[Congressional Record Volume 147, Number 9 (Wednesday, January 24, 2001)]
[Senate]
[Pages S548-S549]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Ms. Snowe, Mr. Bond, Mr. Wellstone, 
        Mr. Cleland, Ms. Landrieu, Mr. Harkin, Mr. Levin, Mr. 
        Lieberman, Mr. Bingaman, Mr. Enzi, Mr. Kohl, and Mr. Johnson):
  S. 174. A bill to amend the Small Business Act with respect to the 
microloan program, and for other purposes; to the Committee on Small 
Business.
  Mr. KERRY. Mr. President, today Senator Snowe and I are introducing a 
bill to improve the Small Business Administration's Microloan Program, 
a program which makes a very big difference through very small loans of 
up to $35,000. We are very pleased that Senators Bond, Wellstone, 
Cleland, Landrieu, Harkin, Levin, Lieberman, Bingaman, Enzi, and Kohl 
are joining us and cosponsoring this bill.
  Senator Snowe and I have worked together many times on this program, 
pushing to make sure our country's smallest businesses have access to 
capital and business assistance. The changes we are introducing today 
are not controversial, and they are not new. In fact, they should sound 
familiar to all but our newest colleagues. First, they were part of the 
microloan provisions in the Senate version of last year's SBA 
Reauthorization bill. Second, our Committee and the full Senate voted 
unanimously to pass them. Further, they were drafted in cooperation 
with the Administration and with the folks who make the loans and 
provide the business training. The National Association of SBA 
Microloan Intermediaries (NASMI) and its members were full partners in 
shaping this legislation in the 106th Congress.
  These provisions were not included in the conference agreement on 
SBA's Reauthorization bill because the House Committee on Small 
Business wanted to postpone consideration of these changes until they 
could hold a hearing and their members could have a chance to weigh in 
on the program. I thank former House Small Business Committee Chairman 
Talent, and returning Ranking Member Nydia Velazquez, for working with 
us on the microloan changes.
  These changes we are re-introducing today will make the SBA Microloan 
Program more flexible to meet credit needs, more accessible to 
microentrepreneurs across the nation, and more streamlined for lenders 
to make loans and provide management assistance. They complement the 
program and technical changes we made last year.
  The Microloan Program Improvement Act of 2001 does the following:
  It allows microintermediaries to offer revolving lines of credit. 
Currently, microloans are short-term loans. Eliminating this 
requirement will allow intermediaries greater latitude in developing 
microloan products that best meet their community's needs by offering 
borrowers revolving lines of credit, such as for seasonal contract 
needs. Congress does not intend for this flexibility to be used to make 
loans with long terms, such as 15 and 30 years.
  It broadens the eligibility criteria for potential 
microintermediaries. Instead of requiring intermediaries to have one 
year of experience in making microloans to startup, newly established, 
or growing small businesses and providing technical assistance to its 
borrowers, this legislation would deem a prospective intermediary 
eligible if it has equivalent experience.
  It expands flexibility to intermediaries to subcontract out technical 
assistance. Currently, intermediaries are limited to using 25 percent 
of their funds to assist prospective borrowers. This change allows an 
intermediary to allocate as much technical assistance as appropriate. 
This subsection also increases the percentage of technical assistance 
grant funds that an intermediary can use to subcontract out technical 
assistance. Currently, intermediaries can only subcontract 25 percent, 
and this legislation would raise it to 35 percent.
  It establishes a peer-to-peer mentoring program to help new 
intermediaries provide the best possible service to microentrepreneurs. 
Specifically, SBA would be allowed to use up to $1 million of annual 
appropriations for technical assistance grants to provide peer-to-peer 
mentoring by subcontracting with one or more national trade 
associations of SBA microlending intermediaries, or subcontracting with 
entities knowledgeable of and experienced in microlending and related 
technical assistance. As Congress increases the number of lending 
intermediaries around the country to reach more people, we want to make 
sure that new intermediaries have the benefits of lessons learned by 
other more

[[Page S549]]

experienced lending intermediaries. Because the microlending industry 
is still very young, there are few sources of conventional training 
available to prospective and new intermediaries. According to the 
National Association of SBA Microloan Intermediaries, experienced SBA 
microlenders are called upon frequently to assist new intermediaries in 
addressing issues with their loan fund, from financial management and 
marketing to targeting loan funds effectively to a population or 
business sector. While these experienced intermediaries do their best 
to respond to the needs of their colleagues, they currently lack the 
resources to respond effectively and efficiently to the growing needs 
of the field.
  Before I wrap up my statement, I would like to quickly run through 
the changes we made and that President Clinton signed into law on 
December 21.
  Increases the maximum loan amount from $25,000 to $35,000;
  Increases the average loan size for each intermediary's portfolio 
from $10,000 to $15,000 and increases the average loan size for 
specialty lenders from $7,500 to $10,000;
  Raises the threshold for the comparable credit test from $15,000 to 
$20,000;
  Increases the number of non-lending technical assistance (TA) 
providers from 25 to 55 and raises the maximum grant amount to each TA 
provider from $125,000 to $200,000; and,
  Increases the number of intermediaries SBA is authorized to fund from 
200 to 300.
  Mr. President, I ask for unanimous consent that the bill be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 174

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Microloan Program 
     Improvement Act of 2001''.

     SEC. 2. MICROLOAN PROGRAM.

