[Congressional Record Volume 153, Number 129 (Tuesday, September 4, 2007)]
[House]
[Pages H10029-H10032]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MICROLOAN AMENDMENTS AND MODERNIZATION ACT
Ms. VELAZQUEZ. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 3020) to amend the Small Business Act to improve the
Microloan program, and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 3020
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Microloan
Amendments and Modernization Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I--MICROLOAN
Sec. 101. Transmission of credit reporting information.
Sec. 102. Flexible credit.
Sec. 103. Intermediary eligibility requirements.
Sec. 104. Average loan size.
Sec. 105. Technical assistance.
Sec. 106. Entrepreneurs with disabilities.
TITLE II--PRIME
Sec. 201. Short title.
Sec. 202. PRIME.
Sec. 203. Conforming repeal.
TITLE I--MICROLOAN
SEC. 101. TRANSMISSION OF CREDIT REPORTING INFORMATION.
Section 7(m) of the Small Business Act (15 U.S.C. 636(m))
is amended by adding at the end the following:
``(14) Credit reporting information.--The Administrator
shall establish a process, for use by a lender making a loan
to a borrower under this subsection, under which the lender
provides to the major credit reporting agencies the
information about the borrower that is relevant to credit
reporting, such as the payment activity of the borrower on
the loan.''.
SEC. 102. FLEXIBLE CREDIT.
Section 7(m) of the Small Business Act (15 U.S.C. 636(m))
is amended, in each of paragraphs (1)(B)(i) and (11)(B), by
striking ``short-term,''.
SEC. 103. INTERMEDIARY ELIGIBILITY REQUIREMENTS.
Section 7(m)(2) of the Small Business Act (15 U.S.C.
636(m)(2)) is amended--
(1) in subparagraph (A) by striking ``paragraph (10)'' and
inserting ``paragraph (11)''; and
(2) by amending subparagraph (B) to read as follows:
``(B) has--
``(i) at least--
``(I) 1 year of experience making microloans to startup,
newly established, or growing small business concerns; or
``(II) 1 full-time employee who has not less than 3 years
experience making microloans to startup, newly established,
or growing small business concerns; and
``(ii) at least 1 year of experience providing, as an
integral part of its microloan program, intensive marketing,
management, and technical assistance to its borrowers.''.
SEC. 104. AVERAGE LOAN SIZE.
Section 7(m) of the Small Business Act (15 U.S.C. 636(m))
is amended by striking ``$7,500'' and inserting ``$10,000''
in each of the following places: paragraph (3)(F)(iii),
paragraph (6)(C)(i), and paragraph (6)(C)(ii).
SEC. 105. TECHNICAL ASSISTANCE.
Section 7(m)(4)(E) of the Small Business Act (15 U.S.C.
636(m)(4)(E)) is amended as follows:
(1) Pre-loan.--Clause (i) is amended by striking ``25
percent'' and inserting ``35 percent''.
(2) Third party contracts.--Clause (ii) is amended by
striking ``25 percent'' and inserting ``35 percent''.
SEC. 106. ENTREPRENEURS WITH DISABILITIES.
Section 7(m)(1)(A)(i) of the Small Business Act (15 U.S.C.
636(m)(1)(A)(i)) is amended by inserting ``disabled,'' before
``and minority entrepreneurs''.
TITLE II--PRIME
SEC. 201. SHORT TITLE.
This title may be cited as the ``Program for Investment in
Microentrepreneurs Act'' or the ``PRIME Act''.
SEC. 202. PRIME.
The Small Business Act is amended--
(1) by redesignating section 37 as 99; and
(2) by inserting after section 36 the following:
``SEC. 37. PRIME PROGRAM.
``(a) Definitions.--For purposes of this section, the
following definitions shall apply:
``(1) Capacity building services.--The term `capacity
building services' means services provided to an organization
that is, or that is in the process of becoming, a
microenterprise development organization or program, for the
purpose of enhancing its ability to provide training and
services to disadvantaged entrepreneurs.
