[Congressional Record Volume 161, Number 108 (Monday, July 13, 2015)]
[House]
[Pages H5099-H5101]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MICROLOAN MODERNIZATION ACT OF 2015
Mr. CHABOT. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 2670) to amend the Small Business Act to provide for
expanded participation in the microloan program, and for other
purposes.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 2670
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 Modernization Act
of 2015''.
SEC. 2. WAIVERS OF 25/75 RULE.
(a) Waiver Authorized.--Section 7(m)(4)(E)(i) of the Small
Business Act (15 U.S.C. 636(m)(4)(E)(i)) is amended by adding
at the end the following: ``The Administrator shall by rule
establish a process by which intermediaries may apply for and
the Administrator may grant a waiver from the requirements of
this clause.''.
(b) Contents of Rule.--In the rule required by the
amendment made by subsection (a), the Administrator of the
Small Business Administration shall require any applicant for
a waiver to--
(1) to specify how such applicant will use the additional
technical assistance; and
(2) provide assurance in a form provided for by the
Administrator in the rule that the intermediary will have
sufficient funds to provide technical assistance to all of
the intermediary's borrowers.
(c) Rulemaking Requirements.--The rule required by
subsection (a) shall be promulgated after notice and the
opportunity for comment of not less than 60 days. Such
regulation shall be codified in the Code of Federal
Regulations and shall incorporate any delegation of the
Administrator's authority to approve waivers to any
appropriate subsidiary official.
SEC. 3. MICROLOAN INTERMEDIARY LENDING LIMIT INCREASED.
Section 7(m)(3)(C) of the Small Business Act (15 U.S.C.
636(m)(3)(C)) is amended by striking ``$5,000,000'' and
inserting ``$6,000,000''.
SEC. 4. EXTENDED REPAYMENT TERMS.
Section 7(m)(6) of the Small Business Act (15 U.S.C.
636(m)(6)) is amended by adding at the end the following:
``(F) Repayment terms for loans to small businesses.--The
Administrator may not impose limitations on the term for
repayment of a loan made by an intermediary to a small
business concern or entrepreneur, except that--
``(i) in the case of a loan made by an intermediary of
$10,000 or less, the repayment term shall be not more than 6
years; and
``(ii) in the case of a loan greater than $10,000, the
repayment term shall be not more than 10 years.''.
SEC. 5. LINES OF CREDIT AUTHORIZED.
Section 7(m)(6)(A) of the Small Business Act (15 U.S.C.
636(m)(6)(A)) is amended by inserting after ``short-term''
insert ``(including lines of credit)''.
SEC. 6. GAO STUDY OF MICROENTERPRISE PARTICIPATION.
Not later than 120 days after the date of enactment of this
Act, the Comptroller General of the United States shall
complete a study on and report to the Committee on Small
Business of the House of Representatives on the following:
(1) The operations (including services provided, structure,
size, and area of operation) of a representative sample of--
(A) intermediaries that are eligible for participation in
the microloan program under section 7(m) of the Small
Business Act and that do participate; and
(B) intermediaries (including those operated for profit,
operated as non-profits, and those affiliated with a United
States institution of higher learning) that are so eligible
and that do not participate.
(2) The reasons why intermediaries described in paragraph
(1)(B) choose not to participate.
(3) Recommendations on how to encourage increased
participation in the microloan program by intermediaries
described in paragraph (1)(B).
(4) Recommendations on how to decrease the costs associated
with participation in the microloan program for eligible
intermediaries.
SEC. 7. OFFICE OF ADVOCACY ECONOMIC STUDY OF MANDATORY
SAVINGS REQUIREMENT.
Not later than 120 days after the date of enactment of this
Act, the Chief Counsel for Advocacy of the Small Business
Administration shall submit to the Committee on Small
Business of the House of Representatives a report on the
economic impact of a mandatory savings requirement on
business concerns eligible to participate in the microloan
program under section 7(m) of the Small Business Act,
including on the benefits and costs of such a requirement and
recommendations on implementation of such a requirement.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Ohio (Mr. Chabot) and the gentlewoman from New York (Ms. Velazquez)
each will control 20 minutes.
