>> it didn't take long in our research to find the disparities in voting rights, especially native-americans. that was a shock to me considering we have been in co-existence for a long time and they struggle with voting rights and gerrymandering is an outdated exists and still exists and there are problems and those are things we wanted to focus on. >> to watch all the entries, go to studentcam.org. >> our guest is karen mill. inise topic of small business. fintech, small business and the american dream -- karen, thank you for being with us. what is the goal and purpose of

the small business administration. uniquelye s.b.a., we in the united states have an agency like this. the flagship program is about getting loans out to small businesses, and this was particularly important. i actually got this position 10 years ago right at this time, and i was unanimously confirmed by the senate, i try to mention that these days, and th one of the reasons sva had an important role was that we were in a credit crisis. banks have stopped lending. we were able to raise the sb a guaranteed rate and get about 1000 banks lending at that time. does things around advice, disaster recovery and small business contracting. host: now that you are in the private sector, how do you describe the current state of small businesses, and what is the largest factor facing them.

a interesting time for small businesses. in the last month or so, we saw some russian in optimum -- some caution in small business optimism. the numbers say that they are still hiring, in fact, they are having a lot of trouble finding people. so business is still good on the small business front. host: i suppose getting access to capital is one of those things that is concerned. what would you say it is like, as far as getting loans on banks these days? guest: right now credit markets are very robust, and that is good. one of the things i imputed took about is this new transformation happening in small business lending. that used to be that you would go to the bank, wait three weeks and then they would say, can you give me a personal guarantee? some of that is still true, but five or six years ago, a new set

of technology players him on the .cene, the fintechs what i read about in the book is how this will transform small business lending. don't think the banks are going to lose right away, this is a fun and exciting playing field, so we will talk about who might be the winners and losers. host: what is fintech? guest: is a general word for financial technology, and it covers everything from bitcoin to launching, but i don't talk about that -- it's going to block chain -- it covers everything from bitcoin to block chain. i focus on how it will change small business technology, how it will make small businesses able to fill out navigation online, get the money in their bank account the next day but still have a good experience. and how banks can adopt that

technology to service their small business customers better. host: give me an example of one of these systems, how does it work and what of the best practices? guest: in the beginning there was a whole set of new technology companies -- lending club, prosper, who made both consumer and small business loans. it was a digital experience. now, small businesses had some good things to say about that, high,e costs were very partly because the run up banks, these were new companies getting their money from hedge funds. small businesses were paying very high prices for these loans are we at the banks, however, have come back on the scene and now fintech represents banks taking technology into their own environment in various ways. they might be partnering with a buildingthey might be their own customer experience, their own lending formulas, but

this is where fintech and small business lending is evolving right now. host: the book is called fintech, small business and the american dream. karen mills is the author, former administrator of the small business administration. if you would like to talk about these concepts, you can call us on the lines. small business owners out there, 202-748-8000. everybody else, 202-748-8001. you can feel free to post your thoughts on our twitter feed @cspanwj. you look at three minutes in your book when it comes to small business lending. the first one is that most small businesses fail and most should not be financed. guest: yes. in fact, the small business myth that most annoys me is the one where people say small businesses are not very important to the economy. there are economists who believe this. but it is a few silicon valley firms who are important, and also big business.

but half the people who work in this country own or work for a small business. half the jobs. it is two out of every three new jobs. it is also the path to social and economic mobility. that is why we say it is the path to the american dream, a uniquely american virtue. so when small business doesn't get a seat at the table and doesn't get attention particularly in washington, we are missing out. one of the things i find it troubling, i call it the political paradox. everybody is for small business, bipartisan issue. but nobody does anything. i say, what do you think of the small business act of 2019? people don't know about that. that is because it doesn't exist. nobody is putting forth real proposals, even though you can get a partisan support. host: statistics tell us 80% of

businesses who start in their first year will survive 60% in their fourth year. . are those consistent numbers, and if i am a lender, are those good risks to take a gamble on? guest: the small business credit market is really a place where we are trying to get a loan to a credit worthy small business. that doesn't mean everybody should get a loan, because as you point out, a lot of small businesses don't make it. the idea is bad, the time, the location is bad. but if the small business is credit worth the, the desire of the marketplace is to make sure to have capital and funding. the trick is, how do you know? this is the problem we call opacity.ion capacit it is hard to see a small business in figure out if it is a good one or a bad one. fintech can remove that opacity by creating small streams of data that informed the credit

decision. -- if i amecond myth a small business owner, who do i go to for a loan? is the community banks and a good option, can i go to the larger bank, where do i have the most success? guest: when the fintechs came on the scene, the first thing everyone thought was, a are going to put the banks out of business. the dinosaurs are going to die. that has not happened. the common events are still there, although they are declining. when i was in office, they were about 8000, now they are about 5000. there are all sorts of structural reasons why they are getting gobbled up, big banks still make a lot of small business loans. but these new technology providers changed again. it was a bit david and goliath at first. and watchath got up them back, in the dinosaurs woke up. now, big tech has entered --

