Washington, DC—July 19, 2018—Last night, the Microloan Program Modernization Act (S. 526) was passed by the Senate. The bill was introduced by Sen. Deb Fischer on March 2, 2017 and cosponsored by a bipartisan group of House members, including Sens. Chris Coons (D-DE), Tim Scott (R-SC), Kirsten Gillibrand (D-NY), Jeanne Shaheen (D-NH), Gary Peters (D-MI), Joe Donnelly (D-IN) and Tammy Duckworth (D-IL). The original text of the legislation was amended on March 20, 2018 in the Committee on Small Business and Entrepreneurship markup.
“Since the program’s inception in 1992, intermediary lenders have used SBA Microloan funds to originate more than $875 million in loans to small businesses that have created or retained 254,450 jobs,” said Bob Rapoza, spokesperson for the Friends of the SBA Microloan Program. “This is a great step forward, which recognizes the successful track record of Microloan intermediaries. Senators Fischer, Coons, Scott, Gillibrand, Shaheen, Peters and Donnelly worked hard to push this bill across the finish line in the Senate to ensure small business entrepreneurs have access to the resources they need to succeed.”
The legislation, as passed by the Senate, updates several requirements of the Small Business Administration (SBA) Microloan program and the Small Business Act (15 U.S.C. §636), designed to streamline the Microloan program and improve assistance to entrepreneurs, sole proprietorships and very small businesses. Specifically, the bill increases the Microloan Intermediary limit from $5 million to $6 million and authorize two reports on the SBA Microloan Program. One study would be completed by SBA and the other would be conducted by the GAO, report on intermediary practices, participation, and outcomes.
The companion bill to S. 526, H.R. 2056, was passed by the House in July 2017. The House bill was introduced by Rep. Stephanie Murphy (D-FL) and cosponsored by Reps. Nydia Velazquez (D-NY), Seth Moulton (D-MA), Don Bacon (R-NE), Yvette Clarke (D-NY), Gregory Meeks (D-NY), Ron Kind (D-WI), Andy Harris (R-MD), Jenniffer Gonzalez-Colon (R-PR), Derek Kilmer (D-WA), Darren Soto (D-FL), and Mark Takano (D-CA).
The program serves small businesses that are considered “un-bankable” because they cannot access affordable credit from conventional lenders. By serving entrepreneurs that operate start-up and new businesses, lack sufficient collateral, or have limited or poor credit histories, the SBA Microloan program fills a gap in the private market. Currently, there are approximately 150 SBA Microloan Intermediaries serving rural, suburban, and urban communities headquartered in 46 States, Puerto Rico, and the District of Columbia. The program allows intermediaries to make loans up to $50,000, though the average SBA Microloan less than $14,000.
Despite intermediaries serving “at-risk” small businesses, the SBA Microloan program touts an exceptionally low loss rate of less than 2 percent. In FY 2017, there were 150 SBA Microloan Intermediaries serving rural, suburban, and urban communities across 46 States, Puerto Rico, and the District of Columbia. Of those microbusinesses that received services and loans, 55 percent were minority entrepreneurs, 46.6 percent were women entrepreneurs, and 37.7 percent were startups. In FY 2017, intermediaries made 4,992 loans—totaling more than $69.3 million—to small businesses supporting nearly 18,700 jobs.
“We thank Senator Fischer and Rep. Murphy for introducing this important legislation. We also appreciate the strong leadership of Chairman Jim Risch (R-ID) and Ranking Member Ben Cardin (D-MD) for guiding the Microloan Modernization Act bill through the Senate Committee on Small Business and Entrepreneurship, as well as Chairman Steve Chabot (R-OH) and Nydia Velazquez (D-NY) for their management of the bill through the House Small Business Committee,” adds Rapoza. “This change to the SBA Microloan Program will simplify and remove unnecessarily burdensome regulations for the SBA Microloan Program, allowing intermediaries to better meet the needs of the minority, women, veteran and low-income entrepreneurs they serve.”
To learn more about the SBA Microloan Program, read the 2018 Friends of the SBA Microloan Program Report, released in May.
About the SBA Microloan Program
The Small Business Administration (SBA) Microloan Program is the largest federal program exclusively targeted to supporting the credit needs of very small businesses and sole-proprietorships. Through a network of community-based, nonprofit Intermediaries, the SBA Microloan program provides small-dollar loans, up to $50,000, and technical assistance to small businesses that cannot secure credit from conventional lenders or other SBA guaranteed loans, including many women, low-income, veteran, and minority entrepreneurs.
About the Friends of the SBA Microloan Program
The Friends of the SBA Microloan Program is an informal working group of nonprofit SBA Microloan Intermediaries, represented by Rapoza Associates, a public interest lobbying and government relations firm located in Washington, D.C. The Friends Network supports economic opportunity for underserved entrepreneurs in rural, suburban, and urban communities across the nation by increasing access to the resources and services necessary to create wealth and build assets through business ownership.