59–006 

110TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 110–313 

MICROLOAN AMENDMENTS AND MODERNIZATION ACT 

SEPTEMBER 4, 2007.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Ms. VELA ́ ZQUEZ, from the Committee on Small Business, 

submitted the following 

R E P O R T 

[To accompany H.R. 3020] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Small Business, to whom was referred the bill 

(H.R. 3020) to amend the Small Business Act to improve the 

Microloan program, and for other purposes, having considered the 

same, report favorably thereon with an amendment and recommend that the bill as amended do pass. 

CONTENTS 

Page 

I. Amendment ................................................................................................. 1 

II. Purpose of the Bill and Summary ............................................................. 5 

III. Background and Need for Legislation ....................................................... 7 

IV. Hearings ....................................................................................................... 11 

V. Committee Consideration ........................................................................... 12 

VI. Committee Votes ......................................................................................... 12 

VII. Section-by-Section Analysis of H.R. 3020 .................................................. 13 

VIII. Congressional Budget Office Cost Estimate ............................................. 15 

IX. Committee Estimate of Costs ..................................................................... 16 

X. Oversight Findings ...................................................................................... 17 

XI. Statement of Constitutional Authority ...................................................... 17 

XII. Compliance With Public Law 104–4 .......................................................... 17 

XIII. Congressional Accountability Act .............................................................. 17 

XIV. Federal Advisory Committee Statement ................................................... 17 

XV. Statement of No Earmarks ........................................................................ 17 

XVI. Performance Goals and Objectives ............................................................ 17 

XVII. Changes in Existing Law Made by the Bill, as Reported ........................ 17 

AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 


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SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Microloan Amendments and 

Modernization Act’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—MICROLOAN 

Sec. 101. Transmission of credit reporting information. 

Sec. 102. Flexible credit. 

Sec. 103. Intermediary eligibility requirements. 

Sec. 104. Average loan size. 

Sec. 105. Technical assistance. 

Sec. 106. Entrepreneurs with disabilities. 

TITLE II—PRIME 

Sec. 201. Short title. 

Sec. 202. PRIME. 

Sec. 203. Conforming repeal. 

TITLE I—MICROLOAN 

SEC. 101. TRANSMISSION OF CREDIT REPORTING INFORMATION. 

Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) is amended by adding 

at the end the following: 

‘‘(14) CREDIT REPORTING INFORMATION.—The Administrator shall establish a 

process, for use by a lender making a loan to a borrower under this subsection, 

under which the lender provides to the major credit reporting agencies the information about the borrower that is relevant to credit reporting, such as the 

payment activity of the borrower on the loan.’’. 

SEC. 102. FLEXIBLE CREDIT. 

Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) is amended, in each 

of paragraphs (1)(B)(i) and (11)(B), by striking ‘‘short-term,’’. 

SEC. 103. INTERMEDIARY ELIGIBILITY REQUIREMENTS. 

Section 7(m)(2) of the Small Business Act (15 U.S.C. 636(m)(2)) is amended—

(1) in subparagraph (A) by striking ‘‘paragraph (10)’’ and inserting ‘‘paragraph 

(11)’’; and 

(2) by amending subparagraph (B) to read as follows: 

‘‘(B) has—

‘‘(i) at least—

‘‘(I) 1 year of experience making microloans to startup, newly established, or growing small business concerns; or 

‘‘(II) 1 full-time employee who has not less than 3 years experience making microloans to startup, newly established, or growing 

small business concerns; and 

‘‘(ii) at least 1 year of experience providing, as an integral part of its 

microloan program, intensive marketing, management, and technical 

assistance to its borrowers.’’. 

SEC. 104. AVERAGE LOAN SIZE. 

Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) is amended by striking 

‘‘$7,500’’ and inserting ‘‘$10,000’’ in each of the following places: paragraph 

(3)(F)(iii), paragraph (6)(C)(i), and paragraph (6)(C)(ii). 

SEC. 105. TECHNICAL ASSISTANCE. 

Section 7(m)(4)(E) of the Small Business Act (15 U.S.C. 636(m)(4)(E)) is amended 

as follows: 

(1) PRE-LOAN.—Clause (i) is amended by striking ‘‘25 percent’’ and inserting 

‘‘35 percent’’. 

(2) THIRD PARTY CONTRACTS.—Clause (ii) is amended by striking ‘‘25 percent’’

and inserting ‘‘35 percent’’. 

SEC. 106. ENTREPRENEURS WITH DISABILITIES. 

Section 7(m)(1)(A)(i) of the Small Business Act (15 U.S.C. 636(m)(1)(A)(i)) is 

amended by inserting ‘‘disabled,’’ before ‘‘and minority entrepreneurs’’. 


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TITLE II—PRIME 

SEC. 201. SHORT TITLE. 

This title may be cited as the ‘‘Program for Investment in Microentrepreneurs 

Act’’ or the ‘‘PRIME Act’’. 

SEC. 202. PRIME. 

The Small Business Act is amended— (1) by redesignating section 37 as 99; and 

(2) by inserting after section 36 the following: 

‘‘SEC. 37. PRIME PROGRAM. 

‘‘(a) DEFINITIONS.—For purposes of this section, the following definitions shall 

apply: ‘‘(1) CAPACITY BUILDING SERVICES.—The term ‘capacity building services’ means services provided to an organization that is, or that is in the process of 

becoming, a microenterprise development organization or program, for the purpose of enhancing its ability to provide training and services to disadvantaged 

entrepreneurs. ‘‘(2) DISADVANTAGED ENTREPRENEUR.—The term ‘disadvantaged entrepreneur’ means a microentrepreneur that is— ‘‘(A) a very low-income person; 

‘‘(B) a low-income person; or 

‘‘(C) an entrepreneur that lacks adequate access to capital or other resources essential for business success, or is economically disadvantaged, as 

determined by the Administrator. ‘‘(3) COLLABORATIVE.—The term ‘collaborative’ means 2 or more nonprofit entities that agree to act jointly as a qualified organization under this section. ‘‘(4) INDIAN TRIBE.—The term ‘Indian tribe’ means any Indian tribe, band, 

pueblo, nation, or other organized group or community, including any Alaska 

Native village or regional or village corporation, as defined in or established 

pursuant to the Alaska Native Claims Settlement Act, which is recognized as 

eligible for the special programs and services provided by the United States to 

Indians because of their status as Indians. ‘‘(5) INTERMEDIARY.—The term ‘intermediary’ means a private, nonprofit entity that seeks to serve microenterprise development organizations and programs 

as authorized under subsection (d). ‘‘(6) LOW-INCOME PERSON.—The term ‘low-income person’ means a person having an income, adjusted for family size, of not more than— ‘‘(A) for metropolitan areas, 80 percent of the area median income; and 

‘‘(B) for nonmetropolitan areas, the greater of— ‘‘(i) 80 percent of the area median income; or 

‘‘(ii) 80 percent of the statewide nonmetropolitan area median in- come. ‘‘(7) MICROENTREPRENEUR.—The term ‘microentrepreneur’ means the owner 

or developer of a microenterprise. ‘‘(8) MICROENTERPRISE.—The term ‘microenterprise’ means a sole proprietorship, partnership, or corporation that— ‘‘(A) has fewer than 5 employees; and 

‘‘(B) generally lacks access to conventional loans, equity, or other banking 

services. ‘‘(9) MICROENTERPRISE DEVELOPMENT ORGANIZATION OR PROGRAM.—The term ‘microenterprise development organization or program’ means a nonprofit entity, or a program administered by such an entity, including community development corporations or other nonprofit development organizations and social service organizations, that provides services to disadvantaged entrepreneurs. ‘‘(10) POVERTY LINE.—The term ‘poverty line’ means the official poverty line 

defined by the Office of Management and Budget based on the most recent data 

available from the Bureau of the Census. The Administrator shall revise annually (or at any shorter interval the Administrator determines to be feasible and 

desirable) the poverty line. The required revision shall be accomplished by multiplying the official poverty line by the percentage change in the Consumer 

Price Index for All Urban Consumers during the annual or other interval immediately preceding the time at which the revision is made. 

‘‘(11) TRAINING AND TECHNICAL ASSISTANCE.—The term ‘training and technical 

assistance’ means services and support provided to disadvantaged entrepreneurs, such as assistance for the purpose of enhancing business planning, 

marketing, management, financial management skills, and assistance for the 

purpose of accessing financial services. 


