[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


        SMALL BUT MIGHTY: A REVIEW OF THE SBA MICROLOAN PROGRAM

=======================================================================

                                HEARING

                               BEFORE THE

        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             MARCH 7, 2019

                               __________

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            Small Business Committee Document Number 116-009
             Available via the GPO Website: www.govinfo.gov
                   
                   
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                         ABBY FINKENAUER, Iowa
                          JARED GOLDEN, Maine
                          ANDY KIM, New Jersey
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                          JUDY CHU, California
                           MARC VEASEY, Texas
                       DWIGHT EVANS, Pennsylvania
                        BRAD SCHNEIDER, Illinois
                      ADRIANO ESPAILLAT, New York
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                         ANGIE CRAIG, Minnesota
                   STEVE CHABOT, Ohio, Ranking Member
   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
                        TRENT KELLY, Mississippi
                          TROY BALDERSON, Ohio
                          KEVIN HERN, Oklahoma
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        TIM BURCHETT, Tennessee
                          ROSS SPANO, Florida
                        JOHN JOYCE, Pennsylvania

                Adam Minehardt, Majority Staff Director
     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
                   Kevin Fitzpatrick, Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Andy Kim....................................................     1
Hon. Kevin Hern..................................................     2

                               WITNESSES

Ms. Ceyl Prinster, President & CEO, Colorado Enterprise Fund, 
  Denver, CO.....................................................     4
Ms. Carolina Martinez, CEO, California Association for Micro 
  Enterprise Opportunity, San Francisco, CA......................     6
Ms. Mariama Jallow, Owner, Mariama's Beauty Supply, Portland, ME.     7
Ms. Michelle Richards, Executive Director, Great Lakes Women's 
  Business Council, Livonia, MI, testifying on behalf of Women 
  Impacting Public Policy........................................     8

                                APPENDIX

Prepared Statements:
    Ms. Ceyl Prinster, President & CEO, Colorado Enterprise Fund, 
      Denver, CO.................................................    23
    Ms. Carolina Martinez, CEO, California Association for Micro 
      Enterprise Opportunity, San Francisco, CA..................    27
    Ms. Mariama Jallow, Owner, Mariama's Beauty Supply, Portland, 
      ME.........................................................    34
    Ms. Michelle Richards, Executive Director, Great Lakes 
      Women's Business Council, Livonia, MI, testifying on behalf 
      of Women Impacting Public Policy...........................    36
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    ECDI - Economic & Community Development Institute............    41

 
        SMALL BUT MIGHTY: A REVIEW OF THE SBA MICROLOAN PROGRAM

                              ----------                              


                        THURSDAY, MARCH 7, 2019

                  House of Representatives,
               Committee on Small Business,
                   Subcommittee on Economic Growth,
                                   Tax, and Capital Access,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:02 a.m., in 
Room 2360, Rayburn House Office Building. Hon. Andy Kim 
[chairman of the Subcommittee] presiding.
    Present: Representatives Kim, Davids, Crow, Delgado, 
Radewagen, Hern, Stauber, and Spano.
    Chairman KIM. Good morning, everyone. I will have the 
Committee come to order now.
    I want to thank everyone for joining us this morning. I 
want to especially thank the witnesses for being here today.
    On this Subcommittee, our primary focus is ensuring that 
America's small businesses and entrepreneurs have access to the 
capital that they need to start and grow their businesses and 
create good paying jobs. Unfortunately, many entrepreneurs, 
particularly from traditionally underserved communities, lack 
the skills, training, and experience needed to demonstrate to 
conventional lenders that they are worth the risk.
    This leaves two main challenges facing entrepreneurs. The 
first being a lack of access to capital. The second being the 
skills and tools it takes to become credit worthy. As 
legislators, it is incumbent upon us to address these 
challenges, and it is the reason that we are here today.
    The Small Business Administration has an array of programs 
designed to boost access to capital and to promote 
entrepreneurial development. However, SBA's Microloan program 
is unique in that it offers entrepreneurs both opportunities to 
unlock affordable capital and the technical assistance they 
need.
    Here is how it works: SBA lends qualified, nonprofit 
intermediary lenders money these intermediaries then use to 
make their microloans to small businesses and entrepreneurs. 
SBA also provides the intermediaries with grant funding to 
offer marketing, management, and technical assistance to 
borrowers and potential borrowers.
    In many cases, intermediaries begin by providing technical 
assistance to a potential borrower to enhance their credit 
readiness prior to making a microloan to the entrepreneur. That 
program began as a pilot program in 1991, and following a 
successful start was made permanent in 1997.
    2018 was a record year for the Microloan program, and the 
program is currently 3.5 percent ahead of where it was at this 
point last year. Last year in my home state of New Jersey, 150 
microloans totaling approximately $2.5 million were approved. 
Since then, it has grown considerably, and many intermediaries 
report that some of the program's original rules are now 
restricting them from meeting existing demands for small 
business financing and providing more technical assistance. In 
other words, they feel the program has outgrown many of those 
rules and have expressed the need for Congress to review some 
of those rules in order to enhance flexibilities for 
intermediaries.
    That brings me to why we were here today. I look forward to 
hearing the recommendations and feedback of our distinguished 
witnesses to continue strengthening the Microloan program. 
Doing so will allow us to provide intermediaries with 
appropriate flexibility to enable them to continue offering 
affordable capital and essential technical assistance to 
America's smallest businesses.
    I hope today's hearing will be a productive opportunity to 
explore the ways Congress can continue modernizing and 
optimizing SBA's Microloan program.
    And now I would like to yield to the Ranking Member, Mr. 
Hern, for an opening statement.
    Mr. HERN. Thank you, Mr. Chairman.
    Although the country continues to record above average 
economic marks, the Nation's smallest firms still face 
challenges when it comes to financing their businesses. This is 
even more pronounced for the category of small businesses known 
as microbusinesses. Recognizing the difficulties the Nation's 
smallest firms face, Congress sought to alleviate the capital 
access issue with the creation of the Small Business 
Administration's Microloan program in 1991, and after a brief 
trial period, Congress made the loans permanent in 1997. And 
the Microloan program has been assisting entrepreneurs ever 
since.
    Unique to the program is the financial transaction that 
includes SBA making a direct loan to a microloan intermediary 
or a nonprofit that is working within the program. From there, 
the intermediary provides loans directly to the small 
businesses in need. Importantly, these small businesses are not 
left by themselves to fight for their survival. Built into the 
program is a requirement of technical assistance or counseling 
by the intermediary. This program is what we are going to be 
discussing today.
    Last year, members of this Committee were able to enact a 
number of reforms to the Microloan program. Included in the 
legislation were two important studies. First, SBA is required 
to study the utilization levels of the program by microlenders. 
Second, the Government Accountability Office is required to 
examine SBA's microloan oversight capabilities. With any 
government program, it is critical to have comprehensive 
oversight to safeguard American taxpayer dollars.
    As we eagerly await both reports, which are due to Congress 
this August, I look forward to today's hearing that will review 
the program from the perspective of you, the participants and 
the witnesses directly involved on the ground. SBA's capital 
access programs are transforming neighborhoods and communities 
from my home state of Oklahoma to Florida and beyond. Following 
in last year's footsteps, we must continue to create an 
environment where small businesses are able to grow, expand, 
and create jobs. As the hearing title implies, these companies 
may be small, but they have an outsize effect on our economy.
    Thank you, Mr. Chairman, and I yield back.
    Chairman KIM. Thank you, Mr. Hern. The gentleman yields 
back.
    If Committee members have an opening statement prepared, we 
would ask that they be submitted for the record.
    I would just like to take a minute to explain the timing 
rules. Each witness gets 5 minutes to testify and each member 
gets 5 minutes for questioning. There is a lighting system to 
assist you. The green light will be on when you begin, and the 
yellow light will come on when you have 1 minute remaining. And 
the red light will come on when you are out of time. And we ask 
that you stay within the timeframe to the best of your 
abilities.
    I would now like to introduce our witnesses.
    Our first witness is Ms. Ceyl Prinster. Ms. Prinster is 
president and CEO of Colorado Enterprise Fund, a position she 
has served in for over 30 years. Her current service roles 
include trustee of the Denver Foundation and Chair of its 
Impact Investing Committee, board and executive committee 
member of the National CDFI Coalition, and board member of the 
Other Side Academy. She previously served as trustee for the 
University of Notre Dame and president of its alumni 
association, and was a founding member of the Denver 
Sustainable Food Policy Council. Her awards include the 2018 
David E. Bailey Small Business Advocate Award from the Denver 
Metro Chamber, Outstanding Woman in Business from the Denver 
Business Journal, and the Financial Services Advocate of the 
Year from the SBA, the Tom Dooley Award from the University of 
Notre Dame. Ms. Prinster is a graduate of, you guessed it, 
University of Notre Dame. Welcome, Ms. Prinster. We are lucky 
to have you today.
    I will continue on and then I will get back to you.
    Our second witness is Ms. Carolina Martinez. Ms. Martinez 
is the CEO of CAMEO, the California Association for Micro 
Enterprise Opportunity, a statewide association that represents 
over 220 lenders, training programs, job creators, agencies, 
and individuals dedicated to furthering microbusiness 
development in California. Ms. Martinez has over 13 years of 
experience working in the economic development and business 
consulting with a variety of nonprofit organizations and 
universities across the Western Hemisphere. She has developed 
bilingual, culturally appropriate, entrepreneurial training 
programs, trained and coached pre-venture and startups, 
developed international networks promoting partnerships among 
private corporations, provided consulting services to 
vulnerable communities, and has owned her own business 
consulting firm. She is a graduate of the University of the 
Andes in Bogota, Colombia, and received her Masters of Business 
Administration from the University of North, Barranquilla, 
Colombia. Welcome, Ms. Martinez.
    Our third witness today is Ms. Mariama Jallow. Ms. Jallow 
is the owner of Mariama's Beauty Supply in Portland, Maine. 
Mariama went to school in The Gambia, a country in West Africa 
and grew up helping her mother manage the family grocery store. 
Because of that experience she knew she wanted to open her own 
business someday. She arrived in the United States in 2012 from 
The Gambia. Her dream of opening a business came true in Maine 
where she operates and continues to expand her business. 
Welcome, Ms. Jallow.
    I would now like to yield to our Ranking Member, Mr. Hern, 
to introduce our final witness.
    Mr. HERN. Our witness is Michelle Richards. Ms. Richards is 
the executive director and a founding board member of the Great 
Lakes Women's Business Council outside of Detroit, Michigan. 
She was a pioneer in the microlending movement, and has been a 
microloan intermediary with the Small Business Administration 
for over 2 decades. Her organization has helped countless 
startups, entrepreneurs, and small businesses with financial 
assistance and counseling. She is also a previous winner of 
SBA's Women's Business Advocate of the Year Award for the State 
of Michigan. Ms. Richards is testifying today on behalf of 
Women Impacting Public Policy. Thank you.
    Chairman KIM. Thank you very much. Welcome.
    We are going to start with Ms. Prinster. Over to you. You 
are recognized for 5 minutes.

