A Summary of the Hearing on the SBA Microloan Program

“In the twenty 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 flexibility intermediaries need to continue funding and training America’s entrepreneurs.” — Subcommittee Chairman, Rep. Kim (D-NJ)


Yesterday,  the House Small Business Subcommittee on Economic Growth, Tax, and Capital Access convened to hear the assembled panel of witnesses discuss their experience with the Small Business Administration (SBA) Microloan program. The panel of experts was composed of a business owner, lenders, and CAMEO’s CEO, Carolina Martinez – you can read their written testimony here.

Access to capital was the most discussed issue in the hearing. It was addressed by both panelists and committee members, who spoke about the different factors that contribute to successfully accessing capital. As Ranking Member Hern (R-OK) said and his colleagues echoed, “One of the biggest problems we have in America is we have people with great ideas, like Ms. Jallow, that have or are having to try to find opportunities to get access to capital so they can start”. Rep. Delgado (D-NY) pushed the issue further, stressing the need for rural areas to have the same access to capital and technical support as more urban ones.

The panelists agreed that rules, such as the 50/50 Rule and the 1/55th Requirement, that dictate loan usage and the distribution timeline need to be amended. Changing these rules would allow greater flexibility for entrepreneurs to use SBA microloan money to meet specific needs. Every business operates differently, allowing lenders and business owners to use the funds how they need, allows for their businesses to succeed.

In addition, Rep. Davids connected with the need for entrepreneurs to have a support network, an entrepreneurial environment or ecosystem, in order to be successful. Carolina said that CAMEO works to increase comprehensive support for the entrepreneurs and developing coaching and capital resources. Fellow panelist and business owner, Ms. Jallow, agreed, stressing the necessity of a network especially for people new to America’s way of operating businesses.

Another important issue that Carolina brought up in her testimony is the exponential growth of online lending and the need for a federal truth-in-lending bill:

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, SB 1235. CAMEO believes that the access to capital issue has moved beyond access to ‘appropriateness’ of capital, i.e. capital that is affordable for the small business, is something that the small business can pay back and will help it 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.

Reacting to Carolina’s testimony, Chairman Kim wanted to know more about the problem that entrepreneurs face when accessing fast money. Carolina responded that this is a big problem, for our members, but the evidence is mostly anecdotal and could use further study.

Chairman Kim latched onto the panel’s recommendation for the SBA to share reported data. He saw it directly relating to accessing capital, “I believe if Congress is to effectively confront this issue of predatory lending, we must have accurate and current data available.”

Data is good and necessary, but it needs to go beyond the SBA Microloan program which is a $44 million fund. The online lenders are lending in the billions. A truth-in-lending bill would go far to helping entrepreneurs decide which funding will help their business rather than harm it.


Written by Jill Bletz, CAMEO’s Policy Fellow.