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‘‘(12) VERY LOW-INCOME PERSON.—The term ‘very low-income person’ means having an income, adjusted for family size, of not more than 150 percent of the 

poverty line. ‘‘(b) ESTABLISHMENT OF PROGRAM.—The Administrator shall establish a microenterprise technical assistance and capacity building grant program to provide assistance from the Administration in the form of grants to qualified organizations in 

accordance with this section. ‘‘(c) USES OF ASSISTANCE.—A qualified organization shall use grants made under 

this section— ‘‘(1) to provide training and technical assistance to disadvantaged entrepreneurs; ‘‘(2) to provide training and capacity building services to microenterprise development organizations and programs and groups of such organizations to assist such organizations and programs in developing microenterprise training 

and services; ‘‘(3) to aid in researching and developing the best practices in the field of 

microenterprise and technical assistance programs for disadvantaged entrepreneurs; and ‘‘(4) for such other activities as the Administrator determines are consistent 

with the purposes of this section. ‘‘(d) QUALIFIED ORGANIZATIONS.—For purposes of eligibility for assistance under 

this section, a qualified organization shall be—

‘‘(1) a nonprofit microenterprise development organization or program (or a 

group or collaborative thereof) that has a demonstrated record of delivering 

microenterprise services to disadvantaged entrepreneurs; 

‘‘(2) an intermediary; 

‘‘(3) a microenterprise development organization or program that is accountable to a local community, working in conjunction with a State or local government or Indian tribe; or 

‘‘(4) an Indian tribe acting on its own, if the Indian tribe can certify that no 

private organization or program referred to in this paragraph exists within its 

jurisdiction. 

‘‘(e) ALLOCATION OF ASSISTANCE; SUBGRANTS.—

‘‘(1) ALLOCATION OF ASSISTANCE.—

‘‘(A) IN GENERAL.—The Administrator shall allocate assistance from the 

Administration under this section to ensure that—

‘‘(i) activities described in subsection (c)(1) are funded using not less 

than 75 percent of amounts made available for such assistance; and 

‘‘(ii) activities described in subsection (c)(2) are funded using not less 

than 15 percent of amounts made available for such assistance. 

‘‘(B) LIMIT ON INDIVIDUAL ASSISTANCE.—No single person may receive 

more than 10 percent of the total funds appropriated under this section in 

a single fiscal year. 

‘‘(2) TARGETED ASSISTANCE.—The Administrator shall ensure that not less 

than 50 percent of the grants made under this section are used to benefit very 

low-income persons, including those residing on Indian reservations. 

‘‘(3) SUBGRANTS AUTHORIZED.—

‘‘(A) IN GENERAL.—A qualified organization receiving assistance under 

this section may provide grants using that assistance to qualified small and 

emerging microenterprise organizations and programs, subject to such rules 

and regulations as the Administrator determines to be appropriate. 

‘‘(B) LIMIT ON ADMINISTRATIVE EXPENSES.—Not more than 7.5 percent of 

assistance received by a qualified organization under this section may be 

used for administrative expenses in connection with the making of subgrants under subparagraph (A). 

‘‘(4) DIVERSITY.—In making grants under this section, the Administrator shall 

ensure that grant recipients include both large and small microenterprise organizations, serving urban, rural, and Indian tribal communities serving diverse 

populations. 

‘‘(5) PROHIBITION ON PREFERENTIAL CONSIDERATION OF CERTAIN SBA PROGRAM

PARTICIPANTS.—In making grants under this section, the Administrator shall 

ensure that any application made by a qualified organization that is a participant in the program established under section 7(m) does not receive preferential 

consideration over applications from other qualified organizations that are not 

participants in such program. 

‘‘(f) MATCHING REQUIREMENTS.—

‘‘(1) IN GENERAL.—Financial assistance under this section shall be matched 

with funds from sources other than the Federal Government on the basis of not 

less than 50 percent of each dollar provided by the Administration. 


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‘‘(2) SOURCES OF MATCHING FUNDS.—Fees, grants, gifts, funds from loan 

sources, and in-kind resources of a grant recipient from public or private 

sources may be used to comply with the matching requirement in paragraph (1). ‘‘(3) EXCEPTION.— ‘‘(A) IN GENERAL.—In the case of an applicant for assistance under this 

section with severe constraints on available sources of matching funds, the 

Administrator may reduce or eliminate the matching requirement in paragraph (1). ‘‘(B) LIMITATION.—Not more than 10 percent of the total funds made 

available from the Administration in any fiscal year to carry out this section may be excepted from the matching requirement in paragraph (1), as 

authorized by subparagraph (A). ‘‘(g) APPLICATIONS FOR ASSISTANCE.—An application for assistance under this section shall be submitted in such form and in accordance with such procedures as the 

Administrator shall establish. ‘‘(h) RECORDKEEPING.— ‘‘(1) IN GENERAL.—A qualified organization receiving assistance from the Administration under this section shall keep such records, for such periods as may 

be prescribed by the Administrator and necessary to disclose the manner in 

which any assistance under this section is used and to demonstrate compliance 

with the requirements of this section. ‘‘(2) USER PROFILE INFORMATION.—The Administrator shall require each qualified organization receiving assistance from the Administration under this section to compile such data, as is determined to be appropriate by the Administrator, on the gender, race, ethnicity, national origin, or other pertinent information concerning individuals that utilize the services of the assisted organization to ensure that targeted populations and low-income residents of investment 

areas are adequately served. ‘‘(3) ACCESS TO RECORDS.—The Administrator shall have access on demand, 

for the purpose of determining compliance with this section, to any records of 

a qualified organization that receives assistance from the Administration under 

this section. 

‘‘(4) REVIEW.—Not less than annually, the Administrator shall review the 

progress of each assisted organization in carrying out its strategic plan, meeting 

its performance goals, and satisfying the terms and conditions of its assistance 

agreement. 

‘‘(5) REPORTING.—

‘‘(A) ANNUAL REPORTS.—The Administrator shall require each qualified 

organization receiving assistance from the Administration under this section to submit an annual report to the Administrator on its activities, its 

financial condition, and its success in meeting performance goals, in satisfying the terms and conditions of its assistance agreement, and in complying with other requirements of this section, in such form and manner 

as the Administrator shall specify. 

‘‘(B) AVAILABILITY OF REPORTS.—The Administrator, after deleting or redacting any material as appropriate to protect privacy or proprietary interests, shall make such reports submitted under subparagraph (A) available 

for public inspection. 

‘‘(i) IMPLEMENTATION.—The Administrator shall, by regulation, establish such requirements as may be necessary to carry out this section.’’. 

SEC. 203. CONFORMING REPEAL. 

Subtitle C (15 U.S.C. 6901 et seq.) of title I of the Riegle Community Development 

and Regulatory Improvement Act of 1994 is repealed. 

II. PURPOSE AND SUMMARY

The purpose of H.R. 3020, The Microloan Amendments and Modernization Act (MAMA) is to encourage participation in the 

microloan program by qualified intermediaries (technical assistance 

providers and lenders) and aspiring entrepreneurs. The bill must 

provide new tools while modernizing old ones so that the program 

is better able to inform, educate and assist early stage small businesses to start up, grow, and create jobs. H.R. 3020 amends the 

program for the first time in eight years and responds to observations about barriers to participation indicated to the Committee by 

intermediaries/lenders, business participants and academics who 


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have studied the program. The Small Business Administration 

(SBA), which operates the program, is directed to help in this effort 

and to work with the intermediaries to find a way to report the repayment records of borrowers to major credit agencies and expand 

their capital access options. In addition, the Committee wants to 

move the Program for Investment in MicroEnterprise (PRIME) into 

the Small Business Act merging the program’s authorization with 

most of the other programs run by the SBA. 

To accomplish these purposes, H.R. 3020 encourages increased 

borrower participation in a number of ways that help aspiring entrepreneurs who might not qualify for credit under other programs 

by allowing them greater benefit from the unique microloan process. Also, it helps them by modernizing some of microloan’s provisions to reflect the realities of lending to early stage small businesses in today’s economy. First, the bill would make changes to 

the terms that can be offered on loans to allow more flexibility. The 

current statute requires intermediary lenders to offer only ‘‘shortterm’’ loans. However, longer-term loans or revolving credit allowed 

by the bill would permit microbusiness participants to have greater 

latitude in managing their debt obligations, potentially increasing 

their profitability. The taxpayers’ interests are still protected because the lender takes the first loss if the loan fails. In addition, 

disabled borrowers will be specifically identified as an intended 

beneficiary of microloans in the ‘‘purpose’’ section of the statute, in 

the same manner as current law recognizes women business owners, minority business owners and other deserving groups. Finally, 

SBA is directed to help ensure that repayment histories of the program’s borrowers are duly reported. Creating a reporting mechanism, with the help of the SBA as directed by this bill, would enhance the credit score of microloan participants, permitting them 

to broaden their access to low-cost financing thus spurring the opportunity for continued growth using traditional capital sources. 

H.R. 3020 promotes greater intermediary participation. It modernizes the statutory ceiling on the ‘‘average loan size’’ so more 

intermediaries can qualify for the most favorable interest rate (2 

percent below federal borrowing rate on 5-year Treasury notes) 

raising it to $10,000, the first raise since the program’s inception. 