    STATEMENTS OF CEYL PRINSTER, PRESIDENT & CEO, COLORADO 
ENTERPRISE FUND; CAROLINA MARTINEZ, CEO, CALIFORNIA ASSOCIATION 
   FOR MICRO ENTERPRISE OPPORTUNITY; MARIAMA JALLOW, OWNER, 
MARIAMA'S BEAUTY SUPPLY; MICHELLE RICHARDS, EXECUTIVE DIRECTOR, 
              GREAT LAKES WOMEN'S BUSINESS COUNCIL

                   STATEMENT OF CEYL PRINSTER

    Ms. PRINSTER. Good morning. Thank you.
    I am here today to suggest some improvements to the SBA 
Microloan program, but first I will tell you a little bit about 
my organization and myself.
    I have served as president and CEO of Colorado Enterprise 
Fund (CEF) for over 30 years, starting as its first employee.
    We were founded in 1976 as a nonprofit providing loans to 
disadvantaged small businesses. We are certified both as a 
community development financial institution and an SBA 
microloan intermediary. Overall, we have made over $81 million 
in loans to more than 2,400 businesses in Colorado, and have 
created or maintained over 12,000 jobs. These loans have helped 
businesses that could have not obtained the capital they needed 
to start or grow from traditional banks.
    CEF started with the Microloan program in 1992 when the 
program first began. We have received 15 rounds of program 
loans totaling $11.5 million, with 11 of our loans now paid 
off. With Microloan program funding, we have made 1,500 small 
business loans totaling $18.7 million. A significant percentage 
of our loans, 85 percent, have been made to minority, women, 
veteran, or low-income entrepreneurs.
    The Microloan TA grants have helped us create and 
administer a robust program of business advising, coaching, and 
training using in-house consultants and lending staff and a 
pool of outside legal and accounting professionals, all trained 
to provide trusted guidance to our clients. We deliver an 
average of over 3,000 hours of technical assistance per year 
and over 80 percent of our borrowers utilize our TA services.
    I have led CEF for the entire time since we began in the 
Microloan program 27 years ago and have been a member for many 
years of the Friends of SBA Microloan Program, an informal 
network of microloan intermediaries. I also serve as a board 
member of the National CDFI Coalition representing microlenders 
within the broader CDFI community.
    With this experience, I am confident that I speak for a 
consensus of other microlenders to say that as good as the 
program has been for businesses in Colorado and across the 
Nation, it could be even better. There are two changes I 
suggest to the program that would reduce administrative burden 
on both the nonprofit intermediaries and the SBA to help 
microlenders better support small businesses seeking credit.
    The first improvement is elimination of the 1/55th rule, 
which affects intermediaries' ability to get loan capital from 
the program. This rule was part of the early pilot phase of the 
program and limits the distribution of loan funds for the first 
half of each year to the lesser of 800,000, or 1/55th of the 
new funds appropriated. In some years, the maximum capital 
available gets capped at about 350,000, which will only fund a 
handful of small business loans. Having to wait for additional 
loan funds until the third or fourth quarter of the year 
creates an administrative bottleneck for the agency and undue 
cash restrictions and paperwork for the intermediaries. 
Elimination of this rule will allow SBA to more efficiently get 
loan capital to the microlenders where and when the funds are 
needed and help intermediaries fund their pipeline in a timely 
way.
    The second improvement is elimination of the 50/50 rule, 
which also is a burdensome rule enacted in the pilot phase of 
the program and it affects the administration of our TA grants. 
It limits funds for pre-loan support to 50 percent of the grant 
amount. Microlenders support many startups needing intensive 
business counseling. We cultivate our borrowers by helping them 
with training and counseling to become ready for credit and 
debt. This rule also limits funding for underwriting, which is 
a costly challenge when working with startups and nonbankable 
borrowers. Elimination of this 50/50 rule would enable 
microlenders, many of which are very seasoned in this work, to 
determine the best use of their grants to support their market. 
They would be able to provide the needed upfront assistance to 
help the entrepreneur build a solid base for their startup, in 
addition to the post-loan assistance to support the ongoing 
growth of the business.
    We are very grateful for the support of this Committee for 
the very impactful SBA Microloan program and hope you will 
consider elimination of these two rules which would greatly 
improve it. Thank you.
    Chairman KIM. Thank you so much for sharing that.
    I want to move it on to Ms. Martinez. Over to you for 5 
minutes.