       (a) In General.--Section 7(m) of the Small Business Act (15 
     U.S.C. 636(m)) is amended--
       (1) in paragraph (1)(B)(i), by striking ``short-term,'';
       (2) in paragraph (2)(B), by inserting before the period ``, 
     or equivalent experience, as determined by the 
     Administration'';
       (3) in paragraph (4)(E)--
       (A) by striking clause (i) and inserting the following:
       ``(i) In general.--Each intermediary may expend the grant 
     funds received under the program authorized by this 
     subsection to provide or arrange for loan technical 
     assistance to small business concerns that are borrowers or 
     prospective borrowers under this subsection.''; and
       (B) in clause (ii), by striking ``25'' and inserting 
     ``35''; and
       (4) in paragraph (9), by adding at the end the following:
       ``(D) Peer-to-peer capacity building and training.--The 
     Administrator may use not more than $1,000,000 of the annual 
     appropriation to the Administration for technical assistance 
     grants to subcontract with 1 or more national trade 
     associations of eligible intermediaries, or other entities 
     knowledgeable about and experienced in microlending and 
     related technical assistance, under this subsection to 
     provide peer-to-peer capacity building and training to 
     lenders under this subsection and organizations seeking to 
     become lenders under this subsection.''.
       (b) Conforming Amendment.--Section 7(m)(11)(B) of the Small 
     Business Act (15 U.S.C. 636(m)(11)(B)) is amended by striking 
     ``short-term,''.

  Ms. LANDRIEU. Mr. President, I rise today to bring the attention of 
the Senate to legislation vitally important to the success of the 
Microloan Program of the Small Business Administration. Congress 
created the Microloan Program to reach small businesses not being 
served by traditional lenders or other credit programs within the SBA. 
This program has successfully helped micro entrepreneurs, many of whom 
are minorities, women and low-income individuals, who otherwise would 
have been unable to achieve their goal of owning their own business. 
Due to weak or, merely, non-existent credit histories and limited 
borrowing experience, they were often labeled as unreliable or risky 
borrowers by traditional credit markets and, hence, unable to obtain 
loans to start businesses.
  To address this need and to fill the gap in micro enterprise lending, 
the Microloan Program was created to provide loans to non-profit 
intermediary lenders who, in turn, provide loans under $35,000 to very 
small businesses. In addition to financial resources, intermediary 
lenders provide technical assistance to these business owners, teaching 
them how to manage and run a successful business. Industry experts and 
micro borrowers have testified that supplementing financing with 
technical assistance is critical to the success of the micro enterprise 
and the likelihood of loan repayment.
  Not only crucial to the development of the business of the micro 
borrower, micro loans also serve to strengthen and build communities, 
both growing and those in need of resurgence. To date, lending 
intermediaries have made 10,230 loans, worth in the range of $105 
million. This money and business activity is stimulating many 
communities. As importantly, loans made by this Program have created 
new jobs. The Small Business Administration reports that for every loan 
made, 1.7 jobs have been created. Given the number of loans, this 
calculates to approximately 17,391 new jobs to strengthen the vitality 
of our communities.
  The legislation I am cosponsoring today makes programmatic and 
technical changes to the Small Business Administration's Microloan 
Program, making it more flexible. This flexibility will help the 
Program meet more credit needs, be more accessible to micro 
entrepreneurs across the country, and streamline procedures which 
increase lenders' ability to make loans and provide technical 
assistance to micro entrepreneurs.
  The Microloan Program has had substantial achievements. In South 
Carolina, a small retail establishment's owner wished to sell his 
outlet to an employee, but traditional lenders balked. The Microloan 
Program gave the employee the helping hand he needed with a micro loan. 
He paid that initial loan back early, and a second micro loan, as well. 
The banks now knock on his door. In Virginia, a woman, whose husband 
became disabled and unable to support the family, used a micro loan to 
start a used car dealership. That business has succeeded. So much so 
that she has established a program in her community that helps other 
women get off welfare by providing the automobile transportation to get 
to and from work. I want to be able to cite similar examples in my own 
State of Louisiana. In Louisiana, currently, we do not have any micro 
lenders enrolled in the Program. However, I have fought for increased 
funding to make sure the Program is adequately funded so that 
nationwide we can provide more micro loans and technical assistance. In 
the last Congress, I voted for legislation that increased the number of 
intermediaries authorized from 200 to 300 so that we can reach more 
micro entrepreneurs across the country.
  And today, the proposed legislation will make the necessary changes 
to increase the attractiveness of the Program to prospective micro 
lenders in Louisiana and elsewhere around the country. The legislation 
being introduced today would broaden the eligibility criteria for 
intermediaries in an effort to bring lenders into the Program. This 
legislation would allow for intermediaries to have equivalent lending 
experience, rather than requiring exact micro lending experience. In 
addition, this legislation increases the amounts intermediaries can use 
to subcontract technical assistance, thus easing the burden on lenders 
in providing technical assistance. This legislation should encourage 
intermediaries to get involved in the SBA's Microloan Program in 
Louisiana. I urge lenders in my State to take note of the need for 
their future involvement in this Program. They could make big 
differences in their communities by making very small loans.
  I have consistently supported this Program since joining the 
Committee on Small Business, and will continue to do so because of the 
many benefits that the Microloan Program can provide to micro 
entrepreneurs and our communities. Passage of this legislation can 
continue the successes of the Microloan Program and extend its reach 
into many other communities, such as those in Louisiana. I thank 
Senator Kerry and Senator Snowe for their leadership on this 
legislation and encourage the Committee to act on this bill as soon as 
practicable.
                                 ______