amazon, paypal, square. so we don't actually know yet who will be the winners and losers. i have a theory about it. on the playing field, you have the small syntax, the small banks -- the small fintechs. the others.nks and host: you write that when it comes to the decline of small businesses that the post-financial crisis maybe had something to blame for that particularly with the regulation of dodd frank and the like. guest: i am very sympathetic to small banks who feel that they really have suffered in the last few years from the burden of regulation. it was much more costly for them than for the big banks. but right now, when i say to the small banks -- what i say to the small banks is, don't look backwards. saying no more regulation, less regulation, the answer is actually, it has to be smart regulation.

the questions that are coming at the regulators are really complicated, like, how are you going to figure out what is an algorithm? who owns everybody's data? will we have open banking where you can submit your data to anybody want the way they have in europe and the u.k.? those questions require a different mindset. and by the way, they require our seven regulators will the small business ranking to work together -- small business banking to work together, to streamline and simplify. host: is that a problem in itself, that there are seven regulators just for that aspect of small business? guest: yes, it is. it is too difficult for a bank right now to navigate the world of its regulation, because one a, the otherht say might say b, they might have conflicting guidance.

that does not mean there is not improvement to be had. for instant, a lot of things slipped through the cracks -- small businesses are not protected by certain kinds of disclosures that consumers are protected by. for instance, if i want to buy a truck, i get a whole hawks, and it was a big -- the whole box, and there is a disclosure. if i want to buy a truck for my business, i get nothing, because i am supposed to be sophisticated enough as a business owner. why don't they have the same disk versions for businesses as for consumers. host: 202-748-8000 for small business owners and for everyone else, 202-748-8001. go ahead. morning.ood i am a small business owner and a wanted to express my concern for mobile companies, as my company is. we are struggling to secure loans because we don't have assets.

we don't have these buzzwords like collateral. what is the future for mobile companies who don't have brick-and-mortar buildings and heavy machinery, and large equipment? guest: first of all, the future for mobile companies and non-asset companies is very much helped by the fact that these new fintechs have come on the line, because the bank wanted collateral they could see and touch in order to make your loan. the new syntax put something new on the table -- the new fintechs put something new on the table. they said, we will take all the data about your business. we don't have to just touch your machine, we can look into your bank account, your quickbooks account, your receipt that you are taking in through your payment systems, and we can figure out using our over them whether or not to give you a loan based on your cash flow. so i think the world is opening up to more cash flow-based

lending and that should help you. host: when it comes to the cash flow based lending, wendy you know that will be a success -- when do you know that it will be a success and help businesses overall. hostguest: so we are now seeing banks saying that i don't want to lose my business to the fintechs. and they are working harder to. get the data. apis.ta comes through data pipes that did not exist a few years ago, application programming interface -- everything is an acronym, as you know. so if we get all this data that we do not have before to assess you, maybe we don't have to rely so much on physical collateral. likeince more businesses teresa's our service businesses, we need to give them funds too. so this bodes well. i would say that we are at an early stage of the innovation

cycle. banks are just figuring out how to take the data and write algorithms. i think things will get better for these loans. they will be available in more of the traditional banks over the next two years or three years. it is coming. host: she talked about being a mobile business what do you think the future holds when it comes to online businesses versus brick-and-mortar businesses? what do you think might happen in the next 5-10 years? guest: the good news for small business amazon is here and we can sell online. and the bad news for small business is amazon is here and they control a lot of the online selling. on the net of it, it is a good thing. a business now can reach markets that it can before. before.it could not i feel positive about small businesses, they even export all over the world, local businesses can use the internet to go to new markets.

host: let us hear from joe in pensacola, florida, a small business owner. caller: hi. i have been a small business owner all my life. i did good to my was really lucky, but it was mostly government getting in my way. up in connecticut, you have to pay what they call a "just being there" tax. i can tell you about my businesses in the second, but they charge me 250 a year just for -- they collect business identity or something. the same tax that they charged general electric before they left connecticut. 250. if i don't do any business, i have to send a check to the state of connecticut for $250 even though i don't have any sales that year. i don't want to lose my llc, so i just pay it. another thing, i love small businesses. i heard the lady talk about how

we need to be able to get bank money. let me tell you, unless you are buying buildings or something, that kind of small business, in a person -- in a person who needs to go a bank or your small business, you are doing the wrong thing. i started my small businesses idea, telephone, a good knowing what i am doing, overspend. and don't host: where did you get the initial capital from? -- or instance, i started the music business. i found an old -- who was very good. he never recorded. i saw him playing in a bar and i said, i will start a record company around the sky. we recorded him, i use my own money, and it worked. when i sold that one cd, i just oneve a lot to my

