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house Bill H.R. 2056

Does the SBA's Microloan Program Need More Flexibility Between Borrowers and Lenders?

Argument in favor

These changes will help give small businesses and entrepreneur expanded access to the capital they need to grow when banks normally wouldn’t provide such loans.

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07/24/2017
It needs to be easier to be a small business owner. The regulations are overwhelming.
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Jim2423's Opinion
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07/24/2017
Yes this should be out there for small business owners. How else can they make it except give up everything to maintain their budget. Big business gets every kind of break you can think of.
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wnscfp's Opinion
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07/24/2017
This is a yes vote for many reasons in my opinion . The nonprofit organizations that handle these programs do so because banks are not interested in making loans the small . Plus they must spend a large amount of time training the borrowers about financial matters . These loans allow the individuals to become their own boss who would likely otherwise have a low-paying job working for someone else . This bill improves loan flexibility by increasing the repayment terms from six years to 10 years on larger loans and allows the lenders to provide lines of credit not just monthly term loans . You'll know the bill has a very stringent follow-up program to reported success or failure to Congress . SBA also monitors all its lenders closely in terms of repayment history , losses etc. also each lender is currently limited to total loan exposure of $5 million and this bill increases it to 6 million . The fact that the lenders are asking for more total exposure would indicate to me that this program is quite successful and there is sufficient demand in the marketplace . Because of the average small size of these loans and the diversification among many borrowers exposure to our economy is nominal.
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Argument opposed

The microloan program requirements (like the 25/75 rule) were put in place for a reason — this bill is too flexible with financial intermediaries.

Matthew's Opinion
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07/25/2017
The federal government has no constitutional authority to give loans to businesses let alone regulate loans between businesses.
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IllWill's Opinion
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07/24/2017
There should be more money lent to small businesses, but we should not allow waivers for the 25/75 rule. Bending this rule could result in riskier loans and defaults.
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Tony's Opinion
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07/24/2017
I love small business, but more government involvement is not the answer
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What is House Bill H.R. 2056?

This bill would reform the Small Business Administration’s (SBA) microloan program by giving the SBA the power to grant waivers to financial intermediaries that make loans under this program. 

The microloan program offers small businesses up to $50,000 to help their growth and expansion — though on average, loans are usually only around $13,000. Intermediary lenders are connected with businesses through the program and help eligible borrowers.

The waivers this bill outlines would apply to the 25/75 rule that requires microlenders to spend:

  • At least 75 percent of their grant funding on actual microloan borrowers.
  • No more than 25 percent of grant money on up-front technical assistance and training. This can include anything from guidance on business plan development, basic accounting and record-keeping, to help with license or permit applications etc. 

This bill would also increase the aggregate lending limit (i.e. the total amount of loans disbursed) for microloan intermediaries from $5 million to $6 million. The SBA would be prohibited from limiting loan repayment terms — with two exceptions: 

  • Loans of $10,000 or less must not have repayment terms exceeding six years,
  • Loans greater than $10,000 must have a repayment period of 10 years or less. 

The SBA would be authorized to extend short-term lines of credit for small businesses.

Within 120 days of this bill’s enactment, the Government Accountability Office (GAO) would have to report to the House Small Business Committee describing intermediaries who chose to participate and those who chose not to. This would include reasons why some intermediaries choose not to participate, and recommendations for boosting participation while decreasing costs for those involved in the program.

Also within 120 days of this bill’s enactment, the Chief Counsel for Advocacy of the SBA would report to the House Small Business Committee on the economic impact of a savings requirement on businesses eligible to participate in the microloan program. This report would include a cost-benefit analysis of the requirement, and recommendations on its implementation.

Impact

Small business owners and entrepreneurs participating in the Microloan program, their customers, the SBA, GAO, and Congress.

Cost of House Bill H.R. 2056

A CBO cost estimate is unavailable.

More Information

In-Depth: In its budget request for fiscal year 2016, the SBA requested that Congress eliminate the 25/75 rule, as more developed microlenders provide assistance both pre and post-loan technical assistance.

