed on small business men and women by the Federal Government. Excessive paperwork consumes times, adds to overhead, and to some degree inhibits the capacity of small business to compete in the marketplace.

Our mission, as you have just stated it, is to assist the small business community, thereby strengthening its position in our competitive economy. This extends to the problem of paperwork, addressing the problem itself and hopefully reducing the level of paperwork that has to be done.

It is our goal to administer an Agency that is effective and efficient, an Agency which actively advocates the cause of small business, and an Agency that has reduced redtape and paperwork to a minimum. In this regard, we appreciate your interest and that of the committee in assisting us in this matter.

As you know, SBA is currently studying reorganization options, and several members of the reorganization team are working on ways

to eliminate unnecessary paperwork and to consolidate required forms. SBA, additionally, has had an ongoing paperwork reduction program for several years in the context also of expanding programs.

Senator MCINTYRE. Tell me, just how many years has this program of paperwork production been in existence? How long has it been in existence?

Ms. CLOHERTY. My understanding is, it has been in existence for approximately 5 years.

This has included both public use and in-house forms and, in the next paragraph of the testimony, refers to a number of forms which are not public use forms, but it is illustrative of the effort and it has extended also to the forms used in-house with which the public has little contact with the exception occasionally of a signature of a form filled out by SBA employees.

A major accomplishment in the reduction program, also, was the elimination of so-called bootleg forms.

Senator MCINTYRE. How did those spring up, anyway? As I understand, these are forms that some administrator out in Sacramento, Calif., decided fit in better. He puts together his own form to comply with the local situation.

Ms. CLOHERTY. My understanding, Mr. Chairman, is that they arise again, it seems to be a definitional problem on bootleg, on what exactly is a bootleg form. And my sense of it, in my short stay at SBA, is that it occasionally has in the past included forms which are still in an inventory in the local office but are no longer officially used. That is we have measures underway to control that kind of use of forms which, as I say, have remained in the local office inventory.

More important among the so-called bootleg forms, I think, are a series of forms which are of an informal nature designed to aid the business person in meeting the request for information. Among these, as you know, that we have forms to fill out, we also have a series of bank statements, balance sheets, P. & L.'s, cash flows, and the like which are submitted in conjunction with the formal application. Now, at times, business people simply do not know how to prepare a P. &. L., a balance sheet, and what have you. And in order to aid them in doing that, many of the district offices, in my understanding, prepare virtually memo forms to give the business people that they can then fill out, and my understanding is that this interpretation has been that these are our formal requirements, if we do have bootleg forms. They are not formally included, the material, the substance of the material is required. There is, as you know, a regular form that one makes financial statements in. In any event, I think that this definition is extended to encompass that.

Senator MCINTYRE. You have eliminated them?

Ms. CLOHERTY. What we are doing is: Ms. Katz, the special assistant to the Administrator of the SBA, is currently doing a complete inventory of every office of all forms used. Now to the extent that we can provide them as a useful aid. I suspect it is wise to continue it to the extent that they have proliferated, and are not helping and obviously they must be eliminated—and I think that is what we are doing. I did not mention a third matter which I am sure people in your State and others complain about, and that is that there are a lot of legal requirements, State and local governments have their own forms. These forms

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