Small Business Administration Microloan Program




Small Business Administration
Microloan Program

Updated February 25, 2021
Congressional Research Service
https://crsreports.congress.gov
R41057




Small Business Administration Microloan Program

Summary
The Small Business Administration’s (SBA’s) Microloan program provides direct loans to
nonprofit intermediary lenders to provide “microloans” of up to $50,000 to small businesses and
nonprofit child care centers. They also provide marketing, management, and technical assistance
to microloan borrowers and potential borrowers. Authorized in 1991 as a five-year demonstration
project, it became operational in 1992 and was made permanent, subject to reauthorization, in
1997.
The Microloan program is designed to assist women, low-income, veteran, and minority
entrepreneurs and small business owners by providing them small-scale loans for working capital
or the acquisition of materials, supplies, or equipment. In FY2020, Microloan intermediaries
provided 5,890 microloans totaling $85.0 million. The average Microloan was $14,434 and had a
6.5% interest rate.
The program’s critics argue that it is expensive relative to alternative programs, duplicative of the
SBA’s 7(a) loan guaranty program, and subject to administrative shortfalls. The program’s
advocates argue that it assists many who are not 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 and retain jobs. Job creation and
preservation, always a congressional interest, has taken on increased importance given the
Coronavirus Disease 2019 (COVID-19) pandemic’s adverse impact on the national economy.
This report describes the program’s eligibility standards and operating requirements, examines
arguments presented by the program’s critics and advocates, and discusses legislation affecting
the program, including the following:
 P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act), which, among other provisions, appropriated $17 billion to pay the
principal, interest, and any associated fees that are owed on an existing 7(a),
504/CDC, or Microloan that is in a regular servicing status for a six-month period
starting on the next payment due date.
 P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and
Venues Act (Division N, Title III of the Consolidated Appropriations Act of
2021), which, among other provisions, waived the Microloan Technical
Assistance program’s matching requirement in FY2021; increased the Microloan
intermediaries’ aggregate loan amount after their first year of participation in the
program from $6 million to $10 million in FY2021 (reverts to $7 million on
October 1, 2021); increased the intermediaries’ annual maximum loan amount
after their first year in the program from $2.5 million to $4.5 million in FY2021
(reverts to $3 million on October 1, 2021); and appropriated (1) an additional $50
million for the Microloan Technical Assistance program (for a total of $85
million in FY2021), (2) $7 million for Microloan credit subsidies (for a total of
$12 million in FY2021 to support up to $110 million in Microloans), and (3) $3.5
billion to continue SBA debt relief payments for 7(a) loans, 504/CDC loans, and
Microloans.
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Contents
Small Business Microloans and Training Assistance ...................................................................... 1
The SBA Microloan Program: Funding, Eligibility Standards, Program Requirements,
and Statistics ................................................................................................................................. 4
Funding ..................................................................................................................................... 4
Intermediary Microloan Lender Eligibility Standards .............................................................. 5
Intermediary Microloan Lender Program Requirements .......................................................... 6
Intermediary Marketing, Management, and Technical Training Assistance ............................. 8
Nonlending Technical Assistance Providers ............................................................................. 9
Microloan Borrower Eligibility Standards .............................................................................. 10
Microloan Borrower Program Requirements .......................................................................... 10
Microloan Program Statistics .................................................................................................. 12
Congressional Issues ..................................................................................................................... 13
Program Duplication ............................................................................................................... 14
Program Cost ........................................................................................................................... 15
Program Administration .......................................................................................................... 16
Legislation ..................................................................................................................................... 19
Concluding Observations .............................................................................................................. 21

Tables
Table 1. Microloan Technical Assistance Program Counseling Services, FY2010-FY2019.......... 5
Table 2. Microloan Program Statistics, FY2010-FY2020 ............................................................. 12

Table A-1. Microloan Technical Assistance Program Funding, FY2000-FY2021 ........................ 23

Appendixes
Appendix. Microloan Technical Assistance Program Funding ..................................................... 23

Contacts
Author Information ........................................................................................................................ 24