                 STATEMENT OF CAROLINA MARTINEZ

    Ms. MARTINEZ. Chair Kim and Ranking Member Helm and members 
of the Subcommittee, my name is Carolina Martinez, and I 
appreciate the opportunity to testify on behalf of the 
California Association for Micro Enterprise Opportunity 
(CAMEO). CAMEO is California's statewide network, microbusiness 
network of over 220 organizations, agencies, and individuals 
that provide entrepreneurs with loans, credits, and business 
technical assistance. Annually, CAMEO members serve about 
21,000 businesses. These firms, largely startups with less than 
five employees, support or create 37,000 new jobs in California 
and generate a total of $1.5 billion in economic activity.
    Congressional investment in microbusiness development 
maters. Business ownership increases income and generates 
wealth in both urban and rural underserved communities. 
Business coaching and capital are critical tools for success. 
Thus, the SBA's Microloan program is of great importance to 
CAMEO and our members.
    Historically, small businesses have struggled to obtain 
access to sufficient capital and credit to enable them to lead 
job growth. The struggle can be even greater for startup and 
microbusinesses.
    Take, for example, Maria Palacio. She is a fifth-generation 
Colombian coffee farmer who started her U.S.-based coffee 
roasting business to help coffee farmers get a fair price. 
Maria secured a contract with Facebook but needed a loan to 
purchase the beans to fulfill the contract. Since Maria's 
company, Progeny Coffee, was a startup, banks could not make 
that loan. Maria turned to Working Solutions, a CAMEO member, 
who lent her $25,000 with SBA funds to help her purchase 
inventory at this critical moment. Working Solutions helped 
Maria manage her exponential growth. Over the last 3 years, 
Progeny grew from $10,000 in revenue to over $1 million in 
revenue.
    To address challenges faced by small business owners such 
as Maria, Congress authorized the SBA Microloan program as a 5-
year pilot program in 1991 and made it permanent in 1997. The 
rules of the program have remained basically the same, while 
the lending landscape has dramatically changed. Congress has 
moved to modernize this program, most recently modifying the 
25/75 rule to 50/50.
    While this was helpful, CAMEO offers the following four 
suggestions to further modernize the program. First, eliminate 
the 50/50 rule. The Microloan Technical Assistance Program 
previously required that 25 percent of the technical assistance 
given to the entrepreneur by the lender be provided pre-loan 
and 75 percent post-loan. In 2018, the Congress changed its 
percentage from 25/75 to 50/50. While the relaxed requirement 
is a welcome change, the microloan industry has long advocated 
for this percentage to be lifted altogether as every business 
is unique.
    Second, amend the 1/55th requirement to provide greater 
flexibility. This rule is a left-over requirement from the 
pilot program and is not a sufficient way to distribute funds. 
We, too, support the elimination of the 1/55th rule. 
Additionally, we would support the flexibility of having a 
reserve fund for SBA to deploy capital throughout the year in 
the event of a lapse in appropriations that result in a 
continuing resolution.
    Third, provide access to microloan data. SBA should make 
available publicly data on borrowers who use the Microloan 
program similar to the data available for the 7(a) program. 
Supporters of the program would benefit from having information 
such as geographical location, loan amount, interest rate, 
terms, et cetera. Requiring individuals to file a Freedom of 
Information Act (FOIA) request is burdensome.
    Fourth, increase support for microloan funding. We 
appreciate this Committee's history of strong bipartisan 
support for this program. In 2019, SBA is expected to support 
around $42 million in lending to intermediaries. In addition, 
an appropriation of $31 million was allotted for technical 
assistance. CAMEO requests that this program's growth continue, 
and we will advocate for a 10 percent increase in the program.
    In closing, I am compelled to mention the exponential rise 
of online lending. In 2015, the volume of online lenders was 
five times that of SBA lending and growing at an increasing 
rate. The access to fast money comes at a price, in many cases 
a price too high for many small businesses. Last year, 
California became the first state to pass a transparency in 
small business lending bill to protect entrepreneurs from 
predatory lending. CAMEO believes that the access to capital 
issue has moved beyond access to affordable capital to 
financing that will help it to grow, not force it into 
bankruptcy. We support a federal truth-in-lending bill and 
would welcome this Committee's inquiry into the feasibility of 
such a bill.
    Thank you for inviting me to testify here today. I look 
forward to answering any questions you may have.
    Chairman KIM. Thank you for sharing that. That is all very 
helpful.
    Why do we not move on? Ms. Jallow, over to you. You are 
recognized for 5 minutes.

                  STATEMENT OF MARIAMA JALLOW

    Ms. JALLOW. I am Mariama Jallow, owner of Mariama's Beauty 
Supply in Portland, Maine.
    I arrived in Maine from a small village where my family 
owned and operated a local grocery store. My mother also is a 
leader of a woman's association where every Saturday, 40 to 50 
women meet at our house to make soap. With the money earned by 
selling the soap at the local market, they make loans to 
members of their group so that each woman can start, expand, 
and own their own small business or to help in emergency 
situations.
    After working in Maine for about 3 years, I began to think 
about opening a small grocery store, like the one my family 
owns in our village, which I had helped manage with my mother. 
I soon discovered that despite my business skills, owning a 
store here is nothing like back home. I then saw that I would 
need help to start any business in Maine, as the licensing, 
credit card, and banking systems are all different.
    That was when I learned about Coastal Enterprises (CEI), a 
Community Development Financial Institution (CDFI), and began 
to work with John Scribner of the StartSmart program manager. 
StartSmart works with immigrants, at no cost to them, 
throughout Maine, who are looking to start or expand their 
businesses. When it became apparent that the market for new 
immigrant-owned grocery stores in Portland stores was already 
saturated, I saw that there was a potential for a hair and 
braiding business because there was nothing like that in 
Portland, Maine.
    CEI helped me in all aspects of locating and setting up my 
store, including permitting, recordkeeping, negotiating the 
lease, and many other details. In addition, also, CEI helped in 
passing legislation to allow hair braiders to work in the state 
without a cosmetology license, which at that time was required. 
John and I both testified before the State of Maine 
legislature, in the effort to update the licensing requirements 
at the state level. The bill passed, and then the new 
regulations made it possible for me to offer hair braiding at 
the store without having to obtain the full cosmetology 
license, which has been essential to the cash flow of my 
business.
    CEI continues to support me to meet the necessary 
requirements and obligations related to operating a business, 
such as bookkeeping and the expansion plans that I have. In 
fact, after Mariama's Beauty Supply had been in business for 2 
years, CEI loaned me funds using the Small Business 
Administration (SBA) Microloans. This allowed me to increase my 
retail stock and to renovate my store to include a full-service 
salon, which will employ a hair stylist and makeup artist, in 
addition to the existing hair braiders.
    Whenever I have a question, I call John for advice.
    If it were not for CEI, where would I go for business 
advice?
    I hope and pray that CEI will be here for the next 
generation of people who are coming to Maine, as well as those 
who are already here.
    Just as the women's association in my home village is 
making a difference in their community, I see how CEI is having 
an impact on lives in Maine, including mine.
    Thank you so much.
    Chairman KIM. Thank you so much for sharing your personal 
experience. It is very helpful for us to understand how this 
all works on the ground.
    We are going to move on. Ms. Richards, you are recognized 
for 5 minutes.