``(2) Disadvantaged entrepreneur.--The term `disadvantaged
entrepreneur' means a microentrepreneur that is--
``(A) a very low-income person;
``(B) a low-income person; or
``(C) an entrepreneur that lacks adequate access to capital
or other resources essential for business success, or is
economically disadvantaged, as determined by the
Administrator.
``(3) Collaborative.--The term `collaborative' means 2 or
more nonprofit entities that agree to act jointly as a
qualified organization under this section.
``(4) Indian tribe.--The term `Indian tribe' means any
Indian tribe, band, pueblo, nation, or other organized group
or community, including any Alaska Native village or regional
or village corporation, as defined in or established pursuant
to the Alaska Native Claims Settlement Act, which is
recognized as eligible for the special programs and services
provided by the
[[Page H10030]]
United States to Indians because of their status as Indians.
``(5) Intermediary.--The term `intermediary' means a
private, nonprofit entity that seeks to serve microenterprise
development organizations and programs as authorized under
subsection (d).
``(6) Low-income person.--The term `low-income person'
means a person having an income, adjusted for family size, of
not more than--
``(A) for metropolitan areas, 80 percent of the area median
income; and
``(B) for nonmetropolitan areas, the greater of--
``(i) 80 percent of the area median income; or
``(ii) 80 percent of the statewide nonmetropolitan area
median income.
``(7) Microentrepreneur.--The term `microentrepreneur'
means the owner or developer of a microenterprise.
``(8) Microenterprise.--The term `microenterprise' means a
sole proprietorship, partnership, or corporation that--
``(A) has fewer than 5 employees; and
``(B) generally lacks access to conventional loans, equity,
or other banking services.
``(9) Microenterprise development organization or
program.--The term `microenterprise development organization
or program' means a nonprofit entity, or a program
administered by such an entity, including community
development corporations or other nonprofit development
organizations and social service organizations, that provides
services to disadvantaged entrepreneurs.
``(10) Poverty line.--The term `poverty line' means the
official poverty line defined by the Office of Management and
Budget based on the most recent data available from the
Bureau of the Census. The Administrator shall revise annually
(or at any shorter interval the Administrator determines to
be feasible and desirable) the poverty line. The required
revision shall be accomplished by multiplying the official
poverty line by the percentage change in the Consumer Price
Index for All Urban Consumers during the annual or other
interval immediately preceding the time at which the revision
is made.
``(11) Training and technical assistance.--The term
`training and technical assistance' means services and
support provided to disadvantaged entrepreneurs, such as
assistance for the purpose of enhancing business planning,
marketing, management, financial management skills, and
assistance for the purpose of accessing financial services.
``(12) Very low-income person.--The term `very low-income
person' means having an income, adjusted for family size, of
not more than 150 percent of the poverty line.
``(b) Establishment of Program.--The Administrator shall
establish a microenterprise technical assistance and capacity
building grant program to provide assistance from the
Administration in the form of grants to qualified
organizations in accordance with this section.
``(c) Uses of Assistance.--A qualified organization shall
use grants made under this section--
``(1) to provide training and technical assistance to
disadvantaged entrepreneurs;
``(2) to provide training and capacity building services to
microenterprise development organizations and programs and
groups of such organizations to assist such organizations and
programs in developing microenterprise training and services;
``(3) to aid in researching and developing the best
practices in the field of microenterprise and technical
assistance programs for disadvantaged entrepreneurs; and
``(4) for such other activities as the Administrator
determines are consistent with the purposes of this section.