The Chair recognizes the gentleman from Ohio.
General Leave
Mr. CHABOT. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days to revise and extend their remarks and include
extraneous materials on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Ohio?
There was no objection.
Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, the microloan program, overseen by the Small Business
Administration, the SBA, is designed to provide credit for those
entrepreneurs that would not otherwise have any access to credit, even
basic revolving credit.
Among the SBA's capital access programs, the microloan program is
unique because it also provides technical assistance to borrowers. It
merges the money with the know-how.
To borrow a sports reference, microloans punch above their weight. I
know the President has used that phrase on a number of occasions. These
small-dollar loans are often the most difficult to receive and
typically are the deciding factors in an entrepreneur's ability to
start a business. This is demonstrated by the large number of first
generation entrepreneurs who have received assistance under the
microloan program.
Think about the number of successful individuals who recall starting
a business with funds pooled from family and friends. Well, if no one
in your family has started a business or has money to lend, then that
entrepreneur's dream quickly fades to a distant memory. This is
particularly true in traditionally underserved markets.
By making small-dollar loans less complicated and more accessible, we
will empower individuals to become entrepreneurs; lift up their
families; improve their communities; and, most importantly, create jobs
for a whole lot of Americans.
H.R. 2670 does that. This bill enhances the microloan program by
allowing microloan intermediaries greater flexibility in providing
loans and technical assistance to their borrowers. The expectation is
that the greater flexibility will result in greater participation by
microlenders in the microloan program, thereby increasing the
availability of critical small-dollar loans to these micro-
entrepreneurs that punch above their size.
Despite the greater flexibility, H.R. 2670 also provides safeguards
to maintain the primary feature of the program, and that is low-dollar
loans offered to micro-entrepreneurs, along
[[Page H5100]]
with intermediary-provided technical assistance.
By modernizing the microloan program, as H.R. 2670 does, we are
allowing the little guy a chance to get off the ropes, use their
skills, and create innovative ideas to compete with the heavyweights of
American industry. We all strive for a stronger, more competitive
economy; and this bill aids in that mission.
Mr. Speaker, this bill has broad, bipartisan support once again.
I urge my colleagues to vote ``yes'' on H.R. 2670, and I reserve the
balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, since 1991, the SBA microloan program has provided
millions of dollars in financing and technical assistance to small
businesses and entrepreneurs.
By providing loans to nonprofit intermediaries, who in turn lend
funds to the smallest of small businesses, the program helps borrowers
streamline their operations, grow to profitability, and create new
jobs.
However, the program remains substantially the same as when it was
first enacted. Over the years, we have identified a number of the
program elements that could be updated to better deploy capital.
With that goal in mind, I want to thank Congressman Moulton for
introducing this important legislation. The Microloan Modernization Act
of 2015 will make a number of targeted improvements to assist small
businesses.
For borrowers, SBA set the maximum term of a microloan at 6 years.
Particularly for larger microloans, this has caused financial strain
due to higher monthly payments and is impeding some businesses from
growing.
Today's bill would allow a repayment period of up to 10 years for
loans greater than $10,000, providing borrowers with the flexibility to
better manage cash flow, improve operations, and create more jobs.
Similarly, SBA has prohibited lines of credit; yet not all businesses
need a fixed-rate term loan.
A line of credit is sometimes the better product for a microbusiness
that has cyclic or uneven cash flow. Today's bill will give borrowers
and lenders the flexibility to get them in the right loan product for
their needs.
For intermediary lenders, today's bill would create a new waiver to
the 25-75 rule that restricts the use of technical assistance grants.
This waiver process will help intermediaries more efficiently deploy
technical assistance funding.
Additionally, the legislation will raise the lending cap by 20
percent. By giving successful intermediaries access to an additional $1
million in SBA funding, they will be able to serve more borrowers in
high-demand areas.