                 STATEMENT OF MICHELLE RICHARDS

    Ms. RICHARDS. Thank you. Good morning, Chair Kim, and 
Ranking Member Hern, members of the Committee. I would like to 
thank you for the opportunity to testify.
    My name is Michelle Richards, and I am testifying on behalf 
of Women Impacting Public Policy, a national nonpartisan policy 
organization advocating on behalf of women entrepreneurs.
    I serve as the executive director of the Great Lakes 
Women's Business Council (Great Lakes WBC), which is a 
nonprofit that services women and minority small business 
owners and entrepreneurs through capital, women's business 
certification, training, coaching, and counseling.
    When I started Great Lakes WBC over 34 years ago in 1984, 
microlending was not an industry. We did not know we were a 
microlender because nobody had yet labeled it. But, when the 
SBA Microloan program began, we became one of the first 
organizations to receive funding. We have made $7 million in 
microloans, creating 1,800 jobs, of which 89 percent were to 
women.
    Capital is often the determinant of an entrepreneur's 
ability to start or grow a business. There are nearly 10 
million women-owned businesses in the United States generating 
$1.6 trillion in revenue and employing nine million Americans. 
Yet, for women, accessing capital continues to be difficult. 
Women account for only 16 percent of conventional small 
business loans and receive only 4 percent of the actual loan 
dollars.
    For entrepreneurs in rural areas, the challenge of 
obtaining capital is even greater. As of 2017, only 30 percent 
of community bank branches were in rural areas. Twenty-one 
years have passed since the implementation of the very 
successful Microloan program. It is time for Congress to 
modernize the Microloan program.
    WIPP supports the following three changes: Amending the 1/
55th rule to provide greater flexibility to SBA microlenders, 
as you have heard; eliminating the 50/50 technical assistance 
rule; and providing access to SBA microloan data. The 1/55th 
rule is the number one pain point for microlenders. Under this 
rule, as you have heard, only $800,000 or 1/55th of available 
loan funds are made available to intermediaries. It is divided 
equally among states. The SBA asked for authority to eliminate 
this rule, stating that it restricts the ability of capital for 
small businesses without considering the size of the states or 
the needs of the small business community.
    When the SBA is operating under a continuing resolution, 
loan amounts are even more restricted. We had a loan in which 
we requested a half million dollars and had a pipeline to 
support it, but only received $164,000, because that was all 
that was available for Michigan. Our options were to take the 
smaller loan or forgo it altogether and lose our place in the 
queue for the second half of the year. In another instance, we 
ran out of money at the end of the fiscal year but had to wait 
five months until March when funding was available. This 
affects our credibility and our ability to serve communities.
    WIPP supports the elimination of the 50/50 rule. The 
Microloan program has strict requirements for microlenders. The 
TA program for many years, as was stated, provided 25 percent 
for pre-loans and 75 percent for post-loans. WIPP asked 
Congress to give microloan lenders the flexibility to use TA as 
they see fit. Rather than set a percentage prescribed by the 
Federal Government, many of these organizations like ours have 
more than 2 decades of experience and need the ability to shape 
the program to be the most effective for our clients.
    SBA should make available data on borrowers who use the 
Microloan program, similar to the data that is available 
through the 7(a) program. Data on geographic location, loan 
amount, interest rate, and term would be helpful not only to 
supporters of the program, but to microlenders in determining 
gaps and needs.
    In conclusion, Great Lakes WBC is an example of how 
organizations, in partnership with the SBA, can serve the needs 
of entrepreneurs and their communities, turning them into job 
creators. Making the suggested changes to the Microloan program 
would go a long way toward making the program even more 
impactful.
    Thank you for inviting me to testify here today. I look 
forward to answering any questions you may have.
    Chairman KIM. Thank you. We all appreciate everything that 
you have shared with us today.
    So why do we not move on? We have a lot of questions for 
you and look forward to this conversation.
    I will begin myself. I will recognize myself for 5 minutes. 
Thank you again for being here.
    Capital access is critical, is a critical need for small 
businesses. We all know that. It provides an important 
financial foundation which often determines whether a business 
is going to be able to successfully grow. Predatory lending has 
been a growing issue in the small business community, and 
unfortunately, as capital availability from traditional sources 
has declined, predatory practices have emerged. Predatory 
lending has devastated many small businesses throughout my 
state and certainly across the country.
    I wanted to start with Ms. Martinez. In your testimony you 
mentioned the rapid rise of predatory online small business 
lending and how in many cases access to this fast money comes 
with a price much higher than most small businesses can afford.
    I wanted to just drill down in this because I think it is a 
very important point. Unfortunately, this often leads to 
entrepreneur insolvency and/or small business bankruptcy. How 
often does your organization, or its members encounter an 
entrepreneur or small business struggling with the consequences 
of agreeing to such a loan with predatory, unfair, or 
unreasonable terms?
    Ms. MARTINEZ. Thank you, Chairman Kim.
    Yes. Unfortunately, our members do encounter these cases 
more often than we would like to. So sometimes it is daily. And 
most of our borrowers are actually arriving to us to try to 
save their businesses and save their way of life sometimes. So, 
this predatory lending is really affecting. And one of the 
things that I would say probably is that they are trying to 
serve the clients as efficient as they can, and they are trying 
to use the loan capital that our members have to really help 
the business owners to refinance. But it is something that is 
coming to terms really often and we could say that every day 
they are seeing these kinds of cases.
    Chairman KIM. Well, as you were saying, with the 
refinancing, since microloans may not be used to refinance 
existing debt, how does your organization's work with the 
microloan intermediaries in its network to remedy this problem 
for the borrowers then?
    Ms. MARTINEZ. Yeah, well, CAMEO is helping our members to 
find other alternatives, not restricted loan capital, to be 
able to refinance. So, they are not allowed to use microloan 
capital to do these kinds of loans. Sometimes it is not 
possible, and they get to us really late, and your members have 
to find additional capital to be able to do the refinancing and 
help the small businesses.
    Chairman KIM. Thank you. I believe if Congress is to 
effectively confront this issue of predatory lending we must 
have accurate and current data available as well, and I think 
that gets to a lot of the points you raised, Ms. Richards. In 
your testimony you mentioned challenges in accessing Microloan 
program data. Is the problem that the data around microloans is 
not being collected or that SBA is not reporting it?
    Ms. RICHARDS. SBA is not reporting----
    Chairman KIM. Would you mind using----
    Ms. RICHARDS. Sorry. Technology is never my friend.
    SBA is not reporting it. The data is available.
    Chairman KIM. So I guess from my perspective here, would it 
be unduly burdensome for SBA to require participating 
intermediaries as it collects certain data and to report it to 
the SBA and then obviously we need to address what you just 
mentioned as well about making sure SBA is going to be 
reporting this coming out.
    Ms. RICHARDS. So as a microlender, we report in a system 
that is called MPERS, Microloan Program Economic Reporting 
System, I suspect. And so, in fact, today is the deadline for 
reporting from last month. We report all of this data every 
month. It is available. It is part of the database. It is not 
published. It is not made available.
    Chairman KIM. And from what you have heard so far, what is 
the reasoning you are hearing why this data has not been made 
available?
    Ms. RICHARDS. I am not familiar with the reason why.
    Chairman KIM. Okay. Well, we will make sure we come to the 
bottom of that.
    Well, my time is coming to an end. I want to turn it over 