Congressional Research Service

Small Business Administration Microloan Program

Small Business Microloans and Training Assistance
The Small Business Administration (SBA) administers programs that support small businesses,
including loan guarantees to lenders to encourage them to provide loans to small businesses “that
might not otherwise obtain financing on reasonable terms and conditions” and grants to nonprofit
organizations to provide marketing, management, and technical training assistance to small
business owners.1 Historically, one of the justifications presented for funding the SBA’s loan
guarantee programs has been that small businesses can be at a disadvantage, compared with other
businesses, when trying to obtain access to sufficient capital and credit.2 It has been argued that
this disadvantage is particularly acute for startups and microbusinesses (firms with fewer than
five employees):
Traditional lending institutions, such as banks and investors, are unlikely to offer loans and
investment capital to microfirms due to a variety of reasons. One barrier to microlending
is a concern that startups and smaller enterprises are risky investments since growing
businesses typically exhibit erratic bursts of growth and downturn. The perceived risk of
these types of companies reduces the chances of a microbusiness to obtain financing.
Another issue is that microbusinesses by and large require smaller amounts of capital, and
thus banks or investment companies often believe that it is not efficient use of their time
or resources, nor will they receive a substantive return on investment from such a small
loan amount.3
An Urban Institute survey of SBA 7(a), 504/Certified Development Company (504/CDC), Small
Business Investment Company (SBIC), and Microloan borrowers conducted in 2007 found that
Microloan borrowers reported having the most difficulty in finding acceptable financing
elsewhere. Less than one-third (31%) of Microloan borrowers reported that they would have been
able to find acceptable financing elsewhere, compared with 35% of SBIC borrowers, 40% of 7(a)
borrowers, and 48% of 504/CDC borrowers.4
Since its inception in 1953, the SBA has provided loan guarantees to encourage lenders to issue
small businesses loans.5 Interest in creating a separate loan program to address the specific needs
of startups and microbusinesses increased during the 1980s, primarily due to the growth and
experience of microlending institutions abroad and evidence concerning private lending practices
that led Congress to conclude that a new loan program was necessary “to reach very small
businesses that were not being served by traditional lenders of SBA’s credit programs.”6

1 U.S. Small Business Administration (SBA), Fiscal Year 2010 Congressional Budget Justification, pp. 29-30, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/Congressional_Budget_Justification_2010.pdf.
2 Veronique de Rugy, Why the Small Business Administration’s Loan Programs Should Be Abolished, American
Enterprise Institute for Public Policy Research, AEI Working Paper #126, April 13, 2006, at https://www.aei.org/
research-products/working-paper/why-the-small-business-administrations-loan-programs-should-be-abolished/. Also,
see U.S. Government Accountability Office, Small Business Administration: 7(a) Loan Program Needs Additional
Performance Measures
, GAO-08-226T, November 1, 2007, pp. 3, 9-11, at http://www.gao.gov/new.items/d08226t.pdf.
3 U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan
and Trade Programs
, 110th Cong., 1st sess., July 12, 2007, H.Hrg. 110-35 (Washington: GPO, 2007), p. 6.
4 Christopher Hayes, An Assessment of the Small Business Administration’s Loan and Investment Programs: Survey of
Assisted Businesses
(Washington: The Urban Institute, January 2008), p. 5, at http://www.urban.org/UploadedPDF/
411599_assisted_business_survey.pdf.
5 The SBA also provided direct loans to small businesses until 1994. For further analysis, see CRS Report R40985,
Small Business: Access to Capital and Job Creation, by Robert Jay Dilger.
6 Robert Cull, Asli Demiriguc-Kunt, and Jonathan Morduch, “Microfinance Meets the Market,” Journal of Economic
Perspectives
, vol. 23, no. 1 (Winter 2009), pp. 169-172; and U.S. Congress, Senate Committee on Small Business and
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Small Business Administration Microloan Program

