59–010 

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 


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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. 


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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. 


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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. 

Æ 


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