to Ranking Member, Mr. Hern, who is now recognized for 5 
minutes.
    Mr. HERN. Thank you all. Thank you for your story, Ms. 
Jallow, about the American dream coming here and starting with 
an idea and finding access to capital and realizing that you 
can put people to work. So thank you so much for that story.
    To the entire panel, can you each briefly describe the 
small business environment in your local area, very briefly, 
the optimism? Is there optimism? Very briefly. I have a ton of 
questions.
    Ms. PRINSTER. Colorado has a very strong economy. We have a 
very high level of small business ownership and entrepreneurial 
spirit, and I would say that our level of small business 
startups and growth is very high.
    Mr. HERN. Thank you.
    Ms. Martinez?
    Ms. MARTINEZ. Yeah. California is also a very strong 
economy, and we do see a lot of businesses starting. And I 
think one of the challenges we see definitely is the access to 
capital, and obviously, to the business consulting. But we do 
see also an interesting rise in small businesses, very small 
businesses, and also some of the freelancers and contractors.
    Mr. HERN. Thank you.
    Ms. Jallow?
    Ms. JALLOW. In Portland, there are a lot of immigrant 
businesses starting in Portland. Like, in all of Forest Avenue, 
there are mostly immigrant businesses. And then they are having 
a lot of help from CEI because when I wanted to start my 
business I went to one lady who had a business and then she 
recommended CEI to me. So that is the way we started. And there 
are a lot of us starting.
    Mr. HERN. So, well, I am going to have a follow-up question 
for you.
    Ms. Richards?
    Ms. RICHARDS. Michigan has a shifting economy----
    Chairman KIM. Could you use the microphone?
    Ms. RICHARDS. Michigan has a shifting economy with the 
changes in the automotive industry but actually, three-quarters 
of Michigan is small cities and rural. And so there is still a 
great deal of struggle for enough sufficient support for small 
businesses. But actually, 87 percent of all the businesses in 
Michigan have five employees or less. So that is the bread and 
butter of our state.
    Mr. HERN. That is awesome.
    So I am sure you all looked at our backgrounds or bios. I 
have been a small business owner for 34 years and never ran for 
office before I came here, but I ran on one principle, and that 
was getting out of the way of job creators. Let them create 
more jobs and put people to work. One of the biggest problems 
we have in America is we have people with great ideas, like Ms. 
Jallow, that are having trouble trying to find opportunities to 
get access to capital so they can start. Also along that line, 
I am also in banking in the sense that I got to help start a 
bank many years ago. One of my frustrations was, and I am sure 
you all have heard of the infamous two words, Dodd-Frank. And 
Dodd-Frank really destroyed the ability for the small community 
banks to come out and take a chance on people like Ms. Jallow. 
And so I am sure you all have seen a lift in your 
opportunities, but as Ms. Martinez said, you also have people 
who are taking advantage of this inability for community banks 
to provide access to capital. And so therefore, that is the 
byproduct of what we sometimes do not hear about how when we 
get really engaged in Washington, D.C., in policy that there 
are alternatives that happen, bad things happen.
    So with that, Ms. Richards, we often hear about small 
businesses. They do not have the idea to be able to find like 
CEI like Ms. Jallow did. How are we supposed to find people 
with ideas like Ms. Jallow, how are we supposed to find folks 
like yourself?
    Ms. RICHARDS. Well, first of all, the internet is really 
critical. The Small Business Administration website has a list 
of the microlenders. Or had. They are updating it currently. 
They use our website. The Small Business Development Center, 
another SBA resource partner, is a critical component. Last 
year we received more referrals from the SBDC than any other 
source. We receive referrals from the banks and from former 
lenders, borrowers from our program also. The word is spread 
very widely and the biggest issue is there are still some gaps 
with the Microloan programs where they do not cover all the 
areas of a state. Just officially this month, the last nine 
counties were given to a microlender, so finally, Michigan is 
fully covered.
    Mr. HERN. Ms. Jallow, how did you find CEI in my remaining 
30 seconds.
    Ms. JALLOW. Through a business owner in Portland where I 
used to go and buy groceries. So I was talking to her. I said I 
want to start a grocery store. And then she was like, okay, I 
will give you a name of an organization that helped me, that 
are working with me. And then it was like, okay, I am going to 
call them. And then she gave me CEI's number and then I 
contacted John.
    Mr. HERN. If I may, we hear testimony a lot in our 
Committee about opportunities to loan money. It seems like one 
of our biggest issues is being able to get the message out to 
people with ideas because we have a lot of programs but very 
little awareness on the entire program itself. Thank you.
    Ms. JALLOW. You are welcome.
    Chairman KIM. Thank you. The gentleman's time has expired 
and he yields back.
    And I agree wholeheartedly about wanting to make sure we 
can find ways to inform people about those programs and that is 
something that the Ranking Member and I are committed to doing 
together.
    I wanted to recognize Representative Sharice Davids for 5 
minutes.
    Ms. DAVIS. Thank you, Chairman Kim.
    I am Sharice Davids from Kansas. It is the Kansas City 
metro area. I got really excited. I am going to say what I have 
here but I got really excited about a couple of things that you 
all have said.
    You know, the reason I get so excited is because 
entrepreneurship is kind of baked into the DNA of the place 
that I represent and that I live in. And this concept of an 
entrepreneurial ecosystem and the ways that different 
enterprises can make use of programs and that sort of thing 
plays out, at least from what I have seen, there is an 
organization that I know, a CDFI, which I love CDFIs, a CDFI 
called Alt Cap in the Kansas City area. They were only on the 
Missouri side. They are moving over to the Kansas side as well. 
And they have found different ways to collateralize some of the 
loans. And I know that is sometimes an issue, particularly for 
like artisans. They started a program called Art Cap that helps 
artists collateralize in different kind of ways than what we 
might see ordinarily, which I think is one of the great things 
about microlending and CDFIs. So I might come back to that.
    But I really got excited when you started talking about the 
relationship with SBDC, the Small Business Developments. Can 
you talk, and maybe this will be something that each of you 
could speak to for a moment, about how important it is either 
to build that relationship if it does not exist or if it does, 
and maybe any others, like the PTACs and community colleges. I 
know Johnson County Community College where I went to school 
has a Small Business Development Center. Can you talk a little 
bit about that?
    Ms. RICHARDS. Certainly. The Small Business Development 
Center's purpose is, in fact, to assist the growth or 
development of small businesses. And so they see us as a 
strategic partner. So as soon as they are meeting with someone 
who is going to need financing they alert us so that if we have 
additional questions to ask or direction to give, we work at 
the very beginning stages with them. We also work with the 
PTACs in the area. And many of the community colleges have 
entrepreneurial tracks now. And they frequently ask us to come 
and speak to their class before they graduate so that they know 
about the resources available to them because startup capital 
is very difficult for banks to provide. And so alternative 
financing, like the microloan programs, are very critical.
    Ms. JALLOW. For me, having the experience back home, to 
come over here and then to start is a huge difference because 
the licensing, the insurance and everything is different, 
whereas back home you can just start. But when I learned about 
CEI they definitely helped me because I was thinking that I 
cannot do it after talking to people. I was thinking that I 
cannot do it but after meeting with John and talking about it, 
I always get excited whenever I leave the office because I am 
like, okay, I can do it. And then we have people that are 
working in there, too, that are from different countries.
    Ms. MARTINEZ. Well, from CAMEO, we do believe that the only 
way that we are going to be supporting the entrepreneur is if 
