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	<title> - SMALL BUT MIGHTY: A REVIEW OF THE SBA MICROLOAN PROGRAM</title>
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	[House Hearing, 116 Congress]
	[From the U.S. Government Publishing Office]


	SMALL BUT MIGHTY: A REVIEW OF THE SBA MICROLOAN PROGRAM

	=======================================================================

	HEARING

	BEFORE THE

	SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS

	OF THE

	COMMITTEE ON SMALL BUSINESS
	UNITED STATES
	HOUSE OF REPRESENTATIVES

	ONE HUNDRED SIXTEENTH CONGRESS

	FIRST SESSION

	__________

	HEARING HELD
	MARCH 7, 2019

	__________

	[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	Small Business Committee Document Number 116-009
	Available via the GPO Website: www.govinfo.gov


	__________


	U.S. GOVERNMENT PUBLISHING OFFICE
	35-332 PDF WASHINGTON : 2019

	-----------------------------------------------------------------------------------
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	HOUSE COMMITTEE ON SMALL BUSINESS

	NYDIA VELAZQUEZ, New York, Chairwoman
	ABBY FINKENAUER, Iowa
	JARED GOLDEN, Maine
	ANDY KIM, New Jersey
	JASON CROW, Colorado
	SHARICE DAVIDS, Kansas
	JUDY CHU, California
	MARC VEASEY, Texas
	DWIGHT EVANS, Pennsylvania
	BRAD SCHNEIDER, Illinois
	ADRIANO ESPAILLAT, New York
	ANTONIO DELGADO, New York
	CHRISSY HOULAHAN, Pennsylvania
	ANGIE CRAIG, Minnesota
	STEVE CHABOT, Ohio, Ranking Member
	AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
	TRENT KELLY, Mississippi
	TROY BALDERSON, Ohio
	KEVIN HERN, Oklahoma
	JIM HAGEDORN, Minnesota
	PETE STAUBER, Minnesota
	TIM BURCHETT, Tennessee
	ROSS SPANO, Florida
	JOHN JOYCE, Pennsylvania

	Adam Minehardt, Majority Staff Director
	Melissa Jung, Majority Deputy Staff Director and Chief Counsel
	Kevin Fitzpatrick, Staff Director


	C O N T E N T S

	OPENING STATEMENTS

	Page
	Hon. Andy Kim.................................................... 1
	Hon. Kevin Hern.................................................. 2

	WITNESSES

	Ms. Ceyl Prinster, President & CEO, Colorado Enterprise Fund,
	Denver, CO..................................................... 4
	Ms. Carolina Martinez, CEO, California Association for Micro
	Enterprise Opportunity, San Francisco, CA...................... 6
	Ms. Mariama Jallow, Owner, Mariama's Beauty Supply, Portland, ME. 7
	Ms. Michelle Richards, Executive Director, Great Lakes Women's
	Business Council, Livonia, MI, testifying on behalf of Women
	Impacting Public Policy........................................ 8

	APPENDIX

	Prepared Statements:
	Ms. Ceyl Prinster, President & CEO, Colorado Enterprise Fund,
	Denver, CO................................................. 23
	Ms. Carolina Martinez, CEO, California Association for Micro
	Enterprise Opportunity, San Francisco, CA.................. 27
	Ms. Mariama Jallow, Owner, Mariama's Beauty Supply, Portland,
	ME......................................................... 34
	Ms. Michelle Richards, Executive Director, Great Lakes
	Women's Business Council, Livonia, MI, testifying on behalf
	of Women Impacting Public Policy........................... 36
	Questions for the Record:
	None.
	Answers for the Record:
	None.
	Additional Material for the Record:
	ECDI - Economic & Community Development Institute............ 41


