[Senate Report 114-301]
[From the U.S. Government Publishing Office]
Calendar No. 485
114th Congress } { Report
SENATE
2d Session } { 114-301
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MICROLOAN PROGRAM MODERNIZATION ACT OF 2016
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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.
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