we provide the resources in a comprehensive way. And I think 
the entrepreneurial ecosystem dimension is something that we 
are very interested in continuing to develop. The resources are 
available. There are the SBDCs, the WBCs. There are a lot of 
independent, nonprofit organizations that are providing 
business counseling to the entrepreneurs, but we just need to 
be aware of these resources. And building really strong 
networks where we share what programs are in existence and we 
determine what gaps are needed. It is important to be able to 
fulfill that need of the entrepreneur and find the right 
capital for them as well.
    Ms. PRINSTER. We work very closely with the SBDCs across 
our state in Colorado. In fact, some of our lending team will 
have office hours within the SBDC to talk specifically about 
financing, and particularly, our ability to help them. Most of 
our SBDCs do a very good job on classes, and we do refer 
businesses to them for counseling and training. Sometimes, and 
this addresses the 50/50 rule, sometimes the SBDCs have long 
waiting times for their counselors, or their counselors might 
not be as attuned to some of the populations that we serve. So, 
we would like to have more flexibility with our grants to do 
that pre-loan technical assistance. And then, of course, we 
will also support them post-loan because we have the loan to 
them. Therefore, that 50/50 rule does play into this issue 
about SBDCs and what they do well and what we feel we have the 
better opportunity to provide.
    Ms. DAVIS. Thank you. I appreciate that. And I appreciate 
your time. And with that I yield back.
    Chairman KIM. Great. Thank you.
    I now want to recognize for 5 minutes Representative 
Radewagen from American Samoa.
    Mrs. RADEWAGEN. Talofa. And good morning.
    Thank you, Chairman Kim and Ranking Member Hern for holding 
this hearing. And I want to thank the panel for appearing 
today. Each of you has a fascinating story and I just am very 
interested in it.
    My main goal while serving on this Committee is to see 
small business development in my home district of American 
Samoa, and it is my belief that microloans are the way forward 
for American Samoa. Now, I have seen the wonder of microloans 
in the neighboring independent Nation of Samoa, which has been 
a great boon for their small businesses. And I actually went 
into their villages and talked with many of the small business 
owners. And interestingly enough, it turns out almost all of 
the ones who get microloans are women. So they have discovered, 
the people who administer the microloan program, discovered men 
are not really as good at paying their loans back on time. So 
women have a better chance at it, so whatever that means.
    But I have a few questions. I would love to ask all of you 
questions, but Ms. Richards, because our time is so limited, 
when you are speaking with small businesses, what is the number 
one issue they raise?
    Ms. RICHARDS. Well, truthfully, the number one issue they 
raise is that they need capital. What we recognize is that what 
they need is capital, and usually they need assistance either 
with focused marketing strategy or operational excellence. They 
have business operations that are not successful. And so the 
biggest issue is getting them to understand that it is not just 
the money they need from us; it is the technical assistance and 
us to be a partner in their business growth.
    Mrs. RADEWAGEN. So after assisting a small business, I 
presume the relationship you built with small business does not 
stop, correct?
    Ms. RICHARDS. It does not stop. They are much like children 
and they never go away. They come back. They come back in a 
good way. And so truthfully, as they hit key milestones, 
whether that is moving to a new location. We had a company that 
went actually into manufacturing the product instead of 
importing it, that they will come to us first to help 
strategize, create a financing plan, and to move it forward.
    Mrs. RADEWAGEN. I see. So in your statement you explain 
that 93 percent of all your loans are through SBA's Microloan 
program. What is the makeup of the remaining 7 percent of 
loans?
    Ms. RICHARDS. The 7 percent is from investments from some 
foundations and some area banks that have key target areas that 
they want to invest money in.
    Mrs. RADEWAGEN. So do you know on average how many hours of 
technical assistance you might supply to a single small 
business in a given year?
    Ms. RICHARDS. We tend to estimate about 15 hours of 
technical assistance. Now, that will include any preparation 
time that a counselor, business counselor, will be doing in 
preparation for that meeting.
    Mrs. RADEWAGEN. So that would be 15 hours in a given year? 
Okay.
    Thank you, Mr. Chairman. I yield back.
    Chairman KIM. Thank you.
    We are going to move forward, and I would like to recognize 
Representative Crow from Colorado for 5 minutes.
    Mr. CROW. Thank you, Mr. Chairman.
    Ms. Prinster, always good to see a fellow Coloradan in D.C. 
Thank you for coming and joining us here today. And to all of 
the witnesses, really appreciate your hard work and what you 
are doing for small businesses and your leadership in your 
communities.
    This is a general question, and I would invite all of you 
to respond to it. But I represent one of the most diverse 
districts in the country. There are over 140 languages spoken 
in my largest city, but one in five residents of my community 
were born outside of the United States. And one of the biggest 
issues that they face, and this tends to be a very 
entrepreneurial community, they start their own businesses, and 
one of the biggest issues they face is just the lack of 
transferability of credit. These are folks that own businesses 
from where they came, but they come over here and they are 
coming with a blank slate and it is very hard for them to 
access capital and to start businesses. And I would love to 
hear your thoughts on whether you have experienced that, maybe 
starting with Ms. Jallow. What are the ways we can address 
that?
    Ms. JALLOW. Yes. For me, at the start, I had capital to 
start but in 2 years I needed some to grow, to add more 
inventory in the store and then to renovate the store for a 
full license salon because right now we just do braids, 
braiding, which some ladies rent from me and start their own 
businesses. Because, when they arrive some cannot speak English 
but having that opportunity to rent from me and sit and do hair 
braiding does not require much English to do that. But 
definitely the loan helped me to now renovate and put a full 
hair stylist that I will be employing and a makeup artist to do 
makeup.
    Ms. PRINSTER. I am familiar with your district, 
Representative Crow. Your point about people who lack credit 
history is one of the reasons why the SBA Microloan program is 
so important. We are very familiar with this type of situation. 
Because we are a nonprofit, we see it as part of our mission to 
help immigrants, refugees, re-entering citizens, and veterans 
who may not have any or a very deep credit history or may have 
a troubled credit history. We really see this as part of our 
mission to help them to establish a business and establish 
their credit. We report credit monthly through an agency that 
works with Equifax and TransUnion so it is a credit-building 
function and we see this as very important for those businesses 
that are trying to establish credit. But as far as making the 
loan in the first place, we have the flexibility to look past 
imperfect credit, look at their business plan, work with them, 
and again, more funding for this pre-loan technical assistance 
would help us. These are the kind of populations that really 
need that more dedicated handholding to get to a point where 
they are credit-ready.
    Ms. MARTINEZ. Well, among our members we do have several of 
them that are providing alternative underwriting criteria when 
they are actually offering loans to a specific population such 
as immigrants and refugees and people with credits that are 
very troubled. So, considering that kind of alternative ways to 
provide the loan and assess the loan before doing it and 
providing that pre-loan technical assistance is key to actually 
help them build the credit and actually access capital to grow 
their business. So, we do believe that needs to be kind of a 
partnership again and with different organizations and the 
microlenders, the SBDCs and WBCs and all of them to really work 
between themselves to provide that pre-loan technical 
assistance and also to consider for the lenders an alternative 
way of considering and assessing the loan before approving.
    Mr. CROW. Thank you.
    Thank you. I yield back.
    Chairman KIM. Thank you.