	SMALL BUT MIGHTY: A REVIEW OF THE SBA MICROLOAN PROGRAM

	----------


	THURSDAY, MARCH 7, 2019

	House of Representatives,
	Committee on Small Business,
	Subcommittee on Economic Growth,
	Tax, and Capital Access,
	Washington, DC.
	The Subcommittee met, pursuant to call, at 10:02 a.m., in
	Room 2360, Rayburn House Office Building. Hon. Andy Kim
	[chairman of the Subcommittee] presiding.
	Present: Representatives Kim, Davids, Crow, Delgado,
	Radewagen, Hern, Stauber, and Spano.
	Chairman KIM. Good morning, everyone. I will have the
	Committee come to order now.
	I want to thank everyone for joining us this morning. I
	want to especially thank the witnesses for being here today.
	On this Subcommittee, our primary focus is ensuring that
	America's small businesses and entrepreneurs have access to the
	capital that they need to start and grow their businesses and
	create good paying jobs. Unfortunately, many entrepreneurs,
	particularly from traditionally underserved communities, lack
	the skills, training, and experience needed to demonstrate to
	conventional lenders that they are worth the risk.
	This leaves two main challenges facing entrepreneurs. The
	first being a lack of access to capital. The second being the
	skills and tools it takes to become credit worthy. As
	legislators, it is incumbent upon us to address these
	challenges, and it is the reason that we are here today.
	The Small Business Administration has an array of programs
	designed to boost access to capital and to promote
	entrepreneurial development. However, SBA's Microloan program
	is unique in that it offers entrepreneurs both opportunities to
	unlock affordable capital and the technical assistance they
	need.
	Here is how it works: SBA lends qualified, nonprofit
	intermediary lenders money these intermediaries then use to
	make their microloans to small businesses and entrepreneurs.
	SBA also provides the intermediaries with grant funding to
	offer marketing, management, and technical assistance to
	borrowers and potential borrowers.
	In many cases, intermediaries begin by providing technical
	assistance to a potential borrower to enhance their credit
	readiness prior to making a microloan to the entrepreneur. That
	program began as a pilot program in 1991, and following a
	successful start was made permanent in 1997.
	2018 was a record year for the Microloan program, and the
	program is currently 3.5 percent ahead of where it was at this
	point last year. Last year in my home state of New Jersey, 150
	microloans totaling approximately $2.5 million were approved.
	Since then, it has grown considerably, and many intermediaries
	report that some of the program's original rules are now
	restricting them from meeting existing demands for small
	business financing and providing more technical assistance. In
	other words, they feel the program has outgrown many of those
	rules and have expressed the need for Congress to review some
	of those rules in order to enhance flexibilities for
	intermediaries.
	That brings me to why we were here today. I look forward to
	hearing the recommendations and feedback of our distinguished
	witnesses to continue strengthening the Microloan program.
	Doing so will allow us to provide intermediaries with
	appropriate flexibility to enable them to continue offering
	affordable capital and essential technical assistance to
	America's smallest businesses.
	I hope today's hearing will be a productive opportunity to
	explore the ways Congress can continue modernizing and
	optimizing SBA's Microloan program.
	And now I would like to yield to the Ranking Member, Mr.
	Hern, for an opening statement.
	Mr. HERN. Thank you, Mr. Chairman.
	Although the country continues to record above average
	economic marks, the Nation's smallest firms still face
	challenges when it comes to financing their businesses. This is
	even more pronounced for the category of small businesses known
	as microbusinesses. Recognizing the difficulties the Nation's
	smallest firms face, Congress sought to alleviate the capital
	access issue with the creation of the Small Business
	Administration's Microloan program in 1991, and after a brief
	trial period, Congress made the loans permanent in 1997. And
	the Microloan program has been assisting entrepreneurs ever
	since.
	Unique to the program is the financial transaction that
	includes SBA making a direct loan to a microloan intermediary
	or a nonprofit that is working within the program. From there,
	the intermediary provides loans directly to the small
	businesses in need. Importantly, these small businesses are not
	left by themselves to fight for their survival. Built into the
	program is a requirement of technical assistance or counseling
	by the intermediary. This program is what we are going to be
	discussing today.
	Last year, members of this Committee were able to enact a
	number of reforms to the Microloan program. Included in the
	legislation were two important studies. First, SBA is required
	to study the utilization levels of the program by microlenders.
	Second, the Government Accountability Office is required to
	examine SBA's microloan oversight capabilities. With any
	government program, it is critical to have comprehensive
	oversight to safeguard American taxpayer dollars.
	As we eagerly await both reports, which are due to Congress
	this August, I look forward to today's hearing that will review
	the program from the perspective of you, the participants and
	the witnesses directly involved on the ground. SBA's capital
	access programs are transforming neighborhoods and communities
	from my home state of Oklahoma to Florida and beyond. Following
	in last year's footsteps, we must continue to create an
	environment where small businesses are able to grow, expand,
	and create jobs. As the hearing title implies, these companies
	may be small, but they have an outsize effect on our economy.
	Thank you, Mr. Chairman, and I yield back.
	Chairman KIM. Thank you, Mr. Hern. The gentleman yields
	back.
	If Committee members have an opening statement prepared, we
	would ask that they be submitted for the record.
	I would just like to take a minute to explain the timing
	rules. Each witness gets 5 minutes to testify and each member
	gets 5 minutes for questioning. There is a lighting system to
	assist you. The green light will be on when you begin, and the
	yellow light will come on when you have 1 minute remaining. And
	the red light will come on when you are out of time. And we ask
	that you stay within the timeframe to the best of your
	abilities.
	I would now like to introduce our witnesses.
	Our first witness is Ms. Ceyl Prinster. Ms. Prinster is
	president and CEO of Colorado Enterprise Fund, a position she
	has served in for over 30 years. Her current service roles
	include trustee of the Denver Foundation and Chair of its
	Impact Investing Committee, board and executive committee
	member of the National CDFI Coalition, and board member of the
	Other Side Academy. She previously served as trustee for the
	University of Notre Dame and president of its alumni
	association, and was a founding member of the Denver
	Sustainable Food Policy Council. Her awards include the 2018
	David E. Bailey Small Business Advocate Award from the Denver
	Metro Chamber, Outstanding Woman in Business from the Denver
	Business Journal, and the Financial Services Advocate of the
	Year from the SBA, the Tom Dooley Award from the University of
	Notre Dame. Ms. Prinster is a graduate of, you guessed it,
	University of Notre Dame. Welcome, Ms. Prinster. We are lucky
	to have you today.
	I will continue on and then I will get back to you.
	Our second witness is Ms. Carolina Martinez. Ms. Martinez
	is the CEO of CAMEO, the California Association for Micro
	Enterprise Opportunity, a statewide association that represents
	over 220 lenders, training programs, job creators, agencies,
	and individuals dedicated to furthering microbusiness
	development in California. Ms. Martinez has over 13 years of
	experience working in the economic development and business
	consulting with a variety of nonprofit organizations and
	universities across the Western Hemisphere. She has developed
	bilingual, culturally appropriate, entrepreneurial training
	programs, trained and coached pre-venture and startups,
	developed international networks promoting partnerships among
	private corporations, provided consulting services to
	vulnerable communities, and has owned her own business
	consulting firm. She is a graduate of the University of the
	Andes in Bogota, Colombia, and received her Masters of Business
	Administration from the University of North, Barranquilla,
	Colombia. Welcome, Ms. Martinez.
	Our third witness today is Ms. Mariama Jallow. Ms. Jallow
	is the owner of Mariama's Beauty Supply in Portland, Maine.
	Mariama went to school in The Gambia, a country in West Africa
	and grew up helping her mother manage the family grocery store.
	Because of that experience she knew she wanted to open her own
	business someday. She arrived in the United States in 2012 from
	The Gambia. Her dream of opening a business came true in Maine
	where she operates and continues to expand her business.
	Welcome, Ms. Jallow.
	I would now like to yield to our Ranking Member, Mr. Hern,
	to introduce our final witness.
	Mr. HERN. Our witness is Michelle Richards. Ms. Richards is
	the executive director and a founding board member of the Great
	Lakes Women's Business Council outside of Detroit, Michigan.
	She was a pioneer in the microlending movement, and has been a
	microloan intermediary with the Small Business Administration
	for over 2 decades. Her organization has helped countless
	startups, entrepreneurs, and small businesses with financial
	assistance and counseling. She is also a previous winner of
	SBA's Women's Business Advocate of the Year Award for the State
	of Michigan. Ms. Richards is testifying today on behalf of
	Women Impacting Public Policy. Thank you.
	Chairman KIM. Thank you very much. Welcome.
	We are going to start with Ms. Prinster. Over to you. You
	are recognized for 5 minutes.

	STATEMENTS OF CEYL PRINSTER, PRESIDENT & CEO, COLORADO
	ENTERPRISE FUND; CAROLINA MARTINEZ, CEO, CALIFORNIA ASSOCIATION
	FOR MICRO ENTERPRISE OPPORTUNITY; MARIAMA JALLOW, OWNER,
	MARIAMA'S BEAUTY SUPPLY; MICHELLE RICHARDS, EXECUTIVE DIRECTOR,
	GREAT LAKES WOMEN'S BUSINESS COUNCIL

	STATEMENT OF CEYL PRINSTER

	Ms. PRINSTER. Good morning. Thank you.
	I am here today to suggest some improvements to the SBA
	Microloan program, but first I will tell you a little bit about
	my organization and myself.
	I have served as president and CEO of Colorado Enterprise
	Fund (CEF) for over 30 years, starting as its first employee.
	We were founded in 1976 as a nonprofit providing loans to
	disadvantaged small businesses. We are certified both as a
	community development financial institution and an SBA
	microloan intermediary. Overall, we have made over $81 million
	in loans to more than 2,400 businesses in Colorado, and have
	created or maintained over 12,000 jobs. These loans have helped
	businesses that could have not obtained the capital they needed
	to start or grow from traditional banks.
	CEF started with the Microloan program in 1992 when the
	program first began. We have received 15 rounds of program
	loans totaling $11.5 million, with 11 of our loans now paid
	off. With Microloan program funding, we have made 1,500 small
	business loans totaling $18.7 million. A significant percentage
	of our loans, 85 percent, have been made to minority, women,
	veteran, or low-income entrepreneurs.
	The Microloan TA grants have helped us create and
	administer a robust program of business advising, coaching, and
	training using in-house consultants and lending staff and a
	pool of outside legal and accounting professionals, all trained
	to provide trusted guidance to our clients. We deliver an
	average of over 3,000 hours of technical assistance per year
	and over 80 percent of our borrowers utilize our TA services.
	I have led CEF for the entire time since we began in the
	Microloan program 27 years ago and have been a member for many
	years of the Friends of SBA Microloan Program, an informal
	network of microloan intermediaries. I also serve as a board
	member of the National CDFI Coalition representing microlenders
	within the broader CDFI community.
	With this experience, I am confident that I speak for a
	consensus of other microlenders to say that as good as the
	program has been for businesses in Colorado and across the
	Nation, it could be even better. There are two changes I
	suggest to the program that would reduce administrative burden
	on both the nonprofit intermediaries and the SBA to help
	microlenders better support small businesses seeking credit.
	The first improvement is elimination of the 1/55th rule,
	which affects intermediaries' ability to get loan capital from
	the program. This rule was part of the early pilot phase of the
	program and limits the distribution of loan funds for the first
	half of each year to the lesser of 800,000, or 1/55th of the
	new funds appropriated. In some years, the maximum capital
	available gets capped at about 350,000, which will only fund a
	handful of small business loans. Having to wait for additional
	loan funds until the third or fourth quarter of the year
	creates an administrative bottleneck for the agency and undue
	cash restrictions and paperwork for the intermediaries.
	Elimination of this rule will allow SBA to more efficiently get
	loan capital to the microlenders where and when the funds are
	needed and help intermediaries fund their pipeline in a timely
	way.
	The second improvement is elimination of the 50/50 rule,
	which also is a burdensome rule enacted in the pilot phase of
	the program and it affects the administration of our TA grants.
	It limits funds for pre-loan support to 50 percent of the grant
	amount. Microlenders support many startups needing intensive
	business counseling. We cultivate our borrowers by helping them
	with training and counseling to become ready for credit and
	debt. This rule also limits funding for underwriting, which is
	a costly challenge when working with startups and nonbankable
	borrowers. Elimination of this 50/50 rule would enable
	microlenders, many of which are very seasoned in this work, to
	determine the best use of their grants to support their market.
	They would be able to provide the needed upfront assistance to
	help the entrepreneur build a solid base for their startup, in
	addition to the post-loan assistance to support the ongoing
	growth of the business.
	We are very grateful for the support of this Committee for
	the very impactful SBA Microloan program and hope you will
	consider elimination of these two rules which would greatly
	improve it. Thank you.
	Chairman KIM. Thank you so much for sharing that.
	I want to move it on to Ms. Martinez. Over to you for 5
	minutes.

