NORTHAMPTON — A Northampton business owner found herself in the nation’s capital last week at the invitation of Sen. Ed Markey to urge a Senate panel to maintain a pilot program that provides access to capital for budding entrepreneurs to launch businesses.

Mayrena Guerrero used the loan she received three years ago from the federal Small Business Administration’s Community Advantage program to launch Colorful Resilience, a mental health counseling service in West Springfield that supports people of color, the LGBTQ+ community and immigrants.

Since its founding in 2022, the firm has expanded to 15 employees and continues to grow, Guerrero said during testimony before the U.S. Senate Committee on Small Business and Entrepreneurship in Washington last Wednesday. She spoke about her development of an outpatient center for immigrants and first generation individuals, offering cultural competency and shared lived experiences.

“The SBA Community Advantage loan changed my life and the lives of many others,” Guerrero, a native of Santo Domingo, Dominican Republic, told the Senate panel. “I am grateful that this program exists and was lucky to have access to it.”

But some senators on the committee, including its chair, are questioning the effectiveness of the program and flagging it as a burden to taxpayers, citing the number of business owners defaulting on the loans.

For Markey, the SBA’s 7(a) loan program and access to capital is critical for start-ups.

“Without government backing, traditional banks would only lend to the biggest, safest businesses in town, while deeming loans to the smallest as too risky,” Markey said.

Markey added that innovative ideas would never come to realization, especially for underserved communities and women of color, who already face discrimination.

“They fill gaps, they level the playing field,” Markey said, observing that the Community Advantage program in fiscal year 2024 provided 53% of loans to start-ups and 43% of loans to entrepreneurs of color.

Guerrero said she was able to initially access $300,000 from Common Capital, based in Springfield.

“Please continue to support organizations like Common Capital with the support necessary to make businesses like mine possible,” Guerrero said.

However, U.S. Sen. Joni Ernst, the Republic chairwoman from Iowa, blames the Biden administration’s loosening of rules and reckless expansion of the program as increasing the risk for American taxpayers. This includes rising default rates and declining revenues that Ernst said threatens to force taxpayers to foot the bill for the 7(a) program that has previously operated without subsidies.

“These new rules also opened the door to foreseeable fraud by enabling a potentially unlimited number of unregulated, non-depository institutions to become permanently licensed SBA lenders as Small Business Lending Companies, or SBLCs,” Ernst said.

Markey pushed back, noting the Community Advantage is a pilot program, and not the law, and that the 7 (a) program is healthy, with 99% of loans being paid back. With a small default rate, the program has created 886,0000 jobs, he said, and lenders are creating “capital magic” that otherwise wouldn’t exist.

Guerrero initially struggled to get funding until the SBA Advantage Loan through Common Capital. Common Capital was super helpful, she said, and she’s not sure how she would exist if the money wasn’t available. Guerrero said such a relationship wasn’t possible within a community bank, and her other option would have been a predatory lender, which wouldn’t have been conducive to profitability.

“She was unable to receive funding from her community bank, who is also a SBA lender, and she did not have generational wealth to rely on,” Markey said.

Guerrero talked about the how outpatient mental health is primary care. “We are a profitable company, currently employing 15 people, and on track to hire three new full-time clinicians this year,” Guerrero said. “We have about 550 active clients and over 3,000 people have had access to care because we exist.”

“Clients who are adequately supported at an outpatient mental health level rarely need to access higher, more expensive levels of care, like partial hospitalization, inpatient or a residential program,” Guerrero said. “We keep the cost of mental health care down. We don’t depend on government grants to function, and we pay taxes.”

Also among those testifying was Raymond Lanza-Weil, president of Common Capital in Springfield, who said he gets to know lenders and invests a lot of time in them.

But Ernst said there is concern about the trends.

“It’s the early defaults that we’re getting at today, loan defaults are rising faster than pre-COVID and the program is losing money for the first time in a dozen years,” Ernst said, adding there needs to be scrutiny and an understanding for why this is happening.

Lanza-Weil said many applicants and borrowers in New England depend on the Center for Women & Enterprise, but that has had to lay off staff due to a lack of federal funds.

“By making Mayrena a better business person, she’s also a better mental health counselor, and a more sustainable and more viable business in the long term,” Lanza-Weil said.

Guerrero got $300,000 initially, but it would have been helpful and easier to have $500,000 at the beginning. There are not many options in western Massachusetts for seeking such loans, Guerrero said.

“We need to have more resources so we can help the businesses as they grow, not just as they establish,” Lanza-Weil said.

Scott Merzbach can be reached at smerzbach@gazettenet.com.