    I would like to recognize for 5 minutes Representative 
Spano from Florida.
    Mr. SPANO. I have a defective microphone so I am just going 
to hold it.
    First of all, I want to thank the Chairman and the Ranking 
Member for highlighting the need to make sure that small 
businesses know what SBDC does. That has been a frustration for 
me and my community as well.
    I have a couple questions. I think the first maybe I would 
like to direct to Ms. Richards, if you may. You suggest that 
the 1/55th rule should basically end and essentially, that loan 
funds should be allocated according to state size, needs of the 
business community. I would like for you, if you would, just to 
drill down for me, maybe take 30 seconds, drill down. So would 
it just be an allocation, a proportionate share based on the 
population of the states, and then as it relates to the 
business needs of the community, what would be the types of 
criteria that you think we should look at in order to better 
distribute these funds?
    Ms. RICHARDS. Some of those practices are in place. The SBA 
requires a pipeline, for us to show a pipeline of loans and 
that we are in good standing with the program before we can 
borrow. And I think those need to continue to stand in place.
    So I think that the criteria should hold that an 
intermediary has to show that they are in good standing but 
that the funds should be available to the intermediaries who 
are able to effectively deploy them because that is really a 
better indicator I think to Congress of how much funding is 
really needed if we take some of these caps off as to how 
effective we could be at microlending everywhere.
    Mr. SPANO. Okay. So in your opinion, the most important 
criteria would be the effectiveness of the intermediary rather 
than the population of the states or the specific business 
needs of the community?
    Ms. RICHARDS. That is right. That is right. We have become 
very well-powered machines at creating jobs and businesses.
    Mr. SPANO. Do you have any concern that that might 
negatively affect some of the states or the businesses needs of 
the small business community who just happen to be in a region 
that do not really have an effective intermediary?
    Ms. RICHARDS. There are so many great associations that 
support intermediaries at becoming best in class, and there are 
so many resources to incur those skills that I do not think 
that that is really the issue. More and more intermediaries are 
both emerging and growing, and I think that the real issue is 
that because of the way the funds are structured, they ensure 
that great opportunities cannot occur in two intermediaries in 
one state. Someone gets the bulk of the money and someone does 
not.
    Mr. SPANO. Follow-up questions. You had also mentioned 
about the 50/50 rule and you guys really are not in the best 
position to provide this technical assistance. And so do you 
know what the rationale was, SBA's rationale when they 
implemented this rule to begin with? What was their expectation 
or anticipation for intermediaries in terms of technical 
assistance? Why did they think it was important?
    Ms. PRINSTER. If I may answer that question since I was 
around at the early stages of the SBA Microloan Program myself. 
I think the rationale, which originally it was 25/75, 25 being 
for pre-loan, then was changed to 50/50, I think the rationale 
was that they wanted the intermediaries to support the 
businesses who had loans, and to spend most of their time 
working with the borrowers that had an investment from the 
microlender. I think the main rationale was to force us to put 
our focus on businesses that took out loans from us. As the 
industry has grown and matured, we have seen that there are 
many businesses and business owners, including what we were 
talking about with Mr. Crow, not just in Colorado but 
everywhere, that need a lot more of handholding and intense 
work before they are ready for credit. We like being able to 
support them in getting there.
    Mr. SPANO. So what would you say, and you can answer that 
question, too, Ms. Richards as well, but I also wanted to 
interject there, what would be, you had mentioned that 
processing the loan and working on the loan and getting ready 
for the loan is included in this category of technical 
assistance. What other types of technical assistance do 
intermediaries provide, if any, or is it just processing a 
loan?
    Ms. RICHARDS. It is absolutely not just processing a loan. 
Most of the work that is really key is what is going to make 
this business successful and this loan get paid back. And so 
sometimes it is helping people to get into new markets. We 
helped a woman who had a battery franchise get an industrial 
contract with a utility company which allowed her to be able to 
grow at a great rate, use the expertise she has and basically 
open up new markets. Our reach is much greater than their 
reach.
    Mr. SPANO. Just really quickly. Do you have any concern 
that doing away with the 50/50 rule requiring any technical 
assistance at all would create a problem where intermediaries 
would not have really an interest to provide those resources?
    Ms. RICHARDS. Absolutely not. I think it was originally 
designed because the only benchmark they had was banking, and 
so banks inherently are not going to spend that kind of time 
upfront cultivating those deals. That makes sense. That is a 
good business decision. But we are in a different category and 
we need the flexibility to do what we need to do.
    Mr. SPANO. Thank you, Mr. Chairman.
    Chairman KIM. Thank you.
    Moving on I would like to recognize Representative Delgado 
from New York for 5 minutes.
    Mr. DELGADO. Thank you, Chairman. And thank you, all the 
witnesses for taking the time to educate us today. It is 
important, this work.
    And I wanted to stress, as someone who represents Upstate 
New York, New York 19, the home of over 27,000 small 
businesses, one of my priorities is to figure out how to 
increase capital for folk back home. And one of the things I 
often hear from folks back home is that they do not feel that 
the Federal Government is helping to revitalize the economy in 
rural communities, and my district is very rural. They cannot 
discussed loans, as we have discussed, to start their business. 
They do not even know where to start, as we have discussed. And 
they want to stay in the community but there are so many 
hurdles for folks to overcome. So Ms. Jallow, what I would like 
to hear from you is to elaborate more on your personal 
experience in trying to get a loan for your small business 
before you began working with the intermediary. What was that 
experience like?
    Ms. JALLOW. Before I started working with CEI I would not 
be able to start anything if it were not for them. I would not 
know where to go in the first place because I was thinking like 
the concept that I have that you can just come and start 
similar to back home. But when I talked to people they are 
like, oh, it is not that way. You have to do this and that. And 
then that is the time I contacted CEI, which is really, really 
helpful. Like, whenever I need something, they are always 
there. Whenever I call, John is ready. Sometimes I will be even 
late. He will be like, you know, it is okay. You can come. So 
it is really helpful for me. And then I know a lot of people 
over there, too, that really get help from them.
    Mr. DELGADO. And can you speak a little bit about how long 
it took before you were made aware of this option, and how did 
you come to learn about it?
    Ms. JALLOW. I learned about it with a business owner in 
Portland who is an immigrant from Cambodia. She is the one who 
told me about CEI. And when I contacted them, it took me like 5 
days for them, you know, when I called him they just told me we 
can set up an appointment. You can come in. So that is the time 
I went in and we talked about it and it was really helpful for 
me to start and I was like, yeah, I can do this.
    Mr. DELGADO. Excellent. Thank you.
    And to anybody on the panel, happy to hear about your 
experiences working with rural businesses that have benefitted 
from the Microloan program and some of the challenges that are 
specific to rural communities when it comes to accessing 
capital.
    Ms. MARTINEZ. Well, we do have a lot of rural businesses 
also that are member-served in California. And I think the 
challenges are high as you mentioned or there are not as many 
microlenders as they would like but there are also alternative 
ways. So definitely they have really strong ones I might say, 
so the lenders that are there might be just one or two, but 
they are really strong. And then also they are considering 
alternative ways to reach them. So, when we are talking about 