	STATEMENT OF CAROLINA MARTINEZ

	Ms. MARTINEZ. Chair Kim and Ranking Member Helm and members
	of the Subcommittee, my name is Carolina Martinez, and I
	appreciate the opportunity to testify on behalf of the
	California Association for Micro Enterprise Opportunity
	(CAMEO). CAMEO is California's statewide network, microbusiness
	network of over 220 organizations, agencies, and individuals
	that provide entrepreneurs with loans, credits, and business
	technical assistance. Annually, CAMEO members serve about
	21,000 businesses. These firms, largely startups with less than
	five employees, support or create 37,000 new jobs in California
	and generate a total of $1.5 billion in economic activity.
	Congressional investment in microbusiness development
	maters. Business ownership increases income and generates
	wealth in both urban and rural underserved communities.
	Business coaching and capital are critical tools for success.
	Thus, the SBA's Microloan program is of great importance to
	CAMEO and our members.
	Historically, small businesses have struggled to obtain
	access to sufficient capital and credit to enable them to lead
	job growth. The struggle can be even greater for startup and
	microbusinesses.
	Take, for example, Maria Palacio. She is a fifth-generation
	Colombian coffee farmer who started her U.S.-based coffee
	roasting business to help coffee farmers get a fair price.
	Maria secured a contract with Facebook but needed a loan to
	purchase the beans to fulfill the contract. Since Maria's
	company, Progeny Coffee, was a startup, banks could not make
	that loan. Maria turned to Working Solutions, a CAMEO member,
	who lent her $25,000 with SBA funds to help her purchase
	inventory at this critical moment. Working Solutions helped
	Maria manage her exponential growth. Over the last 3 years,
	Progeny grew from $10,000 in revenue to over $1 million in
	revenue.
	To address challenges faced by small business owners such
	as Maria, Congress authorized the SBA Microloan program as a 5-
	year pilot program in 1991 and made it permanent in 1997. The
	rules of the program have remained basically the same, while
	the lending landscape has dramatically changed. Congress has
	moved to modernize this program, most recently modifying the
	25/75 rule to 50/50.
	While this was helpful, CAMEO offers the following four
	suggestions to further modernize the program. First, eliminate
	the 50/50 rule. The Microloan Technical Assistance Program
	previously required that 25 percent of the technical assistance
	given to the entrepreneur by the lender be provided pre-loan
	and 75 percent post-loan. In 2018, the Congress changed its
	percentage from 25/75 to 50/50. While the relaxed requirement
	is a welcome change, the microloan industry has long advocated
	for this percentage to be lifted altogether as every business
	is unique.
	Second, amend the 1/55th requirement to provide greater
	flexibility. This rule is a left-over requirement from the
	pilot program and is not a sufficient way to distribute funds.
	We, too, support the elimination of the 1/55th rule.
	Additionally, we would support the flexibility of having a
	reserve fund for SBA to deploy capital throughout the year in
	the event of a lapse in appropriations that result in a
	continuing resolution.
	Third, provide access to microloan data. SBA should make
	available publicly data on borrowers who use the Microloan
	program similar to the data available for the 7(a) program.
	Supporters of the program would benefit from having information
	such as geographical location, loan amount, interest rate,
	terms, et cetera. Requiring individuals to file a Freedom of
	Information Act (FOIA) request is burdensome.
	Fourth, increase support for microloan funding. We
	appreciate this Committee's history of strong bipartisan
	support for this program. In 2019, SBA is expected to support
	around $42 million in lending to intermediaries. In addition,
	an appropriation of $31 million was allotted for technical
	assistance. CAMEO requests that this program's growth continue,
	and we will advocate for a 10 percent increase in the program.
	In closing, I am compelled to mention the exponential rise
	of online lending. In 2015, the volume of online lenders was
	five times that of SBA lending and growing at an increasing
	rate. The access to fast money comes at a price, in many cases
	a price too high for many small businesses. Last year,
	California became the first state to pass a transparency in
	small business lending bill to protect entrepreneurs from
	predatory lending. CAMEO believes that the access to capital
	issue has moved beyond access to affordable capital to
	financing that will help it to grow, not force it into
	bankruptcy. We support a federal truth-in-lending bill and
	would welcome this Committee's inquiry into the feasibility of
	such a bill.
	Thank you for inviting me to testify here today. I look
	forward to answering any questions you may have.
	Chairman KIM. Thank you for sharing that. That is all very
	helpful.
	Why do we not move on? Ms. Jallow, over to you. You are
	recognized for 5 minutes.

