Peters Cosponsors Legislation to Increase Small Business Lending
Bill Would Improve Participation in Small Business Administration’s Microloan Program
WASHINGTON, DC – U.S. Senator Gary Peters (MI), a member of the Senate Small Business and Entrepreneurship Committee, today announced he has cosponsored legislation to increase participation in the Small Business Administration (SBA)’s Microloan Program by giving microloan intermediaries greater flexibility in providing loans and assistance to borrowers. The Microloan Modernization Act of 2015 passed the Senate Small Business Committee unanimously today and now awaits a vote before the full Senate. Similar legislation already passed the U.S. House of Representatives.
“The SBA’s Microloan Program has supported thousands of businesses across Michigan and the country and plays an important role in helping start-ups and small businesses expand and thrive,” said Senator Peters. “I’m proud to cosponsor legislation that will increase small business lending and help ensure small businesses can continue hiring locally.”
The Microloan Modernization Act of 2015 will allow more microlenders to participate in the SBA’s Microloan Program by increasing flexibility for microloan intermediaries. The bill makes key changes to the program, including:
- Raising the cap on the total amount of loans for any single intermediary from $5 million to $6 million.
- Retaining the current six year repayment term for loan repayments under $10,000 and increasing it to ten years for loans over $10,000.
- Clarifying that intermediaries can make lines of credit available to their borrowers. Under current SBA regulations, it is unclear whether such lines of credit are included in the definition of working capital, which is an allowable use for a microloan. This provision makes it clear that lines of credit are acceptable.
- Allowing waivers of what is known as the 25/75 rule, which allows up to 25 percent of microloan funds to be spent on pre-borrower education while 75 percent had to be used for ongoing technical assistance to borrowers. The bill directs SBA to come up with a rule and process to allow microloan intermediaries to apply for waivers if they have sufficiently demonstrated how they would use the funds.
The SBA’s Microloan Program was established in 1991 as a pilot program. Since then, the program has grown to 137 active intermediary lenders who have made more than $55 million in loans in 2014, totaling $670 million worth of loans to nearly 4,000 small businesses across the country since its inception.
Peters has long been a champion of Michigan small businesses. Last month, Peters cosponsored the Microloan Act of 2015, legislation that eliminated outdated provisions in the SBA’s Microloan Program and cut red tape for Michigan small business owners. Last week, Peters introduced a bipartisan bill that already passed the Senate unanimously, which strengthens the SBA’s main lending program, the 7(a) loan program, by increasing the 7(a) lending cap for fiscal year 2015. In April, Peters introduced legislation increasing the 7(a) lending cap for 2016 as well, which passed the Committee on Small Business and Entrepreneurship and awaits a vote before the full Senate. As a member of the U.S. House of Representatives, Peters authored the State Small Business Credit Initiative (SSBCI), which leverages private capital with targeted federal investments to support small businesses. The program has been a huge success, supporting nearly 9,000 jobs in Michigan and leveraging nearly $450 million in capital for Michigan businesses.
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