cd of this guy and i sold it for two years. going into little record stores one at a time. the record businesses, it is like a consignment business. you go in there and you plead, please put this record on your -- host: joe, thank you for the story. guest: i love the story. joe, you are a great american entrepreneur. you come up with an idea, you have a lot of hustle, you have a good eye for talent. you made it into the cd, you sell.he cd and you make an important point, which is that you can't get ahead of your cash flow. it is ok to take a loan for something that you know you can pay back. maybe you've got a seasonal problem, maybe you are going to need a piece of equipment in order to grow, but you have to be very careful when you take out debt that you know how you're going to pay it back. that is one of the things some

of the new fintech dashboards and cash floor forecasters -- cash flow forecasters will help people do. which is see into the future and see what is the loan that is right for me? i sympathize on your point. every state has a business task. that would be very happy if a text the big businesses more than the small businesses. point taken, good one. host: denise in texas, small business owner. caller: hi. my business is clothing. is, my nameber one is brandi -- donald trump is branding. it that nowadays, -- classic branding? the second question is, which and more leaning

toward small business? guest: branding is really important for small businesses. and actually, there are some really interesting questions about whether you should put your name on a small business. trump put his name on it, martha stewart put her name on it. but in general, people say that sometimes you want to make another business. if you decide to sell it, and might not have your name on it. that not putting the business use and growth that you have growth ideas. there are economist at i. m.i.t. that say that that have people's name on it don't grow. it tends not to be a growth business while some other products tend to be worth businesses. i think it comes down to you. is this brand is something that communicates you and your

product, and your customer value proposition in a way you feel proud of? that is a personal decision you might make. host: by the way, on twitter, matt smith that application program interface, the term was correct, that it is basically a communication platform between two programs. another viewer had this to offer, saying -- sb in loans for just need businesses, how do you show cash flow if you need a loan to start your business? guest: that is the hardest thing in the world to do, how do you start a business and prove that you have got a track record? location of the nsba loan will be made -- occasionally, a s.b.a. loan will be made just to start a business, but most start their businesses with friends and family money. some people max out their credit cards and take a lot of risk that way. but it is very hard to get a bank loan, that is the truth right now, to just start,

because you don't have a history. host: from our all others line, this is linda in ohio. caller: good morning. i have a question from the general public. my son's girlfriend wants to start a small flower shop, which i think is not a good idea because she's not quite with it yet. so i recommended that they set up an appointment with a local score community. the serviceknow, corps of retired executives, i wanted to know if you thought that was a good suggestion, if they are helpful, if they are even still much in business. we have them near akron. . there is an akron chapter. but is that a good suggestion? are those people helpful? guest:. that is a brilliant suggestion s.b.a.s part of the

couns small businesses across the country. els these are experienced small business owners, 12,000 of them. the best thing is that they are free. they will walk you through starting a business. it is a terrific idea. i love seeing young people think about entrepreneurship. but business is hard and you don't want to go into it without your eyes wide of an and without a plan. so the score person has to walk through and make sure that your son's girlfriend and this flower shop have really a plan in front of them before you make that kind of investment. host: are there certain types of small businesses generally that do better at startup and continuing on? guest: federal think it is the small business but -- i think it is not as much of the small business that the entrepreneur. there are serial entrepreneurs,

like a gentleman in the music is nice, that is just who they are. my grandfather came to this country, he was an entrepreneur to his core. they used to say, in our family, we don't work for other people, we work for ourselves. there is something special about america that we nurture these kinds of entrepreneurs, that other countries don't like failure. and it makes it too hard to start a business. they are almost envious of our american culture, that makes an entrepreneur the hero, almost. host: our guest is karen mills, she served as the former administrator for the small business administration under the obama administration, and is fintech.r of a book on tell us about the idea of where you got -- the story of where you got the idea for this book. guest: i was an administrator of the s.b.a. during the financial

crisis. 10 years ago the country was in dire shape. we can't forget how tough it was for small business owners. i tell the story about being able to in the s.b.a. increase he loan guarantee rates to 90% and get a lot of banks back to lending. i went. south of little rock and i was standing in the middle of a muddy sawmill, and it was really cold. the wife of the business owner, who was the accountant, she looked at me and said, you saved or business. i heard that hundreds of times. what it brought home to me was how important capital is a small business in this country. when capital markets froze, we lost 1.8 million small business jobs in that first quarter. so i feel that having a chance to make sure that small business credit markets work well for small business was a real honor