	STATEMENT OF MARIAMA JALLOW

	Ms. JALLOW. I am Mariama Jallow, owner of Mariama's Beauty
	Supply in Portland, Maine.
	I arrived in Maine from a small village where my family
	owned and operated a local grocery store. My mother also is a
	leader of a woman's association where every Saturday, 40 to 50
	women meet at our house to make soap. With the money earned by
	selling the soap at the local market, they make loans to
	members of their group so that each woman can start, expand,
	and own their own small business or to help in emergency
	situations.
	After working in Maine for about 3 years, I began to think
	about opening a small grocery store, like the one my family
	owns in our village, which I had helped manage with my mother.
	I soon discovered that despite my business skills, owning a
	store here is nothing like back home. I then saw that I would
	need help to start any business in Maine, as the licensing,
	credit card, and banking systems are all different.
	That was when I learned about Coastal Enterprises (CEI), a
	Community Development Financial Institution (CDFI), and began
	to work with John Scribner of the StartSmart program manager.
	StartSmart works with immigrants, at no cost to them,
	throughout Maine, who are looking to start or expand their
	businesses. When it became apparent that the market for new
	immigrant-owned grocery stores in Portland stores was already
	saturated, I saw that there was a potential for a hair and
	braiding business because there was nothing like that in
	Portland, Maine.
	CEI helped me in all aspects of locating and setting up my
	store, including permitting, recordkeeping, negotiating the
	lease, and many other details. In addition, also, CEI helped in
	passing legislation to allow hair braiders to work in the state
	without a cosmetology license, which at that time was required.
	John and I both testified before the State of Maine
	legislature, in the effort to update the licensing requirements
	at the state level. The bill passed, and then the new
	regulations made it possible for me to offer hair braiding at
	the store without having to obtain the full cosmetology
	license, which has been essential to the cash flow of my
	business.
	CEI continues to support me to meet the necessary
	requirements and obligations related to operating a business,
	such as bookkeeping and the expansion plans that I have. In
	fact, after Mariama's Beauty Supply had been in business for 2
	years, CEI loaned me funds using the Small Business
	Administration (SBA) Microloans. This allowed me to increase my
	retail stock and to renovate my store to include a full-service
	salon, which will employ a hair stylist and makeup artist, in
	addition to the existing hair braiders.
	Whenever I have a question, I call John for advice.
	If it were not for CEI, where would I go for business
	advice?
	I hope and pray that CEI will be here for the next
	generation of people who are coming to Maine, as well as those
	who are already here.
	Just as the women's association in my home village is
	making a difference in their community, I see how CEI is having
	an impact on lives in Maine, including mine.
	Thank you so much.
	Chairman KIM. Thank you so much for sharing your personal
	experience. It is very helpful for us to understand how this
	all works on the ground.
	We are going to move on. Ms. Richards, you are recognized
	for 5 minutes.