``(d) Qualified Organizations.--For purposes of eligibility
for assistance under this section, a qualified organization
shall be--
``(1) a nonprofit microenterprise development organization
or program (or a group or collaborative thereof) that has a
demonstrated record of delivering microenterprise services to
disadvantaged entrepreneurs;
``(2) an intermediary;
``(3) a microenterprise development organization or program
that is accountable to a local community, working in
conjunction with a State or local government or Indian tribe;
or
``(4) an Indian tribe acting on its own, if the Indian
tribe can certify that no private organization or program
referred to in this paragraph exists within its jurisdiction.
``(e) Allocation of Assistance; Subgrants.--
``(1) Allocation of assistance.--
``(A) In general.--The Administrator shall allocate
assistance from the Administration under this section to
ensure that--
``(i) activities described in subsection (c)(1) are funded
using not less than 75 percent of amounts made available for
such assistance; and
``(ii) activities described in subsection (c)(2) are funded
using not less than 15 percent of amounts made available for
such assistance.
``(B) Limit on individual assistance.--No single person may
receive more than 10 percent of the total funds appropriated
under this section in a single fiscal year.
``(2) Targeted assistance.--The Administrator shall ensure
that not less than 50 percent of the grants made under this
section are used to benefit very low-income persons,
including those residing on Indian reservations.
``(3) Subgrants authorized.--
``(A) In general.--A qualified organization receiving
assistance under this section may provide grants using that
assistance to qualified small and emerging microenterprise
organizations and programs, subject to such rules and
regulations as the Administrator determines to be
appropriate.
``(B) Limit on administrative expenses.--Not more than 7.5
percent of assistance received by a qualified organization
under this section may be used for administrative expenses in
connection with the making of subgrants under subparagraph
(A).
``(4) Diversity.--In making grants under this section, the
Administrator shall ensure that grant recipients include both
large and small microenterprise organizations, serving urban,
rural, and Indian tribal communities serving diverse
populations.
``(5) Prohibition on preferential consideration of certain
sba program participants.--In making grants under this
section, the Administrator shall ensure that any application
made by a qualified organization that is a participant in the
program established under section 7(m) does not receive
preferential consideration over applications from other
qualified organizations that are not participants in such
program.
``(f) Matching Requirements.--
``(1) In general.--Financial assistance under this section
shall be matched with funds from sources other than the
Federal Government on the basis of not less than 50 percent
of each dollar provided by the Administration.
``(2) Sources of matching funds.--Fees, grants, gifts,
funds from loan sources, and in-kind resources of a grant
recipient from public or private sources may be used to
comply with the matching requirement in paragraph (1).
``(3) Exception.--
``(A) In general.--In the case of an applicant for
assistance under this section with severe constraints on
available sources of matching funds, the Administrator may
reduce or eliminate the matching requirement in paragraph
(1).
``(B) Limitation.--Not more than 10 percent of the total
funds made available from the Administration in any fiscal
year to carry out this section may be excepted from the
matching requirement in paragraph (1), as authorized by
subparagraph (A).
``(g) Applications for Assistance.--An application for
assistance under this section shall be submitted in such form
and in accordance with such procedures as the Administrator
shall establish.
``(h) Recordkeeping.--
``(1) In general.--A qualified organization receiving
assistance from the Administration under this section shall
keep such records, for such periods as may be prescribed by
the Administrator and necessary to disclose the manner in
which any assistance under this section is used and to
demonstrate compliance with the requirements of this section.
``(2) User profile information.--The Administrator shall
require each qualified organization receiving assistance from
the Administration under this section to compile such data,
as is determined to be appropriate by the Administrator, on
the gender, race, ethnicity, national origin, or other
pertinent information concerning individuals that utilize the
services of the assisted organization to ensure that targeted
populations and low-income residents of investment areas are
adequately served.
``(3) Access to records.--The Administrator shall have
access on demand, for the purpose of determining compliance
with this section, to any records of a qualified organization
that receives assistance from the Administration under this
section.
``(4) Review.--Not less than annually, the Administrator
shall review the progress of each assisted organization in
carrying out its strategic plan, meeting its performance
goals, and satisfying the terms and conditions of its
assistance agreement.
