[Congressional Record Volume 147, Number 159 (Friday, November 16, 2001)]
[Senate]
[Pages S12013-S12014]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               MICROLOAN PROGRAM IMPROVEMENT ACT OF 2001

  Mr. REID. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of Calendar No. 55, S. 174.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The assistant legislative clerk read as follows:

       A bill (S. 174) a bill to extend the Small Business Act 
     with respect to the Microloan Program, and for other 
     purposes.

  There being no objection, the Senate proceeded to consider the bill.


                           Amendment No. 2164

  Mr. REID. Mr. President, Senator Kerry has an amendment at the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Nevada [Mr. Reid] for Mr. Kerry proposes 
     an amendment numbered 2164.

  The amendment is as follows:

 (Purpose: To correct a loan amount for purposes of the small business 
                           microloan program)

       At the end of the bill, add the following new section:

     SEC. 3. MICROLOAN PROGRAM CORRECTION.

       Section 7(m)(3)(F)(iii) of the Small Business Act (15 
     U.S.C. 636(m)(3)(F)(iii)) is amended by striking ``$7,500'' 
     and inserting ``$10,000.''

  Mr. KERRY. Mr. President, I am here today to urge passage of a bill 
to improve the U.S. Small Business Administration's Microloan Program, 
a program which makes an enormous difference to many aspiring 
entrepreneurs through very small loans of up to $35,000. The demand for 
these loans go up when the economy slows down and people lose their 
jobs or face reduced hours because they often start their own business 
or start a part-time venture to patch their income losses.
  Senator Snowe worked very closely with me to make this day happen. We 
wish to thank Senators Bond, Wellstone, Cleland, Landrieu, Harkin, 
Levin, Lieberman, Bingaman, Enzi, Kohl, Snowe, Johnson, Daschle, 
Conrad, Burns, Inouye, Baucus, and Jeffords for 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. In this instance, we are bringing 
before the Senate changes that the Senate supported unanimously as part 
of its version of last year's SBA Reauthorization bill, but were not 
included by the House because they had not considered them in a 
hearing. This package of changes was reintroduced this year and 
supported unanimously by the Senate Small Business Committee. This bill 
amends the Small Business Administration's Microloan Program to make it 
more flexible to meet credit needs, more accessible to 
microentrepreneurs across the nation, and more streamlined for leaders 
to make loans and provide management assistance. The changes in this 
bill complement the program and technical changes made last year.
  The program provides for microloans, of just $10,000, on average, in 
order to allow many prospective entrepreneurs to realize their dream 
and start their own business. This provides them with financial 
independence and sometimes allows individuals to go from welfare to 
employment.
  Let me just run through some of the provisions of the Microloan 
Program Improvement Act of 2001. First, it eliminates the requirement 
that SBA microloans be ``short-term'' loans. This change will give 
intermediaries greater latitude in developing microloan products 
because they will be able to offer their borrowers revolving lines of 
credit. It will also cut transaction costs for both the borrower and 
the microlender and will generally make it easier to fund these types 
of very small businesses.
  Why are revolving lines of credit important? Because seasonal types 
of businesses really need revolving lines of credit instead of, for 
instance, a 90- or 120-day note. For example, if you are a building 
contractor or painter, you may need $15,000 to front supplies and pay 
your workers because most clients only pay when the work is done. So, 
under the current scenario, if you were to borrow the $15,000 from a 
microlender, you would pay back small payments at the 30 and 60 day 
markers. The entire remaining balance would be due upon receipt of 
payment from your client. Then, when the next client came along, the 
borrower would have to enter into an entirely new loan

[[Page S12014]]

transaction. Under the new scenario, a revolving line of credit would 
eliminate the need for a new loan transaction. The contractor would pay 
the debt upon receipt of payment from the first client and then simply 
write a check against his or her line of credit when the second client 
comes along. I would like to emphasize that our Committee does not 
intend for this flexibility to be used to make loans with long terms, 
such as 15 or 30 years.
  I spent a lot of time describing that provision because I want people 
to understand the needs of these very tiny businesses and how SBA's 
credit programs evolve to meet the market. Of course, this legislation 
makes other small but important changes. It broadens the eligibility 
criteria for potential microintermediaries, which would allow more 
people to benefit from the program and stimulate the creation of 
additional new businesses to start up. This is accomplished by deeming 
intermediaries eligible if they have one year of equivalent experience 
rather than only actual experience in making loans to startup, newly 
established, or growing small businesses.
  Third, this bill expands the program's flexibility for intermediaries 
to subcontract out technical assistance and offer pre-loan technical 
assistance. The bill eliminates the restriction on how much technical 
assistance funding an intermediary can use for pre-loan assistance and 
allows the intermediary to use its discretion to determine the 
appropriate amount. Currently, intermediaries are limited to using up 
to 25 percent of their funds to assist prospective borrowers. This 
change allows an intermediary to allocate as much technical assistance 
as appropriate. The bill 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.
  Finally, the bill establishes a new peer-to-peer mentoring program to 
help new intermediaries acquire the basic knowledge needed to run a 
business from experienced mentors. The bill will authorize up to $1 
million of annual appropriations for such purposes.
  Support for the Microloan Program is not only bipartisan but 
nationwide--it has support from all parts of the country. By removing a 
number of barriers to entry, this bill will be a great advantage to new 
microintermediaries, who, in turn, will improve their ability to assist 
microentrepreneurs, thus, increasing the opportunities for the 
entrepreneurs, their businesses and their communities.
  I urge my colleagues to support the Microloan Program Improvement Act 
of 2001.
  Mr. REID. Mr. President, I ask unanimous consent that the amendment 
be agreed to; that the bill, as amended, be read a third time and 
passed, the motion to reconsider be laid upon the table without any 
intervening action, and that any statements relating thereto be printed 
in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 2164) was agreed to.
  The bill (S. 174), as amended, was read a third time and passed, 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,''.

     SEC. 3. MICROLOAN PROGRAM CORRECTION.

       Section 7(m)(3)(F)(iii) of the Small Business Act (15 
     U.S.C. 636(m)(3)(F)(iii)) is amended by striking ``$7,500'' 
     and inserting ``$10,000''.

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