	STATEMENT OF MICHELLE RICHARDS

	Ms. RICHARDS. Thank you. Good morning, Chair Kim, and
	Ranking Member Hern, members of the Committee. I would like to
	thank you for the opportunity to testify.
	My name is Michelle Richards, and I am testifying on behalf
	of Women Impacting Public Policy, a national nonpartisan policy
	organization advocating on behalf of women entrepreneurs.
	I serve as the executive director of the Great Lakes
	Women's Business Council (Great Lakes WBC), which is a
	nonprofit that services women and minority small business
	owners and entrepreneurs through capital, women's business
	certification, training, coaching, and counseling.
	When I started Great Lakes WBC over 34 years ago in 1984,
	microlending was not an industry. We did not know we were a
	microlender because nobody had yet labeled it. But, when the
	SBA Microloan program began, we became one of the first
	organizations to receive funding. We have made $7 million in
	microloans, creating 1,800 jobs, of which 89 percent were to
	women.
	Capital is often the determinant of an entrepreneur's
	ability to start or grow a business. There are nearly 10
	million women-owned businesses in the United States generating
	$1.6 trillion in revenue and employing nine million Americans.
	Yet, for women, accessing capital continues to be difficult.
	Women account for only 16 percent of conventional small
	business loans and receive only 4 percent of the actual loan
	dollars.
	For entrepreneurs in rural areas, the challenge of
	obtaining capital is even greater. As of 2017, only 30 percent
	of community bank branches were in rural areas. Twenty-one
	years have passed since the implementation of the very
	successful Microloan program. It is time for Congress to
	modernize the Microloan program.
	WIPP supports the following three changes: Amending the 1/
	55th rule to provide greater flexibility to SBA microlenders,
	as you have heard; eliminating the 50/50 technical assistance
	rule; and providing access to SBA microloan data. The 1/55th
	rule is the number one pain point for microlenders. Under this
	rule, as you have heard, only $800,000 or 1/55th of available
	loan funds are made available to intermediaries. It is divided
	equally among states. The SBA asked for authority to eliminate
	this rule, stating that it restricts the ability of capital for
	small businesses without considering the size of the states or
	the needs of the small business community.
	When the SBA is operating under a continuing resolution,
	loan amounts are even more restricted. We had a loan in which
	we requested a half million dollars and had a pipeline to
	support it, but only received $164,000, because that was all
	that was available for Michigan. Our options were to take the
	smaller loan or forgo it altogether and lose our place in the
	queue for the second half of the year. In another instance, we
	ran out of money at the end of the fiscal year but had to wait
	five months until March when funding was available. This
	affects our credibility and our ability to serve communities.
	WIPP supports the elimination of the 50/50 rule. The
	Microloan program has strict requirements for microlenders. The
	TA program for many years, as was stated, provided 25 percent
	for pre-loans and 75 percent for post-loans. WIPP asked
	Congress to give microloan lenders the flexibility to use TA as
	they see fit. Rather than set a percentage prescribed by the
	Federal Government, many of these organizations like ours have
	more than 2 decades of experience and need the ability to shape
	the program to be the most effective for our clients.
	SBA should make available data on borrowers who use the
	Microloan program, similar to the data that is available
	through the 7(a) program. Data on geographic location, loan
	amount, interest rate, and term would be helpful not only to
	supporters of the program, but to microlenders in determining
	gaps and needs.
	In conclusion, Great Lakes WBC is an example of how
	organizations, in partnership with the SBA, can serve the needs
	of entrepreneurs and their communities, turning them into job
	creators. Making the suggested changes to the Microloan program
	would go a long way toward making the program even more
	impactful.
	Thank you for inviting me to testify here today. I look
	forward to answering any questions you may have.
	Chairman KIM. Thank you. We all appreciate everything that
	you have shared with us today.
	So why do we not move on? We have a lot of questions for
	you and look forward to this conversation.
	I will begin myself. I will recognize myself for 5 minutes.
	Thank you again for being here.
	Capital access is critical, is a critical need for small
	businesses. We all know that. It provides an important
	financial foundation which often determines whether a business
	is going to be able to successfully grow. Predatory lending has
	been a growing issue in the small business community, and
	unfortunately, as capital availability from traditional sources
	has declined, predatory practices have emerged. Predatory
	lending has devastated many small businesses throughout my
	state and certainly across the country.
	I wanted to start with Ms. Martinez. In your testimony you
	mentioned the rapid rise of predatory online small business
	lending and how in many cases access to this fast money comes
	with a price much higher than most small businesses can afford.
	I wanted to just drill down in this because I think it is a
	very important point. Unfortunately, this often leads to
	entrepreneur insolvency and/or small business bankruptcy. How
	often does your organization, or its members encounter an
	entrepreneur or small business struggling with the consequences
	of agreeing to such a loan with predatory, unfair, or
	unreasonable terms?
	Ms. MARTINEZ. Thank you, Chairman Kim.
	Yes. Unfortunately, our members do encounter these cases
	more often than we would like to. So sometimes it is daily. And
	most of our borrowers are actually arriving to us to try to
	save their businesses and save their way of life sometimes. So,
	this predatory lending is really affecting. And one of the
	things that I would say probably is that they are trying to
	serve the clients as efficient as they can, and they are trying
	to use the loan capital that our members have to really help
	the business owners to refinance. But it is something that is
	coming to terms really often and we could say that every day
	they are seeing these kinds of cases.
	Chairman KIM. Well, as you were saying, with the
	refinancing, since microloans may not be used to refinance
	existing debt, how does your organization's work with the
	microloan intermediaries in its network to remedy this problem
	for the borrowers then?
	Ms. MARTINEZ. Yeah, well, CAMEO is helping our members to
	find other alternatives, not restricted loan capital, to be
	able to refinance. So, they are not allowed to use microloan
	capital to do these kinds of loans. Sometimes it is not
	possible, and they get to us really late, and your members have
	to find additional capital to be able to do the refinancing and
	help the small businesses.
	Chairman KIM. Thank you. I believe if Congress is to
	effectively confront this issue of predatory lending we must
	have accurate and current data available as well, and I think
	that gets to a lot of the points you raised, Ms. Richards. In
	your testimony you mentioned challenges in accessing Microloan
	program data. Is the problem that the data around microloans is
	not being collected or that SBA is not reporting it?
	Ms. RICHARDS. SBA is not reporting----
	Chairman KIM. Would you mind using----
	Ms. RICHARDS. Sorry. Technology is never my friend.
	SBA is not reporting it. The data is available.
	Chairman KIM. So I guess from my perspective here, would it
	be unduly burdensome for SBA to require participating
	intermediaries as it collects certain data and to report it to
	the SBA and then obviously we need to address what you just
	mentioned as well about making sure SBA is going to be
	reporting this coming out.
	Ms. RICHARDS. So as a microlender, we report in a system
	that is called MPERS, Microloan Program Economic Reporting
	System, I suspect. And so, in fact, today is the deadline for
	reporting from last month. We report all of this data every
	month. It is available. It is part of the database. It is not
	published. It is not made available.
	Chairman KIM. And from what you have heard so far, what is
	the reasoning you are hearing why this data has not been made
	available?
	Ms. RICHARDS. I am not familiar with the reason why.
	Chairman KIM. Okay. Well, we will make sure we come to the
	bottom of that.
	Well, my time is coming to an end. I want to turn it over
	to Ranking Member, Mr. Hern, who is now recognized for 5
	minutes.
	Mr. HERN. Thank you all. Thank you for your story, Ms.
	Jallow, about the American dream coming here and starting with
	an idea and finding access to capital and realizing that you
	can put people to work. So thank you so much for that story.
	To the entire panel, can you each briefly describe the
	small business environment in your local area, very briefly,
	the optimism? Is there optimism? Very briefly. I have a ton of
	questions.
	Ms. PRINSTER. Colorado has a very strong economy. We have a
	very high level of small business ownership and entrepreneurial
	spirit, and I would say that our level of small business
	startups and growth is very high.
	Mr. HERN. Thank you.
	Ms. Martinez?
	Ms. MARTINEZ. Yeah. California is also a very strong
	economy, and we do see a lot of businesses starting. And I
	think one of the challenges we see definitely is the access to
	capital, and obviously, to the business consulting. But we do
	see also an interesting rise in small businesses, very small
	businesses, and also some of the freelancers and contractors.
	Mr. HERN. Thank you.
	Ms. Jallow?
	Ms. JALLOW. In Portland, there are a lot of immigrant
	businesses starting in Portland. Like, in all of Forest Avenue,
	there are mostly immigrant businesses. And then they are having
	a lot of help from CEI because when I wanted to start my
	business I went to one lady who had a business and then she
	recommended CEI to me. So that is the way we started. And there
	are a lot of us starting.
	Mr. HERN. So, well, I am going to have a follow-up question
	for you.
	Ms. Richards?
	Ms. RICHARDS. Michigan has a shifting economy----
	Chairman KIM. Could you use the microphone?
	Ms. RICHARDS. Michigan has a shifting economy with the
	changes in the automotive industry but actually, three-quarters
	of Michigan is small cities and rural. And so there is still a
	great deal of struggle for enough sufficient support for small
	businesses. But actually, 87 percent of all the businesses in
	Michigan have five employees or less. So that is the bread and
	butter of our state.
	Mr. HERN. That is awesome.
	So I am sure you all looked at our backgrounds or bios. I