The microloan program fills a critical gap in the capital markets,
helping underserved businesses that are too small for the banking
sector yet too big to finance with a credit card or loans from friends
and family.
Again, Mr. Speaker, I would like to thank Mr. Moulton for introducing
this bill. It will go a long way toward increasing access to capital
for our Nation's small businesses.
Mr. Speaker, I just would like to point out the fact that 62 percent
of microborrowers are women and minorities, and so this is filling an
important gap that exists for these groups to access capital.
{time} 1630
I thank the gentleman for introducing this important piece of
legislation, and I reserve the balance of my time.
Mr. CHABOT. Mr. Speaker, I yield 3 minutes to the gentleman from
Florida (Mr. Curbelo), who is the chairman of the Subcommittee on
Agriculture, Energy and Trade of the Committee on Small Business.
Mr. CURBELO of Florida. Mr. Speaker, I thank the chairman of the
Committee on Small Business for yielding, and I also thank him for his
leadership on all of these important issues. I also want to commend the
gentleman from Massachusetts (Mr. Moulton) for his work on this
important piece of legislation.
Today, I rise in support of H.R. 2670, the Microloan Modernization
Act of 2015. The microloan program is unique due to its focus on
merging technical assistance with access to capital. For several micro-
entrepreneurs, particularly those in underserved markets, this offers a
way to get the small dollar loans, which a conventional bank would
otherwise deny, while learning important skills, such as developing a
business plan, that will be critical as the company finds success and
grows.
Last year alone, the microloan program was responsible for providing
nearly $56 million in capital and aiding small businesses in creating
or retaining 15,000 jobs.
However, after listening to several entrepreneurs and microloan
intermediaries, it became clear that for the microloan program to truly
tap into its potential, changes were necessary.
H.R. 2670 strives to make those changes and better support
entrepreneurs. For example, currently, the statute says that microloan
intermediaries may make short-term fixed-rate loans to small firms.
Short term can mean different things to different people, but according
to SBA regulations, short term means 6 years.
While in some instances this may make sense when the loan is a lower
amount, this one-size-fits-all approach is not beneficial to small
firms. This bill would remedy that by establishing maximum term limits
for loans made by intermediaries to their borrowers: 6 years for loans
under $10,000, and 10 years for loans over $10,000.
While this may seem like a minor change, we all know that allowing
borrowers to get the best repayment terms possible is crucial for
ensuring low default rates and increasing participation in the
microloan program.
Mr. Speaker, in summary, this is a commonsense, bipartisan reform
that will increase access to capital for those most challenged to
receive--our micro-entrepreneurs.
I am proud to be a cosponsor of this legislation, and I congratulate
Mr. Moulton for advancing this bill and Chairman Chabot for bringing it
to the House floor.
I urge my colleagues to support H.R. 2670 and remind them that the
reason we in the Small Business Committee work so hard for these
entrepreneurs, for these people that are making a difference, is
because they hire those in our society, in our communities, that most
need jobs. Think of the college graduate who is looking for a job;
think of the immigrant who arrived in this country and is looking for a
way forward. It is small businesses that oftentimes give these people
their first shot at success.
Ms. VELAZQUEZ. Mr. Speaker, I yield such time as he may consume to
the gentleman from Massachusetts (Mr. Moulton), the sponsor of the
legislation.
Mr. MOULTON. Mr. Speaker, I thank Ms. Velazquez for yielding.
Mr. Speaker, we often say that small businesses are the engine of
economic growth. That is true; and if you look at the data, new
businesses--those younger than 5 years old--created nearly all of our
economy's new jobs in the past two decades.
In order to create the conditions for job creation, the Federal
Government must increase access to capital so new entrepreneurs with a
good idea can take a risk and start a new business. The Small Business
Administration's microloan program fills a critical gap in the capital
markets, helping underserved businesses that are too small for the
banking sector yet too big to finance with a credit card or loans from
friends and family.
