HR 1502, the Microloan Improvement Act of 2021, sponsored by Rep. Kim, was passed by the House last April 15. It is legislation that the Friends of the SBA Microloan have previously supported. The Microloan Improvement Act eliminates the “1/55” TA provision, in favor of setting aside 15% of appropriations for underserved areas for the first two quarters. The bill also authorizes use of micro loans for lines of credit and increases from $7500 to $10,000 loans eligible for a 7-year term and increases to 10 years the loan term for loans greater than $10,000.
The CARES Act inadvertently rescinded an SBA interim final rule that moved the microloan term from 6 to 7 years due to changes intended for the Express Loan Program;
The Economic Aid to Hard Hit Small Businesses, Nonprofits and Venues Act (12 USC 636) established a loan term of 8 years for all micro loans. That provision expired at the end of FY 21. The change in HR 1502 will return loan terms to those in effect prior to their repeal under the Cares Act and will apply to a large portion of microloans, as the average loan is $14,435. It will provide also provide more flexibility with slightly longer loan terms for large loans.
At the time that the House passed HR 1502, it also passed a companion bill – HR 1487 (the Microloan Transparency and Accountability Act of 2021). It is a bill the Friends of the SBA Microloan have previously opposed on the basis that the data reporting requirements would be onerous and punitive to SBA intermediaries. The microloan legislative efforts are next headed to the Senate’s Committee on Small Business and Entrepreneurship, where Senator Duckworth is preparing a companion bill incorporating elements of HR 1503 and HR 1487.
We have been diligently working with Senator Duckworth’s staff to ensure that prudent, helpful updates to the program as found in HR 1502 are included in the Senate legislation, and that program data reporting requirements are not overly burdensome to SBA intermediaries.