[Senate Report 114-301]
[From the U.S. Government Publishing Office]


                                                      Calendar No. 485
114th Congress    }                                     {       Report
                                 SENATE
 2d Session       }                                     {      114-301

======================================================================



 
              MICROLOAN PROGRAM MODERNIZATION ACT OF 2016

                                _______
                                

                 July 13, 2016.--Ordered to be printed

                                _______
                                

Mr. Vitter, from the Committee on Small Business and Enterpreneurship, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 2850]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 2850) to amend the Small 
Business Act to provide for expanded participation in the 
microloan program, and for other purposes, having considered 
the same, reports favorably thereon with amendments and 
recommends that the bill, as amended, do pass.

                            I. INTRODUCTION

    The Microloan Program Modernization Act (S. 2850) was 
introduced by Senator Deb Fischer on April 26, 2016, with 
Committee members Kelly Ayotte, Tim Scott, Christopher Coons, 
Jeanne Shaheen and Gary Peters as cosponsors. The Act would 
provide for expanded access to the Small Business 
Administration's (SBA) microloan program. During the markup of 
the bill, the bill was approved by roll call vote, without 
amendment.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    The SBA Microloan Program provides credit for entrepreneurs 
who do not otherwise have access to credit of any kind, 
primarily assisting low-income individuals with extremely-
limited financial and other resources needed to establish a 
small business. While Congress authorized a demonstration 
program to provide microloans in 1991, the Microloan Program 
did not receive permanent authorization until 1997.
    The program operates through SBA designated microloan 
intermediaries. The SBA makes loans at below market rates to 
the intermediaries who then in turn make loans of up to $50,000 
to borrowers. The SBA provides loans at lower interest rates to 
intermediaries that maintain an average loan size of under 
$7,500. Borrowers then repay the intermediaries who in turn 
repay the SBA. The default rate on loans made by the SBA to 
intermediaries is effectively zero.

                      III. HEARINGS & ROUNDTABLES

    In the 114th Congress, issues related to the SBA Microloan 
Program were addressed at a hearing in the House Subcommittee 
on Economic Growth, Tax and Capital Access of the Committee on 
Small Business entitled ``Improving Capital Access Programs 
within the SBA'' on May 19, 2015. At the hearing, witnesses 
testified that modernization of the Microloan Program was 
needed to ensure that it continues to generate jobs from 
microbusinesses.

                        IV. DESCRIPTION OF BILL

    This bill would increase the limit on microloan funds given 
to an intermediary from $5 million to $6 million and would 
eliminate the 25/75 rule for Technical Assistance (TA) funding, 
which limited TA funding that could be spent prior to a 
borrowers being approved for a loan to 25 percent of the total 
TA funding provided. It also mandates two studies: one by the 
SBA to determine why qualifying intermediaries don't 
participate in the microloan program and a second one from the 
Government Accountability Office, addressing SBA's oversight of 
the microloan program.

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on May 11, 2016.
    A motion to adopt the Microloan Program Modernization Act, 
a bill to amend the Small Business Act to provide for expanded 
participation in the microloan program, and for other purposes, 
was approved by roll call vote with the following Senators 
present: Vitter, Risch, Scott, Ernst, Ayotte, Shaheen, 
Cantwell, Cardin, Heitkamp, Markey, Booker, Coons, Hirono, and 
Peters.

                           VI. COST ESTIMATE

    In compliance with rule XXVI (11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:

                                                     June 28, 2016.
Hon. David Vitter, Chairman,
Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2850, the Microloan 
Program Modernization Act of 2016.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

    Summary: S. 2850 would amend the Small Business 
Administration's (SBA) microloan program. CBO estimates that 
implementing S. 2850 would have no significant effect on the 
federal budget.
    Under current law, SBA operates a program that makes loans 
and grants to eligible not-for-profit entities (known as 
intermediaries) that use those funds to make microloans (loans 
that are less than $50,000) to newly-established or growing 
small businesses. Participating intermediaries can use grant 
funds from SBA to provide technical assistance to small 
businesses that receive a microloan. S. 2850 would raise the 
amount SBA may commit to an intermediary and eliminate the cap 
on the amount of grant funds that intermediaries can spend on 
pre-loan training and technical assistance for prospective 
borrowers. The bill also would direct SBA to conduct a study to 
determine why some intermediaries that are eligible to 
participate in the program fail to do so and to recommend ways 
to increase program participation and decrease costs. Based on 
information from SBA, CBO estimates that the costs to conduct 
the study and update SBA rules would not be significant.
    S. 2850 also would direct the Government Accountability 
Office to evaluate SBA's oversight of intermediaries and the 
microloan program. Based on the costs of similar reports, CBO 
estimates that the costs to report on those activities would 
not be significant.
    Estimate: Enacting S. 2850 would not affect direct spending 
or revenues; therefore, pay-as-you-go procedures do not apply. 
CBO estimates that enacting S. 2850 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    S. 2850 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                  VII. EVALUATION OF REGULATOY IMPACT

    In compliance with rule XXVI (11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This Section designates the bill as the ``Microloan Program 
Modernization Act of 2015.''

Section 2. Definitions

    This section defines both the term intermediary and 
microloan program.

Section 3. Microloan intermediary lending limit increased

    This section amends the Microloan Program by raising the 
total limit on outstanding loans from by $5 million to $6 
million.

Section 4. Elimination of 25/75 rule

    This section repeals the Microloan Program ``25/75'' rule, 
which permits the SBA-designated microloan intermediary lenders 
to expend up to 25% of the intensive marketing, management, and 
technical assistance grant funds they receive from the SBA to 
provide information and technical assistance to small business 
concerns that are their prospective borrowers.

Section 5. SBA study of microenterprise participation

    This section requires the SBA to conduct a study that 
compares the operations of a representative sample of eligible 
intermediaries that participate in the microloan program and of 
eligible intermediaries that do not; study the reasons why the 
latter do not participate; recommend how to encourage increased 
participation by intermediaries in the microloan program, and 
recommend how to decrease the associated costs for intermediary 
participation.

Section 6. GAO study of microenterprise participation

    This section requires the Government Accountability Office 
(GAO) to conduct a study to evaluate: SBA oversight of the 
microloan program, including oversight of participating 
intermediaries; and the specific processes the SBA uses to 
ensure program compliance by participating intermediaries and 
overall microloan program performance.

                                  [all]