``(5) Reporting.--
``(A) Annual reports.--The Administrator shall require each
qualified organization receiving assistance from the
Administration under this section to submit an annual report
to the Administrator on its activities, its financial
condition, and its success in meeting performance goals, in
satisfying the terms and conditions of its assistance
agreement, and in complying with other requirements of this
section, in such form and manner as the Administrator shall
specify.
``(B) Availability of reports.--The Administrator, after
deleting or redacting any material as appropriate to protect
privacy or proprietary interests, shall make such reports
submitted under subparagraph (A) available for public
inspection.
``(i) Implementation.--The Administrator shall, by
regulation, establish such requirements as may be necessary
to carry out this section.''.
SEC. 203. CONFORMING REPEAL.
Subtitle C (15 U.S.C. 6901 et seq.) of title I of the
Riegle Community Development and Regulatory Improvement Act
of 1994 is repealed.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
New York (Ms. Velazquez) and the gentleman from Ohio (Mr. Chabot) each
will control 20 minutes.
The Chair recognizes the gentlewoman from New York.
General Leave
Ms. VELAZQUEZ. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days to revise and extend their remarks and
include extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from New York?
There was no objection.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself as much time as I may
consume.
Small businesses create three out of four new jobs and account for
almost half of our country's income. But that is only part of the
story. The opportunities through business ownership are
[[Page H10031]]
limited only by our own imagination and ability. Each year, 700,000
men, women and children follow the dream of entrepreneurship.
The vast majority of our businesses are very small. Over 50 percent
of all businesses are home based. Most get started without a single
employee. But with hard work, that changes. Ultimately, half the people
who work in this country now work for small businesses.
Small businesses are flexible and more likely to adapt to changes in
the economy. They have to be nimble to survive. So if there is one
thing we have learned, it is that helping these small businesses start
up and grow provides a significant benefit for our local and national
economy.
One of the best methods devised to encourage start-up small
businesses is the small microcredit loan. The SBA Microloan Program
makes funds available to nonprofit community-based lenders. In turn,
these lenders make small loans to eligible borrowers who are often
individual fledgling entrepreneurs that live in the same community
where they work.
The Microloan Amendments and Modernization Act introduced by my
colleague, the ranking member on our committee, Mr. Chabot, improves an
already strong program. It will increase the number of lenders and
borrowers that will be able to get involved in creating new businesses
and help put people in their communities to work. It also encourages
credit reporting so that the excellent repayment history of its
participants is recorded to their benefit.
Finally, the bill takes steps to strengthen the PRIME program, a key
initiative that provides counseling to low-income entrepreneurs.
Since its inception in 1992, the Microloan Program has been reaching
many that otherwise would not be served by the private sector or even
the SBA's traditional loan programs. The type of people that use the
Microloan Program are borrowers that may be unable to get a loan from
traditional sources due to no credit rating or a lack of business
experience.
By filling this void, microloans have become an important source of
assistance for groups who traditionally have had more difficulty
accessing capital. These loans fulfill the goal of widely distributing
resources, as roughly one third are made in rural areas. It is for
these reasons that the program complements the successes of President
Clinton's New Market Initiative. Microloans are a low-cost effective
way to move people off welfare and turn them into business owners and
even employers. There have been only two defaults to the government
since the program's inception, and tens of thousands of jobs retained
and created. This is a great bargain for the taxpayers.
With that, I urge the House to vote for the Microloan Program and
this legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise today in support of H.R. 3020, the Microloan
Amendments and Modernization Act.
The chairwoman and I have worked together on a cooperative basis to
bring this technical but important piece of legislation to the floor.
H.R. 3020 represents the first substantive change in the Microloan
Program in more than 6 years.
According to Dr. Mohammad Yunus, the 2006 Nobel Laureate in Peace and
founder of the Grameen Bank, ``microcredit views each person as a
potential entrepreneur and turn on the tiny economic engines of a
rejected portion of society.''