The bill also will help to increase the number of intermediaries 

that can meet the qualifications to participate in the microloan program. H.R. 3020 sets out the kind of equivalent lending and counseling experience that would allow a well-trained employee to help 

a new non-profit participant qualify as an intermediary. 

In addition, existing restrictions on the use of technical assistance funds are burdensome and can hurt an intermediary’s ability 

to deliver appropriate services to potential borrowers. The bill 

raises the amount of the technical assistance grant that can be 

used for this ‘‘pre-loan’’ assistance to 35 percent from its current 

level of 25 percent. Similarly in certain cases for start up businesses, outside training is absolutely necessary to ensure that the 

borrower is completely prepared to open a business. To cover this 

kind of contingency, the bill raises the amount of the technical assistance grant used for contracted assistance to 35 percent from 25 

percent. 

Finally, H.R. 3020 moves the entire PRIME initiative into the 

Small Business Act. The move should have no direct impact on the 


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1Sec. 7(m) of the Small Business Act; 15 U.S.C. § 636(m) 2 Elaine Edgecomb of the FIELD program at the Aspen Institute says there are about 554 

microfinance programs in the U.S. of which 230 are lenders. Directory of U.S. Micro-Enterprise 

Programs (Field 2002). 3P.L. 102–140, approved October 28, 1991 as a Demonstration Program. The designation 

‘‘demonstration’’ was removed by P.L. 105–135 approved Dec. 2, 1997. 

operation of the program which is already administered by the 

SBA, but it does clarify that the SBA has authority to administer 

the PRIME program. Consolidating the elements of microenterprise 

assistance programs in one place and makes it easier for the Committee to oversee these initiatives in the future. 

III. BACKGROUND AND NEED FOR LEGISLATION

The SBA makes available small loans and technical assistance to 

very small, low-income businesses through the SBA’s microloan 

program and technical assistance grants1 and the PRIME. These 

initiatives form a significant portion of the lending and assistance 

available to such businesses from any source in the United States 

though private sources for microlending are available.2 The 

microloan program targets loans to underserved low-income entrepreneurs using non-profit intermediaries who also provide the technical assistance. Overall, the program has experienced very few defaults from intermediary lenders and few defaults from borrowers. 

This kind of lending is necessary because of a gap in affordable 

capital that is available to very small, unproven businesses. Banks 

do not provide credit to individuals unless they have sufficient assets to protect the lender’s assets. Even SBA’s guaranteed loan program requires adequate amounts of collateral and a reasonable 

credit score. Other starters of small businesses use expensive credit 

card borrowing to start their businesses. But this alternative is not 

available to certain classes of entrepreneurs. For those budding entrepreneurs, the only available alternative is frequently a 

microloan—a small loan provided by non-profit institutions. Microlending and technical assistance for these businesses has received 

strong support over the years from the business community and 

Congress which has continued to fund the programs despite administration proposals to scale back or eliminate them. In fact, as a 

background to the consideration of this bill, the Executive Branch 

has proposed significant changes to the microloan program and has 

once again proposed eliminating the PRIME program for FY 2008. 

Citing redundancy and the cost of providing assistance with each 

loan, the administration proposal would fund microloans by increasing the interest paid by the intermediaries on federal funds 

and ultimately paid by the small business borrowers. Technical assistance funds would be eliminated from both microloan Program 

and PRIME but borrowers or potential borrowers could seek assistance from existing economic development partners, as in fact they 

can now, including the Small Business Development Centers 

(SBDCs), Women’s Business Centers (WBCs), and SCORE. 

Microloan program—— 

Congress created a microloan program in 1991 by adding § 7(m) 

to the Small Business Act.3 The program makes funds available to 

nonprofit, community-based lenders who in turn make very small 

loans to eligible borrowers—mainly higher-risk, fledgling entreVerDate Aug 31 2005 05:50 Sep 06, 2007 Jkt 059006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR313.XXX HR313

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4See the table compiled by the Office of Advocacy, SBA—http://www.sba.gov/advo/research/ 

us88l04.pdf. The amount is the total employees in firms with fewer than 5 employees plus all 

firms with 0 employees. 5Testimony of Elaine Edgecomb, FIELD Project, The Aspen Institute, before the Committee 

on Small Business, U.S. House of Representatives, Washington, DC, June 14, 2007. 6Testimony of Friends of the SBA Microloan Program, submitted for the record to the Committee on Small Business, U.S. House of Representatives, Washington, DC, June 14, 2007, p. 

1. 7Debate Stirs Over Tiny Loans for World’s Poorest, Cecelia Dugger, New York Times, April 

29, 2004, pg. 1, ‘‘Over $2 billion appropriated by Congress for micro credit programs since 1988’’. 

preneurs, whose businesses generally serve their local communities. While the overall set of microenterprises numbers in the 

millions, and one in six employees in the United States works for 

a microenterprise,4 businesses using the microloan program are different because they can not access affordable credit. These borrowers may be unable to get a traditional loan due to poor credit 

scores, no credit history, or a lack of business experience. As structured, the program reaches various important demographic groups 

that have not traditionally been well-served by the private sector 

lends or even the SBA’s 7(a) program. For example, microloans 

have been a source of capital for low-income women business owners (who receive about 44 percent of the loans) and minority borrowers (who receive over 50 percent of the loans.) Also, the loans 

tend to be geographically diverse. In the United States, roughly 

one-third of the microloans are made in rural areas. 

The mechanics of the program are straightforward. SBA makes 

10-year loans of up to $750,000 to intermediaries who, in turn, 

make very small loans of less than $35,000 for less than 6 years. 

If a loan is needed (in some cases a loan may be inadvisable) interest rates to the borrower can vary from 8 percent to 13 percent in 

the current market. The alternative for many businesses at this 

level is significantly higher credit card interest rates, or personal 

loan rates which decrease the chance for survival and growth. The 

average loan for the program is about $13,000 and the funds can 

be used for any business purpose though, due to the small amount, 

the proceeds generally go to the essentials. Most times, additional 

funds are contingent upon the repayment of the previous loan, 

helping a new business to move along one step at a time. Some 

lenders use peer-review with groups of entrepreneurs working together to help businesses; others use trained staff even supplemented by third parties to help with strategy and business planning. Over 98 percent of the loans have been repaid, a similar percentage to most commercial institutions which lend to businesses 

with much higher credit scores.5 The United States microloan 

intermediaries have loaned to 26,000 small business owners over 

the years and created more than 64,000 jobs since the program 

started. In 2006, SBA reports that micro-loans created or retained 

about 10,000 jobs and leveraged roughly $30 million in loans when 

the funds intermediaries obtain from other sources are included.6

Congress and private financial institutions recognized the value 

of this program long ago and its adaptation to our economy to help 

low income communities and borrowers has been a strong success. 

The federal government has supported the concept of micro-lending 

abroad and it contributes millions of dollars in foreign aid that is 

used in international microlending programs.7 Indeed, in one of its 

earliest acts after the fall of Saddam Hussein, the Coalition ProviVerDate Aug 31 2005 05:50 Sep 06, 2007 Jkt 059006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR313.XXX HR313

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8See Coalition Provision Authority Statement of Services and Programs for Economic Development; http://www.cpaliraq.org/economy/privlsectldvlpt.html. 

sional Authority set up a $17 million direct micro-loan fund specifically available to Iraqi entrepreneurs.8

Program for investment in Micro-Entrepreneurs (PRIME) 

The PRIME allows SBA to award grants to non-profit, microenterprise development organizations, programs, collaborators, or 

intermediaries. These funds can be used by an organization to provide much-needed training and technical assistance to low-income 

and disadvantaged entrepreneurs interested in starting or expanding their own businesses. They also can be used to engage in capacity building activities targeted to micro-enterprise development organizations that serve low-income and disadvantaged entrepreneurs. PRIME is distinguished from other technical assistance 

support programs because it is not tied to a loan. In solely providing entrepreneurial development training programs, PRIME 

often is able to assist low-income small business owners with managing their capital needs without taking on unnecessary burdens. 

This function—while often overlooked—is essential to the growth of 

entrepreneurs in low-income communities. By providing marketing 

assistance or business structure and operation advice that helps 

plug the entrepreneur into the community an extended source of 

supporters and advisors are tapped that are available to help the 

business over the long haul. 

Addressing the problems in the Microloan program 

H.R. 3020 amends the SBA’s microloan program in section 7(m) 

to address and correct problems that the Committee has identified 

as creating barriers to the participation of borrowers, potential borrowers and intermediaries. In addition, it modernizes some of its 

provisions to reflect what the Committee found were the realities 

of lending to early stage small businesses in today’s economy. It 

also moves the PRIME program into the Small Business Act to 

allow for stronger, direct administration. 