	have been a small business owner for 34 years and never ran for
	office before I came here, but I ran on one principle, and that
	was getting out of the way of job creators. Let them create
	more jobs and put people to work. One of the biggest problems
	we have in America is we have people with great ideas, like Ms.
	Jallow, that are having trouble trying to find opportunities to
	get access to capital so they can start. Also along that line,
	I am also in banking in the sense that I got to help start a
	bank many years ago. One of my frustrations was, and I am sure
	you all have heard of the infamous two words, Dodd-Frank. And
	Dodd-Frank really destroyed the ability for the small community
	banks to come out and take a chance on people like Ms. Jallow.
	And so I am sure you all have seen a lift in your
	opportunities, but as Ms. Martinez said, you also have people
	who are taking advantage of this inability for community banks
	to provide access to capital. And so therefore, that is the
	byproduct of what we sometimes do not hear about how when we
	get really engaged in Washington, D.C., in policy that there
	are alternatives that happen, bad things happen.
	So with that, Ms. Richards, we often hear about small
	businesses. They do not have the idea to be able to find like
	CEI like Ms. Jallow did. How are we supposed to find people
	with ideas like Ms. Jallow, how are we supposed to find folks
	like yourself?
	Ms. RICHARDS. Well, first of all, the internet is really
	critical. The Small Business Administration website has a list
	of the microlenders. Or had. They are updating it currently.
	They use our website. The Small Business Development Center,
	another SBA resource partner, is a critical component. Last
	year we received more referrals from the SBDC than any other
	source. We receive referrals from the banks and from former
	lenders, borrowers from our program also. The word is spread
	very widely and the biggest issue is there are still some gaps
	with the Microloan programs where they do not cover all the
	areas of a state. Just officially this month, the last nine
	counties were given to a microlender, so finally, Michigan is
	fully covered.
	Mr. HERN. Ms. Jallow, how did you find CEI in my remaining
	30 seconds.
	Ms. JALLOW. Through a business owner in Portland where I
	used to go and buy groceries. So I was talking to her. I said I
	want to start a grocery store. And then she was like, okay, I
	will give you a name of an organization that helped me, that
	are working with me. And then it was like, okay, I am going to
	call them. And then she gave me CEI's number and then I
	contacted John.
	Mr. HERN. If I may, we hear testimony a lot in our
	Committee about opportunities to loan money. It seems like one
	of our biggest issues is being able to get the message out to
	people with ideas because we have a lot of programs but very
	little awareness on the entire program itself. Thank you.
	Ms. JALLOW. You are welcome.
	Chairman KIM. Thank you. The gentleman's time has expired
	and he yields back.
	And I agree wholeheartedly about wanting to make sure we
	can find ways to inform people about those programs and that is
	something that the Ranking Member and I are committed to doing
	together.
	I wanted to recognize Representative Sharice Davids for 5
	minutes.
	Ms. DAVIS. Thank you, Chairman Kim.
	I am Sharice Davids from Kansas. It is the Kansas City
	metro area. I got really excited. I am going to say what I have
	here but I got really excited about a couple of things that you
	all have said.
	You know, the reason I get so excited is because
	entrepreneurship is kind of baked into the DNA of the place
	that I represent and that I live in. And this concept of an
	entrepreneurial ecosystem and the ways that different
	enterprises can make use of programs and that sort of thing
	plays out, at least from what I have seen, there is an
	organization that I know, a CDFI, which I love CDFIs, a CDFI
	called Alt Cap in the Kansas City area. They were only on the
	Missouri side. They are moving over to the Kansas side as well.
	And they have found different ways to collateralize some of the
	loans. And I know that is sometimes an issue, particularly for
	like artisans. They started a program called Art Cap that helps
	artists collateralize in different kind of ways than what we
	might see ordinarily, which I think is one of the great things
	about microlending and CDFIs. So I might come back to that.
	But I really got excited when you started talking about the
	relationship with SBDC, the Small Business Developments. Can
	you talk, and maybe this will be something that each of you
	could speak to for a moment, about how important it is either
	to build that relationship if it does not exist or if it does,
	and maybe any others, like the PTACs and community colleges. I
	know Johnson County Community College where I went to school
	has a Small Business Development Center. Can you talk a little
	bit about that?
	Ms. RICHARDS. Certainly. The Small Business Development
	Center's purpose is, in fact, to assist the growth or
	development of small businesses. And so they see us as a
	strategic partner. So as soon as they are meeting with someone
	who is going to need financing they alert us so that if we have
	additional questions to ask or direction to give, we work at
	the very beginning stages with them. We also work with the
	PTACs in the area. And many of the community colleges have
	entrepreneurial tracks now. And they frequently ask us to come
	and speak to their class before they graduate so that they know
	about the resources available to them because startup capital
	is very difficult for banks to provide. And so alternative
	financing, like the microloan programs, are very critical.
	Ms. JALLOW. For me, having the experience back home, to
	come over here and then to start is a huge difference because
	the licensing, the insurance and everything is different,
	whereas back home you can just start. But when I learned about
	CEI they definitely helped me because I was thinking that I
	cannot do it after talking to people. I was thinking that I
	cannot do it but after meeting with John and talking about it,
	I always get excited whenever I leave the office because I am
	like, okay, I can do it. And then we have people that are
	working in there, too, that are from different countries.
	Ms. MARTINEZ. Well, from CAMEO, we do believe that the only
	way that we are going to be supporting the entrepreneur is if
	we provide the resources in a comprehensive way. And I think
	the entrepreneurial ecosystem dimension is something that we
	are very interested in continuing to develop. The resources are
	available. There are the SBDCs, the WBCs. There are a lot of
	independent, nonprofit organizations that are providing
	business counseling to the entrepreneurs, but we just need to
	be aware of these resources. And building really strong
	networks where we share what programs are in existence and we
	determine what gaps are needed. It is important to be able to
	fulfill that need of the entrepreneur and find the right
	capital for them as well.
	Ms. PRINSTER. We work very closely with the SBDCs across
	our state in Colorado. In fact, some of our lending team will
	have office hours within the SBDC to talk specifically about
	financing, and particularly, our ability to help them. Most of
	our SBDCs do a very good job on classes, and we do refer
	businesses to them for counseling and training. Sometimes, and
	this addresses the 50/50 rule, sometimes the SBDCs have long
	waiting times for their counselors, or their counselors might
	not be as attuned to some of the populations that we serve. So,
	we would like to have more flexibility with our grants to do
	that pre-loan technical assistance. And then, of course, we
	will also support them post-loan because we have the loan to
	them. Therefore, that 50/50 rule does play into this issue
	about SBDCs and what they do well and what we feel we have the
	better opportunity to provide.
	Ms. DAVIS. Thank you. I appreciate that. And I appreciate
	your time. And with that I yield back.
	Chairman KIM. Great. Thank you.
	I now want to recognize for 5 minutes Representative
	Radewagen from American Samoa.
	Mrs. RADEWAGEN. Talofa. And good morning.
	Thank you, Chairman Kim and Ranking Member Hern for holding
	this hearing. And I want to thank the panel for appearing
	today. Each of you has a fascinating story and I just am very
	interested in it.
	My main goal while serving on this Committee is to see
	small business development in my home district of American
	Samoa, and it is my belief that microloans are the way forward
	for American Samoa. Now, I have seen the wonder of microloans
	in the neighboring independent Nation of Samoa, which has been
	a great boon for their small businesses. And I actually went
	into their villages and talked with many of the small business
	owners. And interestingly enough, it turns out almost all of
	the ones who get microloans are women. So they have discovered,
	the people who administer the microloan program, discovered men
	are not really as good at paying their loans back on time. So
	women have a better chance at it, so whatever that means.
	But I have a few questions. I would love to ask all of you
	questions, but Ms. Richards, because our time is so limited,
	when you are speaking with small businesses, what is the number
	one issue they raise?
	Ms. RICHARDS. Well, truthfully, the number one issue they
	raise is that they need capital. What we recognize is that what
	they need is capital, and usually they need assistance either
	with focused marketing strategy or operational excellence. They
	have business operations that are not successful. And so the
	biggest issue is getting them to understand that it is not just
	the money they need from us; it is the technical assistance and
	us to be a partner in their business growth.
	Mrs. RADEWAGEN. So after assisting a small business, I
	presume the relationship you built with small business does not
	stop, correct?
	Ms. RICHARDS. It does not stop. They are much like children
	and they never go away. They come back. They come back in a
	good way. And so truthfully, as they hit key milestones,
	whether that is moving to a new location. We had a company that
	went actually into manufacturing the product instead of
	importing it, that they will come to us first to help
	strategize, create a financing plan, and to move it forward.
	Mrs. RADEWAGEN. I see. So in your statement you explain
	that 93 percent of all your loans are through SBA's Microloan
	program. What is the makeup of the remaining 7 percent of
	loans?
	Ms. RICHARDS. The 7 percent is from investments from some
	foundations and some area banks that have key target areas that
	they want to invest money in.
	Mrs. RADEWAGEN. So do you know on average how many hours of
