Small Business Administration Microloan Program

 Robert Jay Dilger
Senior Specialist in American National Government

The Small Business Administration's (SBA) Microloan program provides direct loans to qualified non-profit intermediary Microloan lenders who, in turn, provide "microloans" of up to $35,000 to small business owners, entrepreneurs, and non-profit child care centers. It also provides marketing, management, and technical assistance to Microloan borrowers and potential borrowers. The program was authorized in 1991 as a five-year demonstration project and became operational in 1992. It was made permanent, subject to reauthorization, in 1997. 

The SBA's Microloan program is designed to assist women, low-income, veteran, and minority entrepreneurs and small business owners and other individuals possessing the capability to operate successful business concerns by providing them small-scale loans for working capital or the acquisition of materials, supplies, or equipment. 

Critics of the SBA's Microloan program argue that it is expensive relative to alternative programs, duplicative of the SBA's 7(a) loan guarantee program, and subject to administrative shortfalls. The program's advocates argue that it provides assistance that reaches many who otherwise would not be served by the private sector and is an important source of capital and training assistance for low-income women and minority business owners. 

Congressional interest in the Microloan program has increased in recent years, primarily because microloans are viewed as a means to assist very small businesses, especially women- and minority-owned startups, to get loans that enable them to create jobs. Job creation, always a congressional interest, has taken on increased importance given the nation's current economic difficulties. 

This report discusses the arguments presented for having a Microloan program, describes the program's operating standards and requirements for lenders and borrowers, and examines the arguments presented by the program's critics and by its advocates. It concludes with an examination of H.R. 3854, the Small Business Financing and Investment Act of 2009, which was passed by the House on October 29, 2009, and is awaiting action in the Senate; S. 2869, the Small Business Job Creation and Access to Capital Act of 2009, which was ordered to be reported by the Senate Committee on Small Business and Entrepreneurship on December 10, 2009, and is awaiting further action in the Senate; and S.Amdt. 4594, an amendment in the nature of a substitute for H.R. 5297, the Small Business Jobs and Credit Act of 2010, which was introduced on August 5, 2010. They would authorize changes to several SBA programs, including the Microloan program, in an attempt to enhance job creation by increasing the availability of credit to small businesses.


Date of Report: August 11, 2010
Number of Pages: 22
Order Number: R41057
Price: $29.95

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