Unlike Bangladesh or other countries that have emulated the Grameen
Bank, microcredit in the United States is not aimed at a rejected
portion of society, but rather at those individuals who do not have
access to commercial financial institutions and the typical resources
to manage those funds. Despite the different target audiences,
microlending in the United States represents a variation of the concept
developed by Dr. Yunus.
The Small Business Administration created a pilot program based on
the success of the Grameen Bank, and Congress created a permanent
authority for the program back in 1992. SBA does not provide
microcredit directly to entrepreneurs; instead, the SBA provides below
market-rate loans to nonprofit intermediaries. These institutions then
make loans to entrepreneurs.
As with other SBA financing programs, the SBA does not provide all
the funds for financing. Intermediaries must contribute 15 percent of
the value of loans in non-Federal funds. But the key to the success of
microlending is not the loans; rather, it is the education and
counseling that the intermediaries provide to their borrowers.
With this knowledge, these entrepreneurs are able to manage their
financial resources and ensure repayment of loans. This success is
demonstrated by the very low number of defaults by borrowers and cost-
effective means by which it produces nearly 10,000 jobs a year in
areas, including parts of my district in Cincinnati, that need economic
revitalization.
Despite its success, the Microloan Program needs to be revised in
light of changes to the economy during the past 6 years and, in some
cases, to update matters that have not been altered since the program's
inception more than 15 years ago.
Microlenders exist, mainly because normal commercial lending
institutions did not provide access to credit for those who are highly
credit risky. One way to improve that is to have borrowers' histories
passed along to credit bureaus. I think having the SBA work with the
intermediaries to accomplish the delivery of credit histories will
benefit borrowers.
H.R. 3020 also enables the intermediaries to determine the length of
credit that will be made available to the borrowers. Given the
expertise of the intermediaries, it makes abundant sense for the
determinations on the length of loans to rest with the intermediaries
and borrowers.
I want to emphasize that this change has no impact on the loan
obligations of the intermediaries to the SBA. The change involves no
risk to the Federal Treasury.
H.R. 3020 also raises the level of the average loan size in an
intermediary's portfolio from $7,500 to $10,000. This level has not
been changed since 1992, and an adjustment is appropriate to take
account of inflation in the intervening 15 years.
The SBA rightly focuses on the number of small businesses that
receive help from its entrepreneurial training partners. However,
ensuring that only those individuals with the right aptitude start
small businesses is as important as the provision of the technical
assistance to businesses that have been in existence for years.
The Microloan Amendments and Modernization Act recognizes the
importance of this training and increases the amount of pre-loan
training that intermediaries may provide. H.R. 3020 also provides for
an increase in the amount of technical assistance training that
intermediaries can contract for from other sources.
As the committee heard in testimony from Professor Lisa Servon, this
will enable intermediaries to focus on those services that they are
best able to perform. Finally, the committee heard from two different
witnesses that the cap on interest rates should be removed.
We also heard that a rise in interest rates will enable
intermediaries to recoup more of their costs, thereby reducing the
amount of funds that they must raise from other sources. I would ask
that the chairwoman work with us as the bill moves through legislative
process to ensure that intermediaries have maximum flexibility to
operate their loan programs with the elimination of the interest rate
cap.
I urge my colleagues to support this legislation.
Mr. Speaker, I yield back the balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I want to thank the ranking member for
introducing this important piece of legislation, and I also want to
thank the staff that worked on this legislation, from the minority
staff, Barbara Pineles; from the majority staff, Ross Orban, Michael
Day, Adam Minehardt and Andy Jimenez.
I strongly urge my colleagues to support the Microloan Program.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from New York (Ms. Velazquez) that the House suspend the
[[Page H10032]]
rules and pass the bill, H.R. 3020, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Ms. VELAZQUEZ. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
____________________