	technical assistance you might supply to a single small
	business in a given year?
	Ms. RICHARDS. We tend to estimate about 15 hours of
	technical assistance. Now, that will include any preparation
	time that a counselor, business counselor, will be doing in
	preparation for that meeting.
	Mrs. RADEWAGEN. So that would be 15 hours in a given year?
	Okay.
	Thank you, Mr. Chairman. I yield back.
	Chairman KIM. Thank you.
	We are going to move forward, and I would like to recognize
	Representative Crow from Colorado for 5 minutes.
	Mr. CROW. Thank you, Mr. Chairman.
	Ms. Prinster, always good to see a fellow Coloradan in D.C.
	Thank you for coming and joining us here today. And to all of
	the witnesses, really appreciate your hard work and what you
	are doing for small businesses and your leadership in your
	communities.
	This is a general question, and I would invite all of you
	to respond to it. But I represent one of the most diverse
	districts in the country. There are over 140 languages spoken
	in my largest city, but one in five residents of my community
	were born outside of the United States. And one of the biggest
	issues that they face, and this tends to be a very
	entrepreneurial community, they start their own businesses, and
	one of the biggest issues they face is just the lack of
	transferability of credit. These are folks that own businesses
	from where they came, but they come over here and they are
	coming with a blank slate and it is very hard for them to
	access capital and to start businesses. And I would love to
	hear your thoughts on whether you have experienced that, maybe
	starting with Ms. Jallow. What are the ways we can address
	that?
	Ms. JALLOW. Yes. For me, at the start, I had capital to
	start but in 2 years I needed some to grow, to add more
	inventory in the store and then to renovate the store for a
	full license salon because right now we just do braids,
	braiding, which some ladies rent from me and start their own
	businesses. Because, when they arrive some cannot speak English
	but having that opportunity to rent from me and sit and do hair
	braiding does not require much English to do that. But
	definitely the loan helped me to now renovate and put a full
	hair stylist that I will be employing and a makeup artist to do
	makeup.
	Ms. PRINSTER. I am familiar with your district,
	Representative Crow. Your point about people who lack credit
	history is one of the reasons why the SBA Microloan program is
	so important. We are very familiar with this type of situation.
	Because we are a nonprofit, we see it as part of our mission to
	help immigrants, refugees, re-entering citizens, and veterans
	who may not have any or a very deep credit history or may have
	a troubled credit history. We really see this as part of our
	mission to help them to establish a business and establish
	their credit. We report credit monthly through an agency that
	works with Equifax and TransUnion so it is a credit-building
	function and we see this as very important for those businesses
	that are trying to establish credit. But as far as making the
	loan in the first place, we have the flexibility to look past
	imperfect credit, look at their business plan, work with them,
	and again, more funding for this pre-loan technical assistance
	would help us. These are the kind of populations that really
	need that more dedicated handholding to get to a point where
	they are credit-ready.
	Ms. MARTINEZ. Well, among our members we do have several of
	them that are providing alternative underwriting criteria when
	they are actually offering loans to a specific population such
	as immigrants and refugees and people with credits that are
	very troubled. So, considering that kind of alternative ways to
	provide the loan and assess the loan before doing it and
	providing that pre-loan technical assistance is key to actually
	help them build the credit and actually access capital to grow
	their business. So, we do believe that needs to be kind of a
	partnership again and with different organizations and the
	microlenders, the SBDCs and WBCs and all of them to really work
	between themselves to provide that pre-loan technical
	assistance and also to consider for the lenders an alternative
	way of considering and assessing the loan before approving.
	Mr. CROW. Thank you.
	Thank you. I yield back.
	Chairman KIM. Thank you.
	I would like to recognize for 5 minutes Representative
	Spano from Florida.
	Mr. SPANO. I have a defective microphone so I am just going
	to hold it.
	First of all, I want to thank the Chairman and the Ranking
	Member for highlighting the need to make sure that small
	businesses know what SBDC does. That has been a frustration for
	me and my community as well.
	I have a couple questions. I think the first maybe I would
	like to direct to Ms. Richards, if you may. You suggest that
	the 1/55th rule should basically end and essentially, that loan
	funds should be allocated according to state size, needs of the
	business community. I would like for you, if you would, just to
	drill down for me, maybe take 30 seconds, drill down. So would
	it just be an allocation, a proportionate share based on the
	population of the states, and then as it relates to the
	business needs of the community, what would be the types of
	criteria that you think we should look at in order to better
	distribute these funds?
	Ms. RICHARDS. Some of those practices are in place. The SBA
	requires a pipeline, for us to show a pipeline of loans and
	that we are in good standing with the program before we can
	borrow. And I think those need to continue to stand in place.
	So I think that the criteria should hold that an
	intermediary has to show that they are in good standing but
	that the funds should be available to the intermediaries who
	are able to effectively deploy them because that is really a
	better indicator I think to Congress of how much funding is
	really needed if we take some of these caps off as to how
	effective we could be at microlending everywhere.
	Mr. SPANO. Okay. So in your opinion, the most important
	criteria would be the effectiveness of the intermediary rather
	than the population of the states or the specific business
	needs of the community?
	Ms. RICHARDS. That is right. That is right. We have become
	very well-powered machines at creating jobs and businesses.
	Mr. SPANO. Do you have any concern that that might
	negatively affect some of the states or the businesses needs of
	the small business community who just happen to be in a region
	that do not really have an effective intermediary?
	Ms. RICHARDS. There are so many great associations that
	support intermediaries at becoming best in class, and there are
	so many resources to incur those skills that I do not think
	that that is really the issue. More and more intermediaries are
	both emerging and growing, and I think that the real issue is
	that because of the way the funds are structured, they ensure
	that great opportunities cannot occur in two intermediaries in
	one state. Someone gets the bulk of the money and someone does
	not.
	Mr. SPANO. Follow-up questions. You had also mentioned
	about the 50/50 rule and you guys really are not in the best
	position to provide this technical assistance. And so do you
	know what the rationale was, SBA's rationale when they
	implemented this rule to begin with? What was their expectation
	or anticipation for intermediaries in terms of technical
	assistance? Why did they think it was important?
	Ms. PRINSTER. If I may answer that question since I was
	around at the early stages of the SBA Microloan Program myself.
	I think the rationale, which originally it was 25/75, 25 being
	for pre-loan, then was changed to 50/50, I think the rationale
	was that they wanted the intermediaries to support the
	businesses who had loans, and to spend most of their time
	working with the borrowers that had an investment from the
	microlender. I think the main rationale was to force us to put
	our focus on businesses that took out loans from us. As the
	industry has grown and matured, we have seen that there are
	many businesses and business owners, including what we were
	talking about with Mr. Crow, not just in Colorado but
	everywhere, that need a lot more of handholding and intense
	work before they are ready for credit. We like being able to
	support them in getting there.
	Mr. SPANO. So what would you say, and you can answer that
	question, too, Ms. Richards as well, but I also wanted to
	interject there, what would be, you had mentioned that
	processing the loan and working on the loan and getting ready
	for the loan is included in this category of technical
	assistance. What other types of technical assistance do
	intermediaries provide, if any, or is it just processing a
	loan?
	Ms. RICHARDS. It is absolutely not just processing a loan.
	Most of the work that is really key is what is going to make
	this business successful and this loan get paid back. And so
	sometimes it is helping people to get into new markets. We
	helped a woman who had a battery franchise get an industrial
	contract with a utility company which allowed her to be able to
	grow at a great rate, use the expertise she has and basically
	open up new markets. Our reach is much greater than their
	reach.
	Mr. SPANO. Just really quickly. Do you have any concern
	that doing away with the 50/50 rule requiring any technical
	assistance at all would create a problem where intermediaries
	would not have really an interest to provide those resources?
	Ms. RICHARDS. Absolutely not. I think it was originally
	designed because the only benchmark they had was banking, and
	so banks inherently are not going to spend that kind of time
	upfront cultivating those deals. That makes sense. That is a
	good business decision. But we are in a different category and
	we need the flexibility to do what we need to do.
	Mr. SPANO. Thank you, Mr. Chairman.
	Chairman KIM. Thank you.
	Moving on I would like to recognize Representative Delgado
	from New York for 5 minutes.
	Mr. DELGADO. Thank you, Chairman. And thank you, all the
	witnesses for taking the time to educate us today. It is
	important, this work.
	And I wanted to stress, as someone who represents Upstate
	New York, New York 19, the home of over 27,000 small
	businesses, one of my priorities is to figure out how to
	increase capital for folk back home. And one of the things I
	often hear from folks back home is that they do not feel that
	the Federal Government is helping to revitalize the economy in
	rural communities, and my district is very rural. They cannot
	discussed loans, as we have discussed, to start their business.
	They do not even know where to start, as we have discussed. And
	they want to stay in the community but there are so many
	hurdles for folks to overcome. So Ms. Jallow, what I would like
	to hear from you is to elaborate more on your personal
	experience in trying to get a loan for your small business
