(Washington, DC) — Senate Committee on Small Business & Entrepreneurship Ranking Member Ben Cardin (D-Md.) today urged U.S. Small Business Administration (SBA) Associate Administrator for Innovation Joe Shepard to implement policies to make the Small Business Investment Company (SBIC) program more inclusive.

“SBIC does a good job of reaching underserved communities, but we still have to do a lot more,” Ranking Member Cardin said during his opening statement. “Our focus today must be on how we can take the SBIC program from a good program to a great program, a more inclusive program that reaches underserved communities frozen out of the traditional venture capital markets.”

The SBIC program, which was created by Congress in 1958, provides financing to small businesses that have high growth potential, but need long-term capital to scale. In the past 61 years, SBIC has invested more than $97 billion in tens of thousands of small businesses, including many well-known companies like Intel, FedEx, Apple and Build-a-Bear.

There is a geographical, gender and racial gap in the traditional venture capital market, which is concentrated in urban centers in Massachusetts, California and New York—with less than 1 percent of all venture capital invested in businesses in rural communities, around 2 percent invested in women-owned businesses and only 1 percent invested in Black- and Hispanic-owned businesses.

Cardin continued, “The simple truth is that the traditional venture capital industry is doing an inadequate job of directing capital to communities most in need…”

While SBIC is better at reaching underserved communities than the venture capital industry—minority- and women-owned businesses each received 4 percent of all SBIC funding between 2013 and 2015—the results of a 2016 Library of Congress report on the program show that the program could be even better. According to the report, minority and women-owned led SBIC funds invest in minority- and women-owned businesses at nearly twice the rate of non-diverse funds.

Cardin urged Shepard and SBA to find ways to build a “pipeline” of diverse investors to participate in the program.

Click here to watch a video of the hearing and click here to download an MP4 of Cardin’s opening statement, a transcript follows:

“I want to welcome all of our witnesses.

“This is our seventh hearing in regards to the reauthorization of the programs under the Small Business Administration.

“I think we all understand that the building block needed to start and grow business is capital, so today’s hearing is particularly important.

“It was in 1958 that the Small Business Investment Act was passed by Congress, which recognized the realities that, for small business, it’s very difficult to find investment dollars.

“Since then, the SBIC program has invested more than $97 billion in tens of thousands of small businesses, including many well-known companies like Intel, Apple, and FedEx.

“Last year alone, SBIC facilitated more than $5.5 billion in investments to more than 1,100 high-growth companies across the country at zero cost to the American taxpayers.

“This funding is vital because traditional venture capital is overwhelmingly concentrated in urban centers in New York, Massachusetts, and California—with less than 1 percent of all venture capital going to businesses in rural communities.

“The lack of diversity is not just geographical. Around 2 percent of venture capital goes to women-owned businesses and only 1 percent goes to Black- and Hispanic-owned businesses. That is not acceptable.

“There are businesses in every community throughout America that could achieve growth if only they had the capital. And that is why we need the SBIC program.

“Consider, for example, Zentech Manufacturing, a Baltimore company that designs and builds high-tech circuit boards, cables, and other parts for companies in the defense and medical technology industries.

“When Zentech needed capital to prevent a takeover that would have shut down the company in Maryland and shipped dozens of jobs overseas, an SBIC fund was the only entity that could provide the type of capital Zentech needed.

“Since then, the company has increased its workforce by more than 60 percent and has successfully competed against oversea companies for contracts—re-shoring manufacturing jobs here in the United States. These are well-paid jobs that are lifting families into the middle class.

“The simple truth is that the traditional venture capital industry is doing an inadequate job of directing capital to communities most in need, and companies like Zentech are missing out on the opportunities for growth and job creation as a result.

“The SBIC program fills a very wide gap in the traditional venture capital markets, but more importantly, SBIC is a good investment for the tax payers.

“According to a 2016 Library of Congress report, SBIC creates 1 job for every $35 spent administering the program and SBIC investments support minority- and women-owned businesses more than twice as often as traditional venture capital. That’s not enough, but at least its better.

“SBIC does a good job of reaching underserved communities, but we still have to do a lot more.

“Our focus today must be on how we can take the SBIC program from a good program to a great program, a more inclusive program that reaches underserved communities frozen out of the traditional venture capital markets.

“We can begin by exploring how to build a pipeline of diverse investors into the SBIC program, because we know that racially- and gender-diverse SBIC funds invest more frequently in minority- and women-owned businesses.

“We also need common sense reforms to make the SBIC program more attractive to investors and more efficient for those who run SBIC funds, especially expediting the licensing process.

“These are some steps that will significantly improve the SBIC program, as well as create jobs and value in communities nationwide.

“So I’m looking forward to the discussion we have today, how we can improve the SBIC program, and the role that this committee can play in facilitating those changes.”