Credit Reporting.—The SBA is directed to help ensure that repayment histories are duly reported. Under the current system, if 

a borrower successfully repays an SBA microloan, as the vast majority do, repayment information is oftentimes not conveyed to 

credit reporting agencies. Intermediary lenders have too small a 

volume of loans to qualify for reporting with the major reporters. 

Creating a reporting mechanism, with the help of the SBA as directed by this bill, would enhance the credit score of microbusiness 

owners, broadening their access to low-cost financing thus spurring 

continued growth through traditional capital sources. 

More Flexible Lending Terms.—H.R. 3020 encourages borrower 

participation by increasing benefits from the unique microloan 

process. The bill makes changes to the terms that can be offered 

on loans to allow more flexibility. Intermediary lenders must offer 

‘‘short-term’’ loans under the current program structure, even 

though more flexibility for longer terms or revolving credit loans 

might better reflect the needs of the borrowers and enhance the 

suitability of their loans. Longer-term loans would permit 

microloan recipients to have greater latitude in managing their 


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debt obligations, potentially increasing their profitability. Lenders 

play a larger role in adjusting the terms to meet the specific needs 

of the borrower. The taxpayers’ interests are still protected because 

the lender will take the first loss if the loan fails. 

Experienced Intermediaries.—To increase the number of intermediaries that can demonstrate the expertise necessary to participate in the microloan program the bill adjusts eligibility requirements. Current requirements to qualify as a microloan intermediary are too restrictive and can bar suitable participants who 

have significant, equivalent microlending experience. Some areas 

that could use this kind of program do not have qualified intermediaries that know the local markets denying businesses the opportunity to participate. In some cases, communities that want the 

program must wait until a non-profit group can accumulate the experience necessary to qualify. The Microloan Amendments and 

Modernization Act sets out the kind of equivalent experience that 

would allow a well-trained employee with significant expertise to 

help a new intermediary qualify for the microloan program. 

Microloan programs will be able to start lending more quickly 

while still ensuring that the technical advisers are well-trained. 

Average Loan Size.—One criticism that has been leveled at the 

program is that it is unsustainable. Ultimately, such a structure 

might discourage non-profit groups who would have liked to participate because they are simply required to struggle too much to 

keep the program going. For example some of the thresholds provided in the law that apply to the money the intermediaries get 

and lend have not been raised since the program’s inception. Con- gress set $7500 as the average loan size and if an intermediary’s 

average loan was below that amount, it could qualify for funds at 

the most favorable rate (currently 2% under the 5 year Treasury 

Bill rate). Raising these thresholds to $10,000 helps keep the cost 

of borrowing low for intermediaries and provides a level that encourages greater intermediary (lender) participation. The program 

is more reasonable and useful to them. The higher threshold reflects inflation as well as the growing capital needs of even low income microbusinesses, and answers a common complaint from the 

microlending community. 

Expanded Use for Technical Assistance Grants.—Existing restrictions on the use of technical assistance funds are burdensome and 

can hurt an intermediary’s ability to deliver appropriate services to 

potential borrowers. For example, intermediaries are not allowed to 

use as much of the funds as they need to work with potential borrowers who may ultimately be advised that they do not need a 

loan. In some circumstances only one loan is made for every 10 aspiring business owners who receive counseling. Such assistance is 

still considered valuable to ensure that an entrepreneur is not encouraged to take on debt that is unnecessary. The bill raises the 

amount of the technical assistance grant that can be used for this 

‘‘pre-loan’’ assistance to 35 percent. Similarly, the limits on grant 

funds used to hire third party contractors that provide specialized 

technical assistance to borrowers have also proved too restrictive. 

There are cases where outside training is absolutely necessary to 

ensure that the borrower is completely prepared to open a business; this can include licensing requirements or information about 

local environment or zoning restrictions. To cover this kind of conVerDate Aug 31 2005 05:50 Sep 06, 2007 Jkt 059006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR313.XXX HR313

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9 15 U.S.C. Section 6901 et seq. 

tingency, the bill raises the amount of the technical assistance 

grant that can be used for contracted assistance to 35 percent. Setting these percentages at a reasonable level encourages participation of good intermediaries and ensures that businesses get the advice they need. 

Entrepreneurs With Disabilities.—Current law lists a host of purposes for the microloan program. Though it is not an exclusive list 

it does guide the operation of the program. The list includes 

women, low-income, veteran and minority business owners specifically. H.R. 3020 adds disabled entrepreneurs to this category. The 

program’s participants have identified the disabled as a group that 

can use more of this type of assistance and the microloan system 

is one tool that can provide them with self-employment as an option for their financial independence. 

PRIME Incorporated Into the Small Business Act.—Finally, Title 

II of the Microloan Amendments and Modernization Act moves the 

entire PRIME into the Small Business Act. This simply removes 

the PRIME from its current location isolated in the United States 

Code as an adjunct to the Riegle Community Development and 

Regulatory Improvement Act of 19949 and adds it as an amendment to the Small Business Act to include its provisions. The move 

should have no direct impact on the operation of the program 

which is already administered by the SBA, but it does clarify that 

the SBA has authority to administer the PRIME program. The 

move consolidates the elements of microenterprise assistance programs in one place and makes it easier for the Committee to oversee these initiatives in the future. The moving of the PRIME Act 

was done in consultation with the Financial Services Committee. 

CONCLUSION

The Microloan Improvements and Modernization Act provides 

solid improvements to an already strong program for underserved 

but deserving and determined entrepreneurs. It builds on the 

strengths of the existing programs and removes some of the small 

but frustrating barriers that have prevented small businesses from 

fully utilizing these SBA programs. Entrepreneurs are given the 

tools they need to succeed without unduly burdening taxpayers. 

IV. HEARINGS

In the 110th Congress, the full Committee on Small Business 

held a hearing on June 14th, 2007 on the challenges facing the 

microloan program. Janet Tasker, the Deputy Associate Administrator of the SBA for Capital Access, provided the administration’s 

plans for the future of the program and facts and data on the program’s accomplishments. SBA strongly supported the capital access 

mission of the program but outlined plans to reduce the government investment by raising the cost of borrowing and eliminating 

technical assistance grants moving the counseling to the SBDC, 

WBC and SCORE programs. Also appearing was Ms. Lisa J. 

Servon—Associate Professor, The New School, New York. She testified that the microloan concept is worthy of government support 

but suggested that for its long term sustainability, Congress should 

be thinking of innovative ways to strengthen the program. Daniel 


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Betancourt, CEO of Community First Fund in Lancaster, PA and 

Chairman of the Association for Enterprise Opportunity spoke 

about the changes intermediaries want and the differences between 

the 7(a) program and microloan program for lenders (his company 

does both). A borrower testifying was Edward ‘‘Champ’’ Hall, owner 

of Champ Hall’s Barber Shop and Barber College, Lancaster City, 

PA. After not being able to find any other loan funds to start a 

business, Mr. Hall used microloans to renovate and open a barber 

shop. He received technical assistance under the program and was 

successful enough to open a barber school (with a new loan) and 

employ six people. Finally Elaine Edgcomb, Director of the FIELD 

Study of the Aspen Institute testified that the microloan program 

when analyzed for its economic value to the community (rather 

than just its cost) is very reasonable. She argued that the government has a role to play in this kind of lending and that job creation, community support, and intense technical assistance that 

trains a good business must be taken into account to offset some 

program costs. Testimony was also submitted by the ‘‘Friends of the 

SBA Microloan Program’’ in strong support of amending and reauthorizing the program. 

On July 12, 2007 the full Committee held a hearing on H.R. 

3020, the Microloan Amendments and Modernization Act, which 

was attended by the Associate Administrator of the SBA for Capital Access, Dr. Michael Hager, who provided the administration’s 

views on H.R. 3020. In addition, three witnesses were invited to 

speak directly to the impact of the legislation on the microloan program. Kristie Darien, the Executive Director of the National Association of the Self Employed explained that her association is made 

up of very tiny businesses and their main complaint is that they 

have a very difficult time obtaining affordable capital. NASE 

strongly supports modernizing (and reauthorizing) the microloan 

program. Mr. Kevin Kelly of the Association of Enterprise Organizations testified that his members fully supported the amendments 

that raised the thresholds to recognize the impact of inflation and 

reduced the barriers for finding qualified intermediaries. Finally, 

Dr. Cordero-Guzman of Baruch College, CUNY, presented the highlights of his recent study that found that microlending can be a 

very valuable tool for starting small businesses. He also found that 

such programs are not economically sustainable as of yet in the 

United States without grants or contributions. Therefore, the government has a role to play in organizing and keeping the program 

going because of its benefits. 

V. COMMITTEE CONSIDERATION

The Committee on Small Business met in open session on July 

19, 2007 to consider H.R. 3020 and any amendments. 