	before you began working with the intermediary. What was that
	experience like?
	Ms. JALLOW. Before I started working with CEI I would not
	be able to start anything if it were not for them. I would not
	know where to go in the first place because I was thinking like
	the concept that I have that you can just come and start
	similar to back home. But when I talked to people they are
	like, oh, it is not that way. You have to do this and that. And
	then that is the time I contacted CEI, which is really, really
	helpful. Like, whenever I need something, they are always
	there. Whenever I call, John is ready. Sometimes I will be even
	late. He will be like, you know, it is okay. You can come. So
	it is really helpful for me. And then I know a lot of people
	over there, too, that really get help from them.
	Mr. DELGADO. And can you speak a little bit about how long
	it took before you were made aware of this option, and how did
	you come to learn about it?
	Ms. JALLOW. I learned about it with a business owner in
	Portland who is an immigrant from Cambodia. She is the one who
	told me about CEI. And when I contacted them, it took me like 5
	days for them, you know, when I called him they just told me we
	can set up an appointment. You can come in. So that is the time
	I went in and we talked about it and it was really helpful for
	me to start and I was like, yeah, I can do this.
	Mr. DELGADO. Excellent. Thank you.
	And to anybody on the panel, happy to hear about your
	experiences working with rural businesses that have benefitted
	from the Microloan program and some of the challenges that are
	specific to rural communities when it comes to accessing
	capital.
	Ms. MARTINEZ. Well, we do have a lot of rural businesses
	also that are member-served in California. And I think the
	challenges are high as you mentioned or there are not as many
	microlenders as they would like but there are also alternative
	ways. So definitely they have really strong ones I might say,
	so the lenders that are there might be just one or two, but
	they are really strong. And then also they are considering
	alternative ways to reach them. So, when we are talking about
	online lending it is actually a good way to reach more rurals.
	It is just it has to be the right way. So, we want to make sure
	that when we are talking about lending and being able to
	optimize the process and make it faster and more accessible for
	our rural business owners especially, we are able to provide
	the right programs and loans. We, being in CAMEO, actually are
	supporting a lot of our members to get more online applications
	and just being able to connect with the members through online
	solutions. And I think that is a really good way to make sure
	that you reach the right business owners without them having to
	travel so far or being able to really experience all the issues
	they might have to find the right partner in the location.
	Mr. DELGADO. Yes. On that point, broadband access would
	probably be important then.
	Ms. MARTINEZ. Totally. Absolutely.
	Mr. DELGADO. Okay. Anybody else want to----
	Ms. PRINSTER. Colorado has many rural areas as well as
	metropolitan areas. Our primary service area is the Front Range
	which is more the metropolitan and small city area but one of
	the difficulties we have in reaching some of the rural
	communities is our ability to fund that outreach. We create
	partnerships very frequently with SBDCs, banks and economic
	development organizations within those communities to be able
	to get the referrals. We have an online application. So there
	are ways that we can serve a business in a rural area without
	always having to be there, but it is important to have those
	connections.
	I would also say that outreach and visibility are critical
	to this program. Once we are connected with a business we can
	help them, but it's hard to reach them if they don't know about
	us. So I suggest that the cost of outreach should be allowed
	under the technical assistance grants because the awareness and
	education of our partners in other communities is a really
	important part of making this program accessible to businesses
	across our state, including rural areas.
	Mr. DELGADO. All right. Thank you.
	I yield back.
	Chairman KIM. Thank you.
	I would like to move on to Representative Stauber from
	Minnesota. You are recognized for 5 minutes.
	Mr. STAUBER. Thank you very much, Mr. Chair, and to the
	witnesses, I appreciate your comments.
	I just want to follow up a little bit on our Ranking Member
	Hern's comments about Dodd-Frank and loaning to small
	businesses. However, well-intentioned that was, I can tell you
	back home it was devastating for our small, local community
	lenders and they are feeling it today. And so when we talk
	about access to capital, that was one of the, I think, the
	negative effects of that law. And so I think our goal is to
	allow this capital, allow our small lending institutions across
	rural American have the ability to have that capital ready and
	available when that entrepreneur comes in. So I think what I am
	hearing back home is from our lending institutions, our
	community lending institutions, that was devastating for them.
	A third of their time, approximately a third of their time
	making sure that they are following the government mandates in
	case they are audited or investigated, which does not seem
	right. Our lending institutions, you have all built trusting
	relations with the lending institutions. I think they are a big
	part of our economy.
	We have talked about broadband. I am on the Transportation
	Infrastructure Committee as well. Broadband is important for
	rural America, rural Minnesota, Northern Minnesota, where I
	represent, and so Ms. Richards, you talk about the Microloan
	program. It is currently operating with half of the number of
	intermediaries that are allowed. So in your opinion, how can we
	attract more intermediaries in that rural area of our country?
	Because we know that once we work broadband in the rural areas,
	that is where our small businesses can relocate or start up.
	Can you just answer that question?
	Ms. RICHARDS. Well, first of all, the current regulations
	around the program, the 25/75 really limit your ability when
	you have a rural area. There is a significant amount of time of
	going to meet with people because you have to go see their
	business. You have to see what it looks like before you go and
	make the loan. So the upfront costs, the pre-loan costs are so
	much higher. It helps that it was moved up to 50 percent which
	gives us some more flexibility because we have some clients
	that we travel 2-1/2 hours or 3 hours to visit in rural areas.
	So the first is that 50/50 rural is really hampering many
	organizations from stepping up to the plate and becoming
	microlenders. Community action agencies, you know, other
	agencies that exist within the rural construct.
	Secondarily, I think that there are networks that are
	continuing to work, and associations. AEO is an association and
	others that are trying to identify organizations that can serve
	those communities. We see this movement as critical that every
	county in this country should be covered. And so that is why I
	was so proud that finally every county in Michigan is covered.
	There are four other microlenders and we mentored every single
	one of them to get started. So part of it is we need to have a
	mentoring network of successful Microloan programs that go in
	and mentor an organization, identified resource to actually
	become a lender. Get the best practices out of the way right
	away.
	Mr. STAUBER. And thank you for those comments.
	I would say that the testimony today, and I am very
	privileged to be on the Small Business Committee. As a small
	business owner myself, what you are doing is vital to the
	startups and to the entrepreneurial spirit because when
	somebody has a good idea they are excited. The door has got to
	be open when they are ready. When they run into roadblocks and
	stumbling blocks, they are not going to pursue it as you
	described. And I think we call can agree that when that
	entrepreneur comes knocking that is where the excitement phase
	is. They have probably done a lot of research where you can
	assist them in getting or developing their small business
	because I think each of you know, and everybody on this
	Committee knows small businesses are the engine of our economy.
	Main Street America depends on small businesses.
	I appreciate all your efforts that you have put forth. And
	Mr. Chair, I yield back.
	Chairman KIM. Thank you so much. And I just want to echo
	your sentiments there. That is certainly the focus of what we
	are trying to do on this Subcommittee and this broader
	Committee. And just in my short time here in Congress already I
	have certainly seen this Committee try to do everything we can
	to put aside any partisan differences and work together to be
	able to figure out how we can help small businesses and
	entrepreneurs, and the work that you are doing is really where
	the rubber hits the road and that is what we need to be
	investing in and figuring out what we can do to make sure to
	help you do your jobs better and help small businesses grow. So
	I just appreciate that sentiment there at the end.
	I think that is the conclusion here of the questions. I
	just wanted to take a moment--did you----
	Mr. HERN. Well, I just want to again say thank you so much.
	What you all do goes thankless sometimes, but thank you so much
	for your relentless pursuit of trying to make this a better
	program.
	Chairman KIM. Absolutely. We all share that sentiment. We
	are grateful for all of you coming out today, and we also just
	want to take a moment to just recognize how exciting it is that
	we have an all-women panel to celebrate Women's History Month
	as well. So I just want to thank you for participating there.
	As we have heard today, there is a lot of good work the
	Microloan program and its partners, intermediaries, are doing
	to enhance access to capital and entrepreneurial development
	for America's smallest businesses. In the 20-plus years the
	program has been in existence it has grown significantly, and
	as we heard today, some of the rules governing the program have
	not kept up with its growth. I look forward to working with my
	colleagues on both sides of the aisle to find policy solutions
	that will thread the needle to provide the flexibility
	intermediaries need to continue funding and training America's
	entrepreneurs.
	I would ask unanimous consent that members have 5
	legislative days to submit statements and supporting material
	for the record.
	Without objection, so ordered.
	And if there is no further business to come before the
	Committee, we are adjourned. Thank you.
	[Whereupon, at 11:14 a.m., the subcommittee was adjourned.]

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