To address the perceived disadvantages faced by very small businesses in gaining access to
capital, Congress authorized the SBA’s Microloan lending program in 1991, as a five-year
demonstration project (P.L. 102-140, the Departments of Commerce, Justice, and State, the
Judiciary, and Related Agencies Appropriations Act, 1992). The program became operational in
1992. Its stated purpose is
to assist women, low-income, veteran ... and minority entrepreneurs and business owners
and other individuals possessing the capability to operate successful business concerns; to
assist small business concerns in those areas suffering from a lack of credit due to economic
downturns; ... to make loans to eligible intermediaries to enable such intermediaries to
provide small-scale loans, particularly loans in amounts averaging not more than $10,000,
to start-up, newly established, or growing small business concerns for working capital or
the acquisition of materials, supplies, or equipment; [and] to make grants to eligible
intermediaries that, together with non-Federal matching funds, will enable such
intermediaries to provide intensive marketing, management, and technical assistance to
microloan borrowers.7
The SBA’s Microloan lending program was made permanent, subject to reauthorization, in 1997
(P.L. 105-135, the Small Business Reauthorization Act of 1997).8
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, obtain loans that enable them to create jobs. Job creation and
preservation, always a congressional interest, has taken on increased importance given the
Coronavirus Disease 2019 (COVID-19) pandemic’s adverse impact on the national economy.

Entrepreneurship, Microloan Program Improvement Act of 2001, report to accompany S. 174, 107th Cong., 1st sess.,
May 26, 2001, S.Rept. 107-18 (Washington: GPO, 2001). About 3.54 million employer firms in the United States in
2012 had fewer than five employees. See U.S. Census Bureau, Statistics of U.S. Businesses: U.S. & States, Totals, at
http://www2.census.gov/econ/susb/data/2012/us_state_totals_2012.xls.
7 15 U.S.C. §636(m)(1)(A).
8 Prior to the Microloan program, the SBA temporarily established, in 1964, the “6 on 6” pilot lending program, which
provided up to $6,000 for a term of up to 6 years “aimed specifically at disadvantaged potential entrepreneurs.” See
U.S. Congress, House Select Committee on Small Business, Subcommittee on Minority Small Business Enterprise,
Government Minority Small Business Programs, hearing pursuant to H. Res. 5 and 19, 92nd Cong., 1st sess., July 27,
1971 (Washington: GPO, 1972), p. 6. Also, in 1964, P.L. 88-452, the Economic Opportunity Act of 1964 (Title IV-
Employment and Investment Incentives), authorized the director of the Office of Economic Opportunity, through the
SBA, to provide what were subsequently called Economic Opportunity Loans (EOL). The EOL program became
operational in January 1965 and continued through 1992 (the final EOL loan disbursement took place in 1996). P.L.
93-386, the Small Business Amendments (approved August 23, 1974) transferred authority for the EOL program from
the Office of Economic Opportunity to the SBA. Initially, the EOL program provided direct loans (of up to $25,000,
with loan terms of up to 15 years) to assist small businesses promote employment of the long-term unemployed.
Starting in 1968, EOL loans increasingly were issued as guaranteed loans. The program’s loan limits were increased,
by law, from $25,000 to $50,000 in 1972 and to $100,000 in 1976. The EOL program’s requirements and operations
evolved over time, but remained focused on providing loans to low-income, minority-owned, very small businesses.
The EOL program also emphasized the provision of management and technical training assistance to disadvantaged
entrepreneurs. See U.S. Congress, House Committee on Education and Labor, Economic Opportunity Act Amendments
of 1967
, hearing on H.R. 8311, 90th Cong., 1st sess., June 23, 1967 (Washington: GPO, 1967), pp. 1356-1362; U.S.
Congress, House Committee on Appropriations, Subcommittee on Commerce, Justice, State, and Judiciary,
Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations for 1993, 102nd
Cong., 2nd sess., February 19, 1992 (Washington: GPO, 1992), pp. 503-504; and U.S. General Accounting (now
Government Accountability) Office, Most Borrowers of Economic Opportunity Loans Have Not Succeeded in
Business
, CED-81-3, December 8, 1980, pp. 1-8, at http://www.gao.gov/assets/140/131190.pdf.
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Small Business Administration Microloan Program