The program has provided hundreds of millions of dollars in financing
and technical assistance to small businesses and entrepreneurs, but the
program is in need of reform. That is why I introduced H.R. 2670, the
Microloan Modernization Act of 2015, which will make a number of
targeted improvements to the program so more borrowers can benefit from
access to capital.
First, the bill increases the loan limit cap for intermediary
lenders. Many successful intermediaries have hit the current $5 million
cap and, as a result, deserving small businesses are denied capital
through no fault of their own.
Second, the bill extends the loan repayment period for loans greater
than $10,000. This small change will provide borrowers with the
flexibility to better manage cash flow, improve operations, and create
more jobs.
[[Page H5101]]
Third, the bill permits lines of credit, which are currently
prohibited by the SBA. Not all businesses need a fixed-rate term loan.
Sometimes a more flexible line of credit is the better product for a
small business that has cyclic or uneven cash flow.
Fourth, the bill creates a waiver for an overly rigid technical
assistance formula known as the 25/75 rule to help intermediaries
deploy technical assistance more efficiently.
Lastly, the bill commissions two studies to explore ways to
incentivize intermediaries to participate in the microloan program and
determine if mandatory savings accounts would benefit entrepreneurs.
The microloan program supported nearly 4,000 small businesses just
last year, and two of these successful businesses are located in Lynn,
Massachusetts, in my district. Prism Products, an industrial
distributor, received a microloan from the SBA to purchase extra
inventory. As a result of the loan, owner Lisa Fitzpatrick was able to
increase revenue and hire a sales professional with 15 years of
experience.
In 2013, local restaurateurs Shawn and Noyan Edmond fulfilled their
lifelong dream of opening a Caribbean restaurant in downtown Lynn. The
microloan enabled the Edmonds to purchase new kitchen equipment and
make renovations to the storefront of Rite Spice Caribbean.
As our economy recovers from the recession, we need more people like
the Edmonds and Lisa Fitzpatrick to take a risk and start a business,
and we need the SBA microloan program to help them. That is why the
Microloan Modernization Act of 2015 is so critical.
In closing, I would like to thank my ranking member, Nydia Velazquez,
for her work on this bill; my chairman, Steve Chabot; and my
colleagues, Representatives Curbelo, Chu, Takai, and Radewagen, for
cosponsoring this bill.
I urge my colleagues to support America's newest entrepreneurs and
vote ``yes'' on this important legislation.
Mr. CHABOT. Mr. Speaker, I reserve the balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may
consume.
The microloan program provides very small loans to start-up, newly
established, or growing small businesses. Many of these businessowners
come from traditionally underserved markets, where personal and
commercial credit is hard to come by.
As a result, the SBA's microloan program is a critical resource that
not only injects much-needed capital, but provides the necessary
business training that ensures borrowers are equipped with the
knowledge needed to succeed.
Since the end of the recession, microlending is up 25 percent
nationwide. By the way, for the last couple of years, the default rate
on microloans is going down. In fact, SBA requested an additional $10
million for next year to handle demand. I can think of no better time
to make long-sought changes to improve the program's efficiency and
capital deployment.
I wanted to thank the gentleman from Massachusetts for introducing
the Microloan Modernization Act of 2015. It will give borrowers new
repayment flexibility and loan choices, provide more flexibility to
intermediaries, and inject additional capital in high-demand areas.
I urge a ``yes'' vote, and I yield back the balance of my time.
Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, in closing, as we work to get capital into the hands of
entrepreneurs, we need to keep SBA programs relevant. We also must
ensure that our lending partners have the flexibility to manage their
loan portfolios in a way that makes the most sense for the borrower.
H.R. 2670 does that.
I want to thank Mr. Moulton and Mr. Curbelo for their leadership on
these reforms. And I once again want to recognize the ranking member,
Ms. Velazquez, for her leadership and her cooperation in getting this
type of legislation to the floor today so that we can pass this.
I urge my colleagues to support H.R. 2670, and I yield back the
balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Ohio (Mr. Chabot) that the House suspend the rules and
pass the bill, H.R. 2670.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.
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