online lending it is actually a good way to reach more rurals. 
It is just it has to be the right way. So, we want to make sure 
that when we are talking about lending and being able to 
optimize the process and make it faster and more accessible for 
our rural business owners especially, we are able to provide 
the right programs and loans. We, being in CAMEO, actually are 
supporting a lot of our members to get more online applications 
and just being able to connect with the members through online 
solutions. And I think that is a really good way to make sure 
that you reach the right business owners without them having to 
travel so far or being able to really experience all the issues 
they might have to find the right partner in the location.
    Mr. DELGADO. Yes. On that point, broadband access would 
probably be important then.
    Ms. MARTINEZ. Totally. Absolutely.
    Mr. DELGADO. Okay. Anybody else want to----
    Ms. PRINSTER. Colorado has many rural areas as well as 
metropolitan areas. Our primary service area is the Front Range 
which is more the metropolitan and small city area but one of 
the difficulties we have in reaching some of the rural 
communities is our ability to fund that outreach. We create 
partnerships very frequently with SBDCs, banks and economic 
development organizations within those communities to be able 
to get the referrals. We have an online application. So there 
are ways that we can serve a business in a rural area without 
always having to be there, but it is important to have those 
connections.
    I would also say that outreach and visibility are critical 
to this program. Once we are connected with a business we can 
help them, but it's hard to reach them if they don't know about 
us. So I suggest that the cost of outreach should be allowed 
under the technical assistance grants because the awareness and 
education of our partners in other communities is a really 
important part of making this program accessible to businesses 
across our state, including rural areas.
    Mr. DELGADO. All right. Thank you.
    I yield back.
    Chairman KIM. Thank you.
    I would like to move on to Representative Stauber from 
Minnesota. You are recognized for 5 minutes.
    Mr. STAUBER. Thank you very much, Mr. Chair, and to the 
witnesses, I appreciate your comments.
    I just want to follow up a little bit on our Ranking Member 
Hern's comments about Dodd-Frank and loaning to small 
businesses. However, well-intentioned that was, I can tell you 
back home it was devastating for our small, local community 
lenders and they are feeling it today. And so when we talk 
about access to capital, that was one of the, I think, the 
negative effects of that law. And so I think our goal is to 
allow this capital, allow our small lending institutions across 
rural American have the ability to have that capital ready and 
available when that entrepreneur comes in. So I think what I am 
hearing back home is from our lending institutions, our 
community lending institutions, that was devastating for them. 
A third of their time, approximately a third of their time 
making sure that they are following the government mandates in 
case they are audited or investigated, which does not seem 
right. Our lending institutions, you have all built trusting 
relations with the lending institutions. I think they are a big 
part of our economy.
    We have talked about broadband. I am on the Transportation 
Infrastructure Committee as well. Broadband is important for 
rural America, rural Minnesota, Northern Minnesota, where I 
represent, and so Ms. Richards, you talk about the Microloan 
program. It is currently operating with half of the number of 
intermediaries that are allowed. So in your opinion, how can we 
attract more intermediaries in that rural area of our country? 
Because we know that once we work broadband in the rural areas, 
that is where our small businesses can relocate or start up. 
Can you just answer that question?
    Ms. RICHARDS. Well, first of all, the current regulations 
around the program, the 25/75 really limit your ability when 
you have a rural area. There is a significant amount of time of 
going to meet with people because you have to go see their 
business. You have to see what it looks like before you go and 
make the loan. So the upfront costs, the pre-loan costs are so 
much higher. It helps that it was moved up to 50 percent which 
gives us some more flexibility because we have some clients 
that we travel 2-1/2 hours or 3 hours to visit in rural areas. 
So the first is that 50/50 rural is really hampering many 
organizations from stepping up to the plate and becoming 
microlenders. Community action agencies, you know, other 
agencies that exist within the rural construct.
    Secondarily, I think that there are networks that are 
continuing to work, and associations. AEO is an association and 
others that are trying to identify organizations that can serve 
those communities. We see this movement as critical that every 
county in this country should be covered. And so that is why I 
was so proud that finally every county in Michigan is covered. 
There are four other microlenders and we mentored every single 
one of them to get started. So part of it is we need to have a 
mentoring network of successful Microloan programs that go in 
and mentor an organization, identified resource to actually 
become a lender. Get the best practices out of the way right 
away.
    Mr. STAUBER. And thank you for those comments.
    I would say that the testimony today, and I am very 
privileged to be on the Small Business Committee. As a small 
business owner myself, what you are doing is vital to the 
startups and to the entrepreneurial spirit because when 
somebody has a good idea they are excited. The door has got to 
be open when they are ready. When they run into roadblocks and 
stumbling blocks, they are not going to pursue it as you 
described. And I think we call can agree that when that 
entrepreneur comes knocking that is where the excitement phase 
is. They have probably done a lot of research where you can 
assist them in getting or developing their small business 
because I think each of you know, and everybody on this 
Committee knows small businesses are the engine of our economy. 
Main Street America depends on small businesses.
    I appreciate all your efforts that you have put forth. And 
Mr. Chair, I yield back.
    Chairman KIM. Thank you so much. And I just want to echo 
your sentiments there. That is certainly the focus of what we 
are trying to do on this Subcommittee and this broader 
Committee. And just in my short time here in Congress already I 
have certainly seen this Committee try to do everything we can 
to put aside any partisan differences and work together to be 
able to figure out how we can help small businesses and 
entrepreneurs, and the work that you are doing is really where 
the rubber hits the road and that is what we need to be 
investing in and figuring out what we can do to make sure to 
help you do your jobs better and help small businesses grow. So 
I just appreciate that sentiment there at the end.
    I think that is the conclusion here of the questions. I 
just wanted to take a moment--did you----
    Mr. HERN. Well, I just want to again say thank you so much. 
What you all do goes thankless sometimes, but thank you so much 
for your relentless pursuit of trying to make this a better 
program.
    Chairman KIM. Absolutely. We all share that sentiment. We 
are grateful for all of you coming out today, and we also just 
want to take a moment to just recognize how exciting it is that 
we have an all-women panel to celebrate Women's History Month 
as well. So I just want to thank you for participating there.
    As we have heard today, there is a lot of good work the 
Microloan program and its partners, intermediaries, are doing 
to enhance access to capital and entrepreneurial development 
for America's smallest businesses. In the 20-plus years the 
program has been in existence it has grown significantly, and 
as we heard today, some of the rules governing the program have 
not kept up with its growth. I look forward to working with my 
colleagues on both sides of the aisle to find policy solutions 
that will thread the needle to provide the flexibility 
intermediaries need to continue funding and training America's 
entrepreneurs.
    I would ask unanimous consent that members have 5 
legislative days to submit statements and supporting material 
for the record.
    Without objection, so ordered.
    And if there is no further business to come before the 
Committee, we are adjourned. Thank you.
    [Whereupon, at 11:14 a.m., the subcommittee was adjourned.]
                           
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