VI. COMMITTEE VOTES

The bill, H.R. 3020, the Microloan Amendments and Modernization Act was marked up by the Committee on Small Business on 

July 19, 2007. The Committee accepted an amendment in the nature of a substitute offered by Chairwoman Vela ́zquez by voice vote 

at 10:23 a.m. No further amendments were offered. The bill was orVerDate Aug 31 2005 05:50 Sep 06, 2007 Jkt 059006 PO 00000 Frm 00012 Fmt 6659 Sfmt 6602 E:\HR\OC\HR313.XXX HR313

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dered reported as amended to the House of Representatives by a 

voice vote at 10:25 a.m. 

VII. SECTION-BY-SECTION ANALYSIS OF THE SMALL ENERGY

EFFICIENT BUSINESS ACT—H.R. 3020 

Section 1 

This section entitles the bill the Microloan Amendments and 

Modernization Act and sets out a table of contents. 

TITLE I—MICROLOAN PROGRAM

Section 101. Transmission of credit scores 

The SBA must facilitate the transmission of credit reporting information by establishing a process so that intermediaries can provide information about borrowers’ payment records to major credit 

reporting agencies. Successful borrowers should benefit from their 

good repayment records and thus, through market forces, expand 

their access to affordable capital. However, it is clear that most 

intermediaries conduct too few credit transactions to qualify for 

such reporting. To overcome this, the SBA will need to help the 

intermediaries in the program devise a method of providing and recording such records with the credit agencies. Whether this can 

best be accomplished by the SBA aggregating such data for reporting or by negotiating agreements for the intermediaries to collect 

the necessary information and report directly with credit agencies 

is left to the discretion of the SBA. 

Section 102. Flexible credit 

The words ‘‘short-term’’ are removed from description of loans in 

§ 7(m) of the Small Business Act. The intermediary and the borrower should be able to tailor the appropriate terms for the loan 

that meet the specific needs and sophistication of the borrower. 

Greater flexibility ultimately allows the borrower greater control in 

managing debt obligations and possibly enhanced profitability. The 

federal interest is protected because the intermediary is also at risk 

and therefore has a strong interest is agreeing to terms that are 

best for the borrower (to ensure full repayment) and the intermediary/lender (who would be the first to absorb any loss). 

Section 103. Intermediary eligibility requirements 

The eligibility requirements for intermediaries are broadened to 

include consideration of equivalent experience of employees in the 

determination of program eligibility. This section adds that an 

intermediary can qualify for the program if it has a full time employee who has 3 years of microlending experience and 1 year of 

providing technical assistance including marketing and management. This is an alternative to the intermediary organization itself 

having direct experience, the current statutory requirement. The 

intent of this provision is to increase the number of intermediaries 

that can qualify for the program with no reduction in the quality 

and experience. If an aspiring intermediary (generally a non-profit 

organization) has no direct experience in microlending and technical assistance then it can hire trained employees with considerable, equivalent experience and still qualify. 


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Section 104. Average loan size 

This section makes changes to three provisions of the microloan 

program increasing the threshold size for certain benefits and requirements. It raises the threshold for average loan size on loans 

made by an intermediary from $7,500 to $10,000. Under this new 

threshold, if the intermediary’s average loan size is below $10,000 

it can receive the most favorable interest rate available on funds 

from the federal government (2 percent below the 5 year Treasury 

Bill rate). This section also raises the threshold for loans on which 

intermediaries can charge a higher rate up to $10,000 from $7,500. 

These thresholds, which have been frozen at the $7,500 level for a 

decade, are being raised to reflect inflation and the realities of operating the microloan program. 

Section 105. Technical assistance 

Pre-loan.—The bill proposes to increase the amount of assistance 

that micro-intermediaries can provide to would-be entrepreneurs 

using funds from their federal technical assistance grants. Oftentimes microentrepreneurs need training, financial education and 

guidance before they can become good borrowers and many who are 

counseled in this way ultimately do not apply for or obtain loans. 

It is important to continue to support this pre-loan advice that has 

a substantial value to low-income entrepreneurs. Raising the 

amount of the grant money that can be used for this purpose to 

35% will facilitate this specialized counseling. 

Third party contract.—Also, this section of the bill increases the 

percentage of the technical assistance grant that can be spent on 

third party contractors that provide appropriate counseling and 

other services. As an integral part of starting a business, an entrepreneur may need some specialized training, financial education or 

counseling in preparation for receiving a loan. For example, the 

borrower may need the benefit of expertise on licensing requirements or local permitting and regulations that a general counselor 

cannot provide. It is intended that up to 35% of the funds from the 

technical assistance grant can be used by the intermediary to procure the services of third party contractors to meet the specialized 

needs of the borrower. 

Section 106. Entrepreneurs with disabilities 

The word ‘‘disabled’’ is added to the list of types of entrepreneurs 

in the Act’s ‘‘purposes’’ section that the microloan intermediaries 

should try to help. While it is not intended to be an exclusive list, 

it will be beneficial to the operation of the program to state specifically that intermediaries should give full consideration to disabled 

loan applicants that might benefit from starting a small, independent business they can operate themselves. The microloan program provides them another important option for their financial future. Though the current law does not prohibit such consideration, 

the microloan program can fill a particular need in this case and 

therefore it warrants a specific statutory enumeration alongside 

other deserving categories already listed. 


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TITLE 2—PROGRAM FOR INVESTMENT IN MICRO-ENTREPRENEURS

(PRIME)

Title 2 removes the PRIME from its current location, isolated in 

the U.S. Code as an adjunct to the Riegle Community Development 

and Regulatory Improvement Act of 1994 (15 U.S.C. 6901 et seq.), 

and amends the Small Business Act to include its provisions. 

PRIME has been operated for a decade by the Administrator and 

the SBA as required by law. It is important that its provisions be 

put into the Small Business Act, which contains other laws, programs and Congressional directions for the SBA, and thus avoid 

confusion about PRIME’s purposes and intended beneficiaries. The 

Committee also believes that the move facilitates the oversight of 

the program by the Committee and its review as part of the SBA’s 

regular reauthorization process. 

VIII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

JULY 26, 2007. 

Hon. NYDIA M. VELA ́ ZQUEZ, 

Chairwoman, Committee on Small Business, House of Representatives, Washington, DC. 

DEAR MADAM CHAIRWOMAN: The Congressional Budget Office 

has prepared the enclosed cost estimate for H.R. 3020, the 

Microloan Amendments and Modernization Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. 

The CBO staff contact is Susan Willie, who can be reached at 

226–2860. 

Sincerely, 

PETER R. ORSZAG. 

Enclosure. 

H.R. 3020—Microloan Amendments and Modernization Act 

Summary: H.R. 3020 would reauthorize the Program for Investment in Microentrepreneurs (PRIME) under the Small Business 

Act and make several changes to the Small Business Administration’s (SBA’s) microloan program. CBO estimates that implementing H.R. 3020 would cost less than $500,000 in 2008 and $7 

million over the 2008–2012 period, assuming appropriation of the 

necessary amounts. Enacting H.R. 3020 would not affect direct 

spending or revenues. 

H.R. 3020 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) 

and would benefit tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 3020 is shown in the following table. The costs 

of this legislation fall within budget function 370 (commerce and 

housing credit). 

By fiscal year, in millions of dollars— 

2007 2008 2009 2010 2011 2012 

SPENDING SUBJECT TO APPROPRIATION 

Spending Under Current Law: 

Budget Authority 1 ........................................................................... 2 0 0 0 0 0 


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By fiscal year, in millions of dollars—

2007 2008 2009 2010 2011 2012 

Estimated Outlays ........................................................................... 1 2 1 0 0 0 

Proposed Changes: 

Estimated Authorization Level ......................................................... 0 2 2 2 2 2 

Estimated Outlays ........................................................................... 0 * 1 2 2 2 

Spending Under H.R. 3020: 

Estimated Authorization Level 1 ...................................................... 2 2 2 2 2 2 

Estimated Outlays ........................................................................... 1 2 2 2 2 2 

1 The 2007 level is the amount appropriated for technical assistance grants under the PRIME program. 

Note.—* = less than $500,000. 

Basis of estimate: For this estimate, CBO assumes that the bill 

will be enacted near the start of fiscal year 2008, the necessary 

amounts will be appropriated for each year, and that spending will 

follow historical patterns. 

The PRIME program provides grants to nonprofit organizations 

to provide technical assistance to low-income owners of very small 

businesses (five employees or less). Although no specific amounts 

are authorized in the bill, CBO expects that annual appropriations 

for the PRIME program would continue over the 2008–2012 period 

equal to the amount appropriated in 2007, adjusted for inflation. 