of the s.b.a. now, it is a game changer. because technology has the ability to transform small business lending to an even better place. i think it is a bit of a magical moment so that is why i wrote the book. host: what do you do besides right books now? guest: i teach at harvard business school. i teach entrepreneurship. the students in the mba program. i teach them about different entrepreneurial situations and how they might start and grow their businesses. i am also still a venture i buy small businesses and try to make them better. from beverly in washington, d.c., a small business owner. caller: hello. time becauseite a folks are supposed to pay rent, and i 15 judges to deny me the

rent. host: keep going. you're hearing the television. we got your first part. keep going. caller: i had this house rental business in the person owes rent for four years and i have had in judges to look at it and not pay me any attention. they pay attention to divorce lawyers. host: thanks. real estate? guest: you have seen this with airbnb. people are making off -- money off of properties they rent. they tend to be good is insist. these have risk. beverly is in a tough position. she is not getting her rent and the judge is not giving her any time of day. situations, you sometimes have to look to cut your losses and what other remedies you have got. business is ups and downs.

you always need a plan b. host: airbnb. those disruptive businesses might have the most risk but the most to gain in the long run. guest: one thing i think is exciting about this whole economy is it gives people a chance to be entrepreneurial on the side. .his is good for the americans sometimes, their side business and side hustle, around being the main job and main business, i think it is a good trend. has it -- host: has it morphed in the last years? guest: there are 30 million small businesses out there. of them have no employees. that is 24 million people either self-employed or part of the gig economy. host: seven you are outside of

the world of the federal government, to what level should the federal government be involved in creating new pools of capital? should that still come from the small business administration? guest: i think the government has his role is to fill market gaps. one of the things we know is the market for credit and small business land does not work perfectly. it had -- it has always frictions and barriers. we hope technology will get rid of some of them. they tend tost, discriminate more against women owned businesses and underserved minorities. the fda portfolio is meant to fill some of that gap. in women owned businesses and other minorities and 95% of the loans that they worth of billion loans, were good. we only had less than a 5% loss rate.

low-cost way to taxpayers, because it costs taxpayers almost nothing, we are for filling an important market gap here that is the role of government. barbara is in north carolina. caller: yes, good morning. this is barbara young. i have a quick question. business owner who started my business back in 1990. real estate. had a plan b like you mentioned. it is important that people going to business, it was very difficult for me to start my business because i was a two kids, and and no one wanted to deal with me. but i did it. people need to understand what it is like to do your own business. it is very difficult to spend

spent many 2:00, 1:00 hours at night. important we get education to these people that want to start the business and that is all. wonderfulnk c-span is and i think we need to focus on education in this country especially in north carolina. host: before you go, you said you had a backup plan. tell us a little about that. plan b was i started a property management company. said, youcant other will be gone all the time. that is my choice. this is my life. i want to open my property management company. i am down to real estate now. you have to have a plan b always in any type of business i saw. i did work.

i worked in planning and i saw all of this development. i knew i could do it. >> it is a push. you have to push yourself and expand the basis. pains.through growing i look back now and probably could have done better. i know what i should have focused on, out in the field, hiring a manager. this is a great story. it makes my heart warm. success of the business here you sold it probably at the right time at the peak. point, abouther mentoring and education and helping to know what they're doing. i think technology will make it

easier for small business to get the same technologies. they will create a small business small business correction. i call it small business utopia. what if you had the ability moving forward to see is my cash flow going to be ok? where are my downspouts? i think that is where the small business utopia could be a game changer for small business owners so they could know, do i need alone, what loan is right for me, will i be able to pay it back? i am optimistic technology can help both the lender and the small business owner. host: from florida, your last call, go right ahead. caller: i appreciate everything you said.

i look at small business owners as pioneers. an american thing. are willing to leave full paying jobs with medical benefits and branch out on our own with no help from the government. us and we arehelp starting a business. 24-30,000nd add dollars to one business and how do you start off that? the best thing we can do is to take care of the medical situation. who do theiry jobs. go ahead and jump off the system dealing wither diabetes and a daughter. business.ing a just know that we suffer out here and we lose people.

we had plans, 20 pages long that would fix this and made it the most productive generation ever. if you release the entrepreneur's in full-time jobs they hate, we would be amazing. thank you for the time. when we did obama care, there was a whole provision in businessmall health-care exchanges. exactly for this purpose. small business owners want to provide health care for employees. exchangesaccess for for their small businesses. i think this needs to be on our agenda so i'm glad that you brought it up. host: what would be the go away advice.

what would you tell them going forward? i would say the new syntax and technology environment will give you more loan options. is a bit of a wild west time. some of those are expensive. you need to make sure you understand your business. you need to make sure you know you can pay back the loan, and you make sure you know your cash flows going forward and make sure they reveal to you all of the costs. so you don't get stuck with a loan. host: karen mills >> u.s. house will be coming back in five minutes. attorney general william barr appointed a prosecutor to examine the origins of e