The lead sponsor of this legislation, Rep. Stephanie Murphy (D-FL), believes that this bill would help entrepreneurs and small business owners: 

"I am proud that my bipartisan microloan bill has moved forward in the legislative process. If enacted, this bill will help more entrepreneurs and small business owners obtain the capital they need to start, grow, and thrive. As the Ranking Member of the Contracting and Workforce Subcommittee, I am also proud to make bipartisan commonsense reforms to the federal contracting process so that small firms can more easily navigate the bureaucratic process, create jobs, and strengthen the economy.”

This bill was passed by the House Small Business Committee on a 19-0 vote, and has the bipartisan support of three Democratic and two Republican cosponsors. This legislation passed the House on a voice vote during the last session of Congress, but wasn't considered in the Senate before the 114th Congress adjourned.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user USDAgov)

AKA

Microloan Modernization Act of 2017

Official Title

To amend the Small Business Act to provide for expanded participation in the microloan program, and for other purposes.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Small Business and Entrepreneurship
  • The house Passed July 24th, 2017
    Passed by Voice Vote
      house Committees
      Committee on Small Business
    IntroducedApril 6th, 2017

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    This is a yes vote for many reasons in my opinion . The nonprofit organizations that handle these programs do so because banks are not interested in making loans the small . Plus they must spend a large amount of time training the borrowers about financial matters . These loans allow the individuals to become their own boss who would likely otherwise have a low-paying job working for someone else . This bill improves loan flexibility by increasing the repayment terms from six years to 10 years on larger loans and allows the lenders to provide lines of credit not just monthly term loans . You'll know the bill has a very stringent follow-up program to reported success or failure to Congress . SBA also monitors all its lenders closely in terms of repayment history , losses etc. also each lender is currently limited to total loan exposure of $5 million and this bill increases it to 6 million . The fact that the lenders are asking for more total exposure would indicate to me that this program is quite successful and there is sufficient demand in the marketplace . Because of the average small size of these loans and the diversification among many borrowers exposure to our economy is nominal.
    Like (5)
    Follow
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    The federal government has no constitutional authority to give loans to businesses let alone regulate loans between businesses.
    Like (5)
    Follow
    Share
    There should be more money lent to small businesses, but we should not allow waivers for the 25/75 rule. Bending this rule could result in riskier loans and defaults.
    Like (5)
    Follow
    Share
    It needs to be easier to be a small business owner. The regulations are overwhelming.
    Like (5)
    Follow
    Share
    Yes this should be out there for small business owners. How else can they make it except give up everything to maintain their budget. Big business gets every kind of break you can think of.
    Like (5)
    Follow
    Share
    I love small business, but more government involvement is not the answer
    Like (4)
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    It's time to help the small businesses, not just the big corporations
    Like (2)
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    We need to do more things like this to help small American businesses. Without these kinds of moves, we will never be able to have a stable economy and stable workforce in the US.
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    When my husband & friends and family started a small pipeline company in 1978, our local bank would only loan us $25,000. We struggled, but made it on a shoestring budget! I support making loans to small businesses.
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    Small business is the backbone of America
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    Small business needs a helping hand to get started and they tend to pay their way better than most government investments of our tax money.
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    Immigrants almost universally start small businesses for the good of the community as well as themselves. Small businesses usually improve quality-of-life in their neighborhoods. A bill with bipartisan support that encourages small businesses as opposed to monopolies is a good idea. Yes!
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    I would support this bill if it kept the regulations that protected the market from weak loans and resulting foreclosures. Vote no or amend.
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    Helping small businesses is ultimately to the benefit of the economy as a whole. Instead of proposing a bill which helps out all types of business big and small, Congress actually has a chance to pass one specifically to benefit small businesses. We need more bills like this one that only benefit small businesses, and not large businesses, to ensure maximum economic diversification.
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    I would like to see us supporting smaller businesses over big huge corporations that do not contribute to the running of this country
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    This gets rid of a horrible economic oversight made by the Federal Government, so I am all for it!
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    These changes will help give small businesses and entrepreneur expanded access to the capital they need to grow when banks normally wouldn’t provide such loans.
    Like (1)
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    Whatever makes it easier for people to grow a business!
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    Make more money available, but these rules were put in place for a reason. We don't want a free-for-all with no rules to keep things honest and sane.
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    We do need to do more to help small businesses and less to help big corporations
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