The Congress appropriated $2 million for technical assistance 

grants under the PRIME program in 2007. Assuming appropriation 

of the necessary amounts, CBO estimates that this provision would 

cost less than $500,000 in 2008 and $7 million over the 2008–2012 

period. 

Under current law, nonprofit lending organizations that make loans that average $7,500 or less under SBA’s microloan program 

are eligible to receive an interest rate reduction of 75 basis points 

below the interest rate charged to intermediaries making higher 

value loans. 

H.R. 3020 would increase the maximum loan amount eligible for the interest rate reduction to $10,000. Because more loans could receive a lower interest rate under the bill, CBO expects that this 

provision would lead to a minor increase in the subsidy rate for the 

microloan program. Because of the small volume of such loans, 

however, we estimate that the increased cost of this provision 

would be less than $500,000 a year. 

Intergovernmental and private-sector impact: H.R. 3020 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA. The bill would authorize grants to tribal governments for 

microenterprise development. Any costs that those entities would 

incur would result from complying with conditions of federal assistance. 

Estimate prepared by: Federal Costs: Susan Willie; Impact on 

State, Local, and Tribal Governments: Elizabeth Cove; Impact on 

the Private Sector: Jacob Kuipers. 

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. 

IX. COMMITTEE ESTIMATE OF COSTS

Clause 3(d)(2) of rule XIII of the Rules of the House of Representatives requires an estimate and a comparison by the Committee of the costs that would be incurred in carrying out H.R. 

2389. However, clause 3(d)(3)(B) of that rule provides that this reVerDate Aug 31 2005 05:50 Sep 06, 2007 Jkt 059006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6602 E:\HR\OC\HR313.XXX HR313

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quirement does not apply when the Committee has included in its 

report a timely submitted cost estimate of the bill prepared by the 

Director of the Congressional Budget Office under section 402 of 

the Congressional Budget Act. 

X. OVERSIGHT FINDINGS

In accordance with clause (2)(b)(1) of rule X of the Rules of the 

House of Representatives, the oversight findings and recommendations of the Committee on Small Business with respect to the subject matter contained in H.R. 3020 are incorporated into the descriptive portions of this report. 

XI. STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds the authority for this legislation in Article I, Section 8, clause 18, of the Constitution of the 

United States. 

XII. COMPLIANCE WITH PUBLIC LAW 104–4 

H.R. 3020 contains no unfunded mandates. 

XIII. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 3020 does not relate to the terms and conditions of employment or access to public services or accommodations with the 

meaning of section 102(b)(3) of P.L. 104–1. 

XIV. FEDERAL ADVISORY COMMITTEE STATEMENT

H.R. 3020 does not establish or authorize the establishment of 

any new advisory committees. 

XV. STATEMENT OF NO EARMARKS

Pursuant to clause 9 of rule XXI, H.R. 3020 does not contain any 

congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI. 

XVI. PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

H.R. 3020 includes a number of provisions designed to update 

and to improve the Small Business Administration’s microloan 

lending and technical assistance programs which specializes in the 

delivery of such assistance to very small, fledgling businesses. It incorporates the existing PRIME initiative into the Small Business 

Act, but makes no changes to the program which is also currently 

operated by the SBA. 

XVII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitVerDate Aug 31 2005 05:50 Sep 06, 2007 Jkt 059006 PO 00000 Frm 00017 Fmt 6659 Sfmt 6601 E:\HR\OC\HR313.XXX HR313

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ted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

SMALL BUSINESS ACT 

* * * * * * * 

SEC. 7.(a) * * * 

* * * * * * * 

(m) MICROLOAN PROGRAM.— (1)(A) PURPOSES.—The purposes of the Microloan Program 

are— (i) to assist women, low-income, veteran (within the 

meaning of such term under section 3(q)), disabled, and 

minority entrepreneurs and business owners and other individuals possessing the capability to operate successful 

business concerns; 

* * * * * * * 

(B) ESTABLISHMENT.—There is established a microloan program, under which the Administration may—

(i) make direct loans to eligible intermediaries, as provided under paragraph (3), for the purpose of making 

øshort-term,¿ fixed interest rate microloans to startup, 

newly established, and growing small business concerns 

under paragraph (6); 

* * * * * * * 

(2) ELIGIBILITY FOR PARTICIPATION.—An intermediary shall 

be eligible to receive loans and grants under subparagraphs 

(B)(i) and (B)(ii) of paragraph (1) if it—

(A) meets the definition in øparagraph (10)¿ paragraph 

(11); and 

ø(B) has at least 1 year of experience making microloans 

to startup, newly established, or growing small business 

concerns and providing, as an integral part of its microloan 

program, intensive marketing, management, and technical 

assistance to its borrowers.¿ 

(B) has—

(i) at least—

(I) 1 year of experience making microloans to 

startup, newly established, or growing small business concerns; or 

(II) 1 full-time employee who has not less than 

3 years experience making microloans to startup, 

newly established, or growing small business concerns; and 

(ii) at least 1 year of experience providing, as an integral part of its microloan program, intensive marketing, management, and technical assistance to its 

borrowers. 

(3) LOANS TO INTERMEDIARIES.—

(A) * * * 

* * * * * * * 

(F) LOAN DURATION; INTEREST RATES.—


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(i) * * * 

* * * * * * * 

(iii) RATES APPLICABLE TO CERTAIN SMALL LOANS.—

Loans made by the Administration to an intermediary 

that makes loans to small business concerns and entrepreneurs averaging not more than ø$7,500¿ 

$10,000, shall bear an interest rate that is 2 percentage points below the rate determined by the Secretary 

of the Treasury for obligations of the United States 

with a period of maturity of 5 years, adjusted to the 

nearest one-eighth of 1 percent. 

* * * * * * * 

(4) MARKETING, MANAGEMENT AND TECHNICAL ASSISTANCE

GRANTS TO INTERMEDIARIES.—Grants made in accordance with 

subparagraph (B)(ii) of paragraph (1) shall be subject to the 

following requirements: 

(A) * * * 

* * * * * * * 

(E) ASSISTANCE TO CERTAIN SMALL BUSINESS CONCERNS.—

(i) IN GENERAL.—Each intermediary may expend an 

amount not to exceed ø25 percent¿ 35 percent of the 

grant funds received under paragraph (1)(B)(ii) to provide information and technical assistance to small 

business concerns that are prospective borrowers 

under this subsection. 

(ii) TECHNICAL ASSISTANCE.—An intermediary may 

expend not more than ø25 percent¿ 35 percent of the 

funds received under paragraph (1)(B)(ii) to enter into 

third party contracts for the provision of technical assistance. 

* * * * * * * 

(6) LOANS TO SMALL BUSINESS CONCERNS FROM ELIGIBLE

INTERMEDIARIES.—

(A) * * * 

* * * * * * * 

(C) INTEREST LIMIT.—Notwithstanding any provision of 

the laws of any State or the constitution of any State pertaining to the rate or amount of interest that may be 

charged, taken, received, or reserved on a loan, the maximum rate of interest to be charged on a microloan funded 

under this subsection shall not exceed the rate of interest 

applicable to a loan made to an intermediary by the Administration—

(i) in the case of a loan of more than ø$7,500¿ 

$10,000 made by the intermediary to a small business 

concern or entrepreneur by more than 7.75 percentage 

points; and 

(ii) in the case of a loan of not more than ø$7,500¿ 

$10,000 made by the intermediary to a small business 


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concern or entrepreneur by more than 8.5 percentage 

points. 

* * * * * * * 

(11) DEFINITIONS.—For purposes of this subsection— (A) * * * 

(B) the term ‘‘microloan’’ means a øshort-term,¿ fixed 

rate loan of not more than $35,000, made by an intermediary to a startup, newly established, or growing small 

business concern; 

* * * * * * * 

(14) CREDIT REPORTING INFORMATION.—The Administrator 

shall establish a process, for use by a lender making a loan to 

a borrower under this subsection, under which the lender provides to the major credit reporting agencies the information 

about the borrower that is relevant to credit reporting, such as 

the payment activity of the borrower on the loan. 

* * * * * * * 

SEC. 37. PRIME PROGRAM. 

(a) DEFINITIONS.—For purposes of this section, the following definitions shall apply: 

(1) CAPACITY BUILDING SERVICES.—The term ‘‘capacity building services’’ means services provided to an organization that is, 

or that is in the process of becoming, a microenterprise development organization or program, for the purpose of enhancing its 

ability to provide training and services to disadvantaged entrepreneurs. 

(2) DISADVANTAGED ENTREPRENEUR.—The term ‘‘disadvantaged entrepreneur’’ means a microentrepreneur that is—

(A) a very low-income person; 

(B) a low-income person; or 

(C) an entrepreneur that lacks adequate access to capital 

or other resources essential for business success, or is economically disadvantaged, as determined by the Administrator. 

