Small Business Early-Stage Investment Act Of 2009

Floor Speech

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Ms. JACKSON-LEE of Texas. Mr. Speaker, I stand here today in support of H.R. 3738, the Small Business Early-Stage Investment Act of 2009, which establishes the Small Business Early-Stage Investment program to provide equity investment finance to small businesses. I support this resolution because I believe that encouraging small business investment is crucial as the United States emerges from the recent economic downturn.

I would like to first thank my colleague, Congressman Glenn Nye, for introducing this valuable legislation. According to the National Bureau of Economic Research (NBER), the United States economy experienced the longest recession since World War II. As described by the Congressional Research Service (CRS), ``this recession features the largest decline in output, consumption, and investment ..... of any post-war recession.'' The tightened credit markets have caused nonresidential investment to decline by 1.7% in the third quarter of 2008, by 21.7% in the fourth quarter of 2008, and by an estimated 37.9% in the first quarter of 2009, as reported by CRS. The impacts of the tightened credit markets and decline in business investment include the possibility of lenders declining to make loans to small businesses that they otherwise would in a more robust economy and small businesses possibly becoming more risk averse, thereby delaying or aborting projects. The difficulty obtaining investment that small businesses face today could lead to delays in new business ventures.

There are certain business sectors that we rely upon for innovation in order to transform our society. The United States is looking to innovation from the energy technology, environmental technology, and clean technology sectors to lead the way in developing technology that will reduce or eliminate climate change factors while maintaining our standard of living. We are looking to the information technology and digital media sectors to help level the educational playing field and open up the world to all students. If we allow these sectors to recover on their own, we could lose precious time for solving these problems.

H.R. 3738 seeks to reverse the negative impacts of the recession and the subsequent decline in investment opportunities for small businesses in critical economic sectors. While there currently exists a Small Business Innovation Research program established to provide small businesses with venture capital for projects in late stages of development, there does not currently exist a program to provide grant funding for early state research. Particularly, the biotechnology and defense technology business sectors require early stage investment to develop innovative technology. H.R. 3738 will help those and other critical sectors gain access to capital in order to drive innovation.

H.R. 3738 will establish a new program to provide equity financing to small businesses in targeted industries with early stage projects. The Small Business Administration (SBA) will be authorized to provide grants to qualified investment companies, determined by the SBA Administrator, under certain criteria. Any firm that applies for funds must have a 1-to-1 match of private funds. Equity firms that apply for these funds must return the funds in full plus 20 percent. While there is a $250 million initial appropriation, the program is predicted to be self-sustaining from the profits of the loan program.

My district is the perfect example of why small businesses are so vital to the nation's economy. Houston's newer and growing economic sub-centers have relied more on small business as their cornerstone than the older Central Business District. According to a report issued by the SBA Office of Advocacy, findings suggest that while small firms support urban economic growth, as development proceeds they grow substantially. In turn, small firm growth plays an important role in urban economic development which is likely to lead to economic growth for the entire local economy. I believe that H.R. 3738 will support the small businesses that sustain Houston's economy.

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