This report describes the Microloan program’s eligibility standards and operating requirements
for lenders and borrowers and examines arguments presented by the program’s critics and
advocates. It also discusses legislation affecting the program, including the following:
 P.L. 111-240, the Small Business Jobs Act of 2010, which, among other
provisions, increased the Microloan program’s loan limit for borrowers from
$35,000 to $50,000 and increased the aggregate loan limit for intermediaries after
their first year of participation in the program from $3.5 million to $5 million.
 P.L. 115-141, the Consolidated Appropriations Act, 2018, which, among other
provisions, relaxed requirements on Microloan intermediaries that prohibited
them from spending more than 25% of their technical assistance funds on
prospective borrowers and more than 25% of those funds on third-party
providers. The act increased those percentages to 50%.
 P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal
Year 2019, which, among other provisions, increased the Microloan program’s
aggregate loan limit for intermediaries after their first year of participation in the
program from $5 million to $6 million.
 P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act), which, among other provisions, appropriated $17 billion ($7.1 billion was
spent) to pay the principal, interest, and any associated fees that are owed on an
existing 7(a), 504/CDC, or Microloan that is in a regular servicing status for a
six-month period starting on the next payment due date.9
 P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and
Venues Act (Division N, Title III of the Consolidated Appropriations Act of
2021), which, among other provisions, waived the Microloan Technical
Assistance program’s matching requirement in FY2021; increased the Microloan
intermediaries’ aggregate loan amount after their first year of participation in the
program from $6 million to $10 million in FY2021 (reverts to $7 million on
October 1, 2021); increased the intermediaries’ annual maximum loan amount
after their first year in the program from $2.5 million to $4.5 million (the first
year remains at $750,000) in FY2021 (reverts to $3 million on October 1, 2021);
and appropriated (1) an additional $50 million for the Microloan Technical
Assistance program (for a total of $85 million in FY2021), (2) $7 million for
Microloan credit subsidies (for a total of $12 million in FY2021 to support up to
$110 million in Microloans), and (3) $3.5 billion to continue SBA debt relief
payments for 7(a) loans, 504/CDC loans, and Microloans.10

9 Of the $17 billion appropriated, $7.1 billion was spent and the remainder was rescinded by P.L. 116-260, the
Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated
Appropriations Act of 2021). See SBA, “SBA Extends Crucial Lifeline to Borrowers Impacted by COVID-19 with
Debt Relief,” January 10, 2021, at https://www.sba.gov/article/2021/jan/10/sba-extends-crucial-lifeline-borrowers-
impacted-covid-19-debt-relief.
10 P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of
the Consolidated Appropriations Act of 2021, §323), appropriated $3.5 billion in FY2021 to resume monthly payments
of principal, interest, and fees for SBA 7(a) loans, 504/CDC loans, and Microloans, capped at $9,000 per month per
borrower. Payments are dependent on the availability of funds, when the loan was disbursed, the type of loan received,
and the business’s industry. The SBA has announced that the $3.5 billion appropriation will enable the agency to
provide two additional monthly payments on 7(a) and 504/CDC loans that were in repayment before March 27, 2020,
starting with the next payment due on or after February 1, 2021. After the first two monthly payments are provided,
businesses with an SBA Community Advantage loan, Microloan, or operating in specified economically hard-hit
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Small Business Administration Microloan Program

The SBA Microloan Program: Funding, Eligibility
Standards, Program Requirements, and Statistics
Unlike the SBA’s 7(a) and 504/CDC loan guarantee programs, the SBA Microloan program does
not guarantee loans.11 Instead, it provides direct loans to qualified nonprofit intermediary
Microloan lenders who, in turn, provide “microloans” of up to $50,000 to small business owners,
entrepreneurs, and nonprofit child care centers.12 There are currently 144 active Microloan
intermediaries serving 49 states, the District of Columbia, and Puerto Rico.13
Funding
The Microloan program