Tomorrow, CAMEO will be submitting the following recommendations on the SBA Microloan program to Senator Rubio’s staff on the Senate Small Business Committee. The committee will be holding a hearing on the program’s reauthorization in June as they attempt to reauthorize the entire Small Business Act this year. Thanks to Emily Gasner, our own in-house specialist who knows from her experience with the Microloan program during her time as CEO of Working Solutions. Do you have other recommendations that you’d like included? If so, email Heidi Pickman with the subject line “SBA Microloan program recommendations” by June 1, 2019.
Modernize and Automate Reporting Technology
- Microlenders should be able to bulk upload loan balances, e.g. as an Excel or other format into the system or directly from loan portfolio software like DownHome, Portfol, or LendingFront to auto-populate in MPERS.
- MPERS, the online system SBA uses for all reporting related to the SBA Microlenders’ loan portfolio, is an outdated system. For example, every month by the 7th day of the month every microlender has to manually input the updated loan balance on each and every active loan in MPERS. If a lender has 300 loans, they manually have to enter the loan balance on each loan, loan-by-loan, every single month. This level of detail and frequency can be a burden on microlenders.
- Everything from portfolio to quarterly reporting on TA grants should be in one system. The system for quarterly reporting/reimbursement requests for TA Grants from the SBA is not in MPERS. TA grant quarterly reports are made outside of MPERS and require various PDFs and Excel spreadsheets. Currently, it is manually entered.
- Annual focus groups should continue, if there is a timely outcome. So far it seems only small changes were made as a result of focus groups/listening sessions and they took a long time to happen.
Reduce the Frequency of Data Entry and the Amount of Reporting Required
- The SBA Microloan program requires constant data entry, outside of and in addition to what most investors request from microlenders or the daily administration that microlenders commonly do.
- Within 7 days of making a microloan, an SBA microlender is required to enter it in MPERS. We recommend changing this to quarterly or annually.
- By the 7th day of every month, the SBA microlender has to update each and every loan in its portfolio balance in MPERS. We recommend changing this to quarterly or annually.
- SBA microlenders have to provide copies of bank statements from the Loan Loss Reserve every quarter. We recommend changing this to annually.
- SBA microlenders have to provide quarterly reports on TA hours and summaries of activities in order to receive a quarterly reimbursement for the SBA Microloan TA Grant. We recommend changing this to an annual report as well as providing all the TA grant funds up front once or twice a year if the SBA can’t advance the full annual TA grant amount before the work starts.
Reduce the Paperwork Required to Receive Payment of SBA Microloan TA Grants
- The quarterly paperwork to receive a TA grant reimbursement from the prior quarter can be time-consuming for microlenders.
- Many of these SBA microlenders are small nonprofits. Waiting 3-6 months to be reimbursed for expenditures made in prior months puts a heavy burden on cash flow.
- Currently, TA grant quarterly reports are made outside of MPERS and require various PDFs and Excel spreadsheets. Everything is manually entered and has to match exactly with percentages and dollar amounts, down to the exact penny or it is automatically rejected. This requires many hours of work even with the help of the Excel calculator. We recommend changing it to an annual report at the end of the grant period.
- The SBA Microloan program is one of the only programs that restricts the fees and interest microlenders can charge, and doesn’t allow them to charge prepayment penalties. Many nonprofit microlenders are small and cash flow from earned income is key. They have to charge a separate set of fees/interest to clients receiving SBA microloans which is different from the fees/interest they charge on all other loans. This is an administrative burden for these microlenders. We recommend allowing for more flexibility on fees and interest.
Learn from the CDFI Fund
- When the CDFI Fund (the Fund) provides a grant to a CDFI, the full grant is made in advance of the work in one upfront payment. This is excellent for the CDFI’s liquidity and ability to leverage other funds.
- The Fund doesn’t request quarterly reports or reimbursements, which greatly reduces the time microlenders spend on reporting so they can use that time to make loans and manage their portfolios.
- The CDFI Fund uses a Salesforce portal for everything and has for several years. Many people are familiar with Salesforce, making it a more intuitive system.
- The CDFI Fund doesn’t put restrictions on the loan fees or interest or other fees microlenders can charge, like prepayment penalties.