[Congressional Record (Bound Edition), Volume 153 (2007), Part 17]
[House]
[Pages 23436-23439]
[From the U.S. 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--

[[Page 23437]]

       (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 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

[[Page 23438]]

     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 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

[[Page 23439]]

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 
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.

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