Microloan Modernization Act of 2015

Floor Speech

BREAK IN TRANSCRIPT

Ms. VELÁZQUEZ. 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.

BREAK IN TRANSCRIPT

Ms. VELÁZQUEZ. 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.

BREAK IN TRANSCRIPT

Source