(3) COLLABORATIVE.—The term ‘‘collaborative’’ means 2 or 

more nonprofit entities that agree to act jointly as a qualified 

organization under this section. 

(4) INDIAN TRIBE.—The term ‘‘Indian tribe’’ means any Indian 

tribe, band, pueblo, nation, or other organized group or community, including any Alaska Native village or regional or village 

corporation, as defined in or established pursuant to the Alaska 

Native Claims Settlement Act, which is recognized as eligible 

for the special programs and services provided by the United 

States to Indians because of their status as Indians. 

(5) INTERMEDIARY.—The term ‘‘intermediary’’ means a private, nonprofit entity that seeks to serve microenterprise development organizations and programs as authorized under subsection (d). 

(6) LOW-INCOME PERSON.—The term ‘‘low-income person’’ means a person having an income, adjusted for family size, of 

not more than— (A) for metropolitan areas, 80 percent of the area median 

income; and 


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(B) for nonmetropolitan areas, the greater of— (i) 80 percent of the area median income; or 

(ii) 80 percent of the statewide nonmetropolitan area 

median income. 

(7) MICROENTREPRENEUR.—The term ‘‘microentrepreneur’’ means the owner or developer of a microenterprise. 

(8) MICROENTERPRISE.—The term ‘‘microenterprise’’ means a 

sole proprietorship, partnership, or corporation that— (A) has fewer than 5 employees; and 

(B) generally lacks access to conventional loans, equity, 

or other banking services. 

(9) MICROENTERPRISE DEVELOPMENT ORGANIZATION OR PROGRAM.—The term ‘‘microenterprise development organization or 

program’’ means a nonprofit entity, or a program administered 

by such an entity, including community development corporations or other nonprofit development organizations and social 

service organizations, that provides services to disadvantaged 

entrepreneurs. 

(10) POVERTY LINE.—The term ‘‘poverty line’’ means the official poverty line defined by the Office of Management and 

Budget based on the most recent data available from the Bureau of the Census. The Administrator shall revise annually (or 

at any shorter interval the Administrator determines to be feasible and desirable) the poverty line. The required revision shall 

be accomplished by multiplying the official poverty line by the 

percentage change in the Consumer Price Index for All Urban 

Consumers during the annual or other interval immediately 

preceding the time at which the revision is made. 

(11) TRAINING AND TECHNICAL ASSISTANCE.—The term ‘‘training and technical assistance’’ means services and support provided to disadvantaged entrepreneurs, such as assistance for 

the purpose of enhancing business planning, marketing, management, financial management skills, and assistance for the 

purpose of accessing financial services. 

(12) VERY LOW-INCOME PERSON.—The term ‘‘very low-income 

person’’ means having an income, adjusted for family size, of 

not more than 150 percent of the poverty line. 

(b) ESTABLISHMENT OF PROGRAM.—The Administrator shall establish a microenterprise technical assistance and capacity building 

grant program to provide assistance from the Administration in the 

form of grants to qualified organizations in accordance with this 

section. 

(c) USES OF ASSISTANCE.—A qualified organization shall use 

grants made under this section—

(1) to provide training and technical assistance to disadvantaged entrepreneurs; 

(2) to provide training and capacity building services to 

microenterprise development organizations and programs and 

groups of such organizations to assist such organizations and 

programs in developing microenterprise training and services; 

(3) to aid in researching and developing the best practices in 

the field of microenterprise and technical assistance programs 

for disadvantaged entrepreneurs; and 

(4) for such other activities as the Administrator determines 

are consistent with the purposes of this section. 


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(d) QUALIFIED ORGANIZATIONS.—For purposes of eligibility for assistance under this section, a qualified organization shall be—

(1) a nonprofit microenterprise development organization or 

program (or a group or collaborative thereof) that has a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs; 

(2) an intermediary; 

(3) a microenterprise development organization or program 

that is accountable to a local community, working in conjunction with a State or local government or Indian tribe; or 

(4) an Indian tribe acting on its own, if the Indian tribe can 

certify that no private organization or program referred to in 

this paragraph exists within its jurisdiction. 

(e) ALLOCATION OF ASSISTANCE; SUBGRANTS.—

(1) ALLOCATION OF ASSISTANCE.—

(A) IN GENERAL.—The Administrator shall allocate assistance from the Administration under this section to ensure that—

(i) activities described in subsection (c)(1) are funded 

using not less than 75 percent of amounts made available for such assistance; and 

(ii) activities described in subsection (c)(2) are funded 

using not less than 15 percent of amounts made available for such assistance. 

(B) LIMIT ON INDIVIDUAL ASSISTANCE.—No single person 

may receive more than 10 percent of the total funds appropriated under this section in a single fiscal year. 

(2) TARGETED ASSISTANCE.—The Administrator shall ensure 

that not less than 50 percent of the grants made under this section are used to benefit very low-income persons, including 

those residing on Indian reservations. 

(3) SUBGRANTS AUTHORIZED.—

(A) IN GENERAL.—A qualified organization receiving assistance under this section may provide grants using that 

assistance to qualified small and emerging microenterprise 

organizations and programs, subject to such rules and regulations as the Administrator determines to be appropriate. 

(B) LIMIT ON ADMINISTRATIVE EXPENSES.—Not more than 

7.5 percent of assistance received by a qualified organization under this section may be used for administrative expenses in connection with the making of subgrants under 

subparagraph (A). 

(4) DIVERSITY.—In making grants under this section, the Administrator shall ensure that grant recipients include both large 

and small microenterprise organizations, serving urban, rural, 

and Indian tribal communities serving diverse populations. 

(5) PROHIBITION ON PREFERENTIAL CONSIDERATION OF CERTAIN SBA PROGRAM PARTICIPANTS.—In making grants under 

this section, the Administrator shall ensure that any application made by a qualified organization that is a participant in 

the program established under section 7(m) does not receive 

preferential consideration over applications from other qualified 

organizations that are not participants in such program. 

(f) MATCHING REQUIREMENTS.—


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(1) IN GENERAL.—Financial assistance under this section 

shall be matched with funds from sources other than the Federal Government on the basis of not less than 50 percent of each 

dollar provided by the Administration. 

(2) SOURCES OF MATCHING FUNDS.—Fees, grants, gifts, funds 

from loan sources, and in-kind resources of a grant recipient 

from public or private sources may be used to comply with the 

matching requirement in paragraph (1). 

(3) EXCEPTION.—

(A) IN GENERAL.—In the case of an applicant for assistance under this section with severe constraints on available 

sources of matching funds, the Administrator may reduce 

or eliminate the matching requirement in paragraph (1). 

(B) LIMITATION.—Not more than 10 percent of the total 

funds made available from the Administration in any fiscal 

year to carry out this section may be excepted from the 

matching requirement in paragraph (1), as authorized by 

subparagraph (A). 

(g) APPLICATIONS FOR ASSISTANCE.—An application for assistance 

under this section shall be submitted in such form and in accordance with such procedures as the Administrator shall establish. 

(h) RECORDKEEPING.—

(1) IN GENERAL.—A qualified organization receiving assistance from the Administration under this section shall keep such 

records, for such periods as may be prescribed by the Administrator and necessary to disclose the manner in which any assistance under this section is used and to demonstrate compliance with the requirements of this section. 

(2) USER PROFILE INFORMATION.—The Administrator shall require each qualified organization receiving assistance from the 

Administration under this section to compile such data, as is 

determined to be appropriate by the Administrator, on the gender, race, ethnicity, national origin, or other pertinent information concerning individuals that utilize the services of the assisted organization to ensure that targeted populations and lowincome residents of investment areas are adequately served. 

(3) ACCESS TO RECORDS.—The Administrator shall have access on demand, for the purpose of determining compliance 

with this section, to any records of a qualified organization that 

receives assistance from the Administration under this section. 

(4) REVIEW.—Not less than annually, the Administrator shall 

review the progress of each assisted organization in carrying 

out its strategic plan, meeting its performance goals, and satisfying the terms and conditions of its assistance agreement. 

(5) REPORTING.—

(A) ANNUAL REPORTS.—The Administrator shall require 

each qualified organization receiving assistance from the 

Administration under this section to submit an annual report to the Administrator on its activities, its financial condition, and its success in meeting performance goals, in satisfying the terms and conditions of its assistance agreement, and in complying with other requirements of this section, in such form and manner as the Administrator shall 

specify. 


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(B) AVAILABILITY OF REPORTS.—The Administrator, after 

deleting or redacting any material as appropriate to protect 

privacy or proprietary interests, shall make such reports 

submitted under subparagraph (A) available for public inspection. 

(i) IMPLEMENTATION.—The Administrator shall, by regulation, establish such requirements as may be necessary to carry out this section. 

SEC. ø37¿ 99. All laws and parts of laws inconsistent with this 

Act are hereby repealed to the extent of such inconsistency. 

SUBTITLE C OF TITLE I OF THE RIEGLE COMMUNITY 

DEVELOPMENT AND REGULATORY IMPROVEMENT 

ACT OF 1994 

øSubtitle C—Microenterprise Technical 

Assistance and Capacity Building Program 

øSEC. 171. SHORT TITLE. 

øThis subtitle may be cited as the ‘‘Program for Investment in 

Microentrepreneurs Act of 1999’’, also referred to as the ‘‘PRIME 

Act’’. 

øSEC. 172. DEFINITIONS. 

øFor purposes of this subtitle, the following definitions shall 

apply: 

ø(1) ADMINISTRATION.—The term ‘‘Administration’’ means 

the Small Business Administration. 

ø(2) ADMINISTRATOR.—The term ‘‘Administrator’’ means the 

Administrator of the Small Business Administration. 

ø(3) CAPACITY BUILDING SERVICES.—The term ‘‘capacity 

building services’’ means services provided to an organization 

that is, or that is in the process of becoming, a microenterprise 

development organization or program, for the purpose of enhancing its ability to provide training and services to disadvantaged entrepreneurs. 

ø(4) COLLABORATIVE.—The term ‘‘collaborative’’ means 2 or 

more nonprofit entities that agree to act jointly as a qualified 

organization under this subtitle. 

ø(5) DISADVANTAGED ENTREPRENEUR.—The term ‘‘disadvantaged entrepreneur’’ means a microentrepreneur that is—

ø(A) a low-income person; 

ø(B) a very low-income person; or 

ø(C) an entrepreneur that lacks adequate access to capital or other resources essential for business success, or is 

economically disadvantaged, as determined by the Administrator. 

ø(6) INDIAN TRIBE.—The term ‘‘Indian tribe’’ has the meaning 

given the term in section 103. 

ø(7) INTERMEDIARY.—The term ‘‘intermediary’’ means a private, nonprofit entity that seeks to serve microenterprise development organizations and programs as authorized under section 175. 


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ø(8) LOW-INCOME PERSON.—The term ‘‘low-income person’’ has the meaning given the term in section 103. 

ø(9) MICROENTREPRENEUR.—The term ‘‘microentrepreneur’’ means the owner or developer of a microenterprise. 

ø(10) MICROENTERPRISE.—The term ‘‘microenterprise’’ means 

a sole proprietorship, partnership, or corporation that— ø(A) has fewer than 5 employees; and 

ø(B) generally lacks access to conventional loans, equity, 

or other banking services. 

ø(11) MICROENTERPRISE DEVELOPMENT ORGANIZATION OR

PROGRAM.—The term ‘‘microenterprise development organization or program’’ means a nonprofit entity, or a program administered by such an entity, including community development corporations or other nonprofit development organizations and social service organizations, that provides services to 

disadvantaged entrepreneurs. 

ø(12) TRAINING AND TECHNICAL ASSISTANCE.—The term ‘‘training and technical assistance’’ means services and support 

provided to disadvantaged entrepreneurs, such as assistance 

for the purpose of enhancing business planning, marketing, 

management, financial management skills, and assistance for 

the purpose of accessing financial services. 

ø(13) VERY LOW-INCOME PERSON.—The term ‘‘very low-income person’’ means having an income, adjusted for family 

size, of not more than 150 percent of the poverty line (as defined in section 673(2) of the Community Services Block Grant 

Act (42 U.S.C. 9902(2)), including any revision required by that 

section). 

øSEC. 173. ESTABLISHMENT OF PROGRAM. 

øThe Administrator shall establish a microenterprise technical 

assistance and capacity building grant program to provide assistance from the Administration in the form of grants to qualified organizations in accordance with this subtitle. 

øSEC. 174. USES OF ASSISTANCE. 

øA qualified organization shall use grants made under this subtitle—

ø(1) to provide training and technical assistance to disadvantaged entrepreneurs; 

ø(2) to provide training and capacity building services to 

microenterprise development organizations and programs and 

groups of such organizations to assist such organizations and 

programs in developing microenterprise training and services; 

ø(3) to aid in researching and developing the best practices 

in the field of microenterprise and technical assistance programs for disadvantaged entrepreneurs; and 

ø(4) for such other activities as the Administrator determines 

are consistent with the purposes of this subtitle. 

øSEC. 175. QUALIFIED ORGANIZATIONS. 

øFor purposes of eligibility for assistance under this subtitle, a 

qualified organization shall be—

ø(1) a nonprofit microenterprise development organization or 

program (or a group or collaborative thereof) that has a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs; 


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ø(2) an intermediary; 

ø(3) a microenterprise development organization or program 

that is accountable to a local community, working in conjunction with a State or local government or Indian tribe; or 

ø(4) an Indian tribe acting on its own, if the Indian tribe can 

certify that no private organization or program referred to in 

this paragraph exists within its jurisdiction. 

øSEC. 176. ALLOCATION OF ASSISTANCE; SUBGRANTS. 

ø(a) ALLOCATION OF ASSISTANCE.—

ø(1) IN GENERAL.—The Administrator shall allocate assistance from the Administration under this subtitle to ensure 

that—

ø(A) activities described in section 174(1) are funded 

using not less than 75 percent of amounts made available 

for such assistance; and 

ø(B) activities described in section 174(2) are funded 

using not less than 15 percent of amounts made available 

for such assistance. 

ø(2) LIMIT ON INDIVIDUAL ASSISTANCE.—No single person 

may receive more than 10 percent of the total funds appropriated under this subtitle in a single fiscal year. 

ø(b) TARGETED ASSISTANCE.—The Administrator shall ensure 

that not less than 50 percent of the grants made under this subtitle 

are used to benefit very low-income persons, including those residing on Indian reservations. 

ø(c) SUBGRANTS AUTHORIZED.—

ø(1) IN GENERAL.—A qualified organization receiving assistance under this subtitle may provide grants using that assistance to qualified small and emerging microenterprise organizations and programs, subject to such rules and regulations as 

the Administrator determines to be appropriate. 

ø(2) LIMIT ON ADMINISTRATIVE EXPENSES.—Not more than 7.5 

percent of assistance received by a qualified organization under 

this subtitle may be used for administrative expenses in connection with the making of subgrants under paragraph (1). 

ø(d) DIVERSITY.—In making grants under this subtitle, the Administrator shall ensure that grant recipients include both large 

and small microenterprise organizations, serving urban, rural, and 

Indian tribal communities serving diverse populations. 

ø(e) PROHIBITION ON PREFERENTIAL CONSIDERATION OF CERTAIN

SBA PROGRAM PARTICIPANTS.—In making grants under this subtitle, the Administrator shall ensure that any application made by 

a qualified organization that is a participant in the program established under section 7(m) of the Small Business Act does not receive preferential consideration over applications from other qualified organizations that are not participants in such program. 

øSEC. 177. MATCHING REQUIREMENTS. 

ø(a) IN GENERAL.—Financial assistance under this subtitle shall 

be matched with funds from sources other than the Federal Government on the basis of not less than 50 percent of each dollar provided by the Administration. 

ø(b) SOURCES OF MATCHING FUNDS.—Fees, grants, gifts, funds 

from loan sources, and in-kind resources of a grant recipient from 


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public or private sources may be used to comply with the matching 

requirement in subsection (a). 

ø(c) EXCEPTION.— ø(1) IN GENERAL.—In the case of an applicant for assistance 

under this subtitle with severe constraints on available sources 

of matching funds, the Administrator may reduce or eliminate 

the matching requirements of subsection (a). 

ø(2) LIMITATION.—Not more than 10 percent of the total 

funds made available from the Administration in any fiscal 

year to carry out this subtitle may be excepted from the matching requirements of subsection (a), as authorized by paragraph 

(1) of this subsection. 

øSEC. 178. APPLICATIONS FOR ASSISTANCE. 

øAn application for assistance under this subtitle shall be submitted in such form and in accordance with such procedures as the 

Administrator shall establish. 

øSEC. 179. RECORDKEEPING. 

øThe requirements of section 115 shall apply to a qualified organization receiving assistance from the Administration under this 

subtitle as if it were a community development financial institution 

receiving assistance from the Fund under subtitle A. 

øSEC. 180. AUTHORIZATION. 

øIn addition to funds otherwise authorized to be appropriated to 

the Fund to carry out this title, there are authorized to be appropriated to the Administrator to carry out this subtitle—

ø(1) $15,000,000 for fiscal year 2000; 

ø(2) $15,000,000 for fiscal year 2001; 

ø(3) $15,000,000 for fiscal year 2002; and 

ø(4) $15,000,000 for fiscal year 2003. 

øSEC. 181. IMPLEMENTATION. 

øThe Administrator shall, by regulation, establish such requirements as may be necessary to carry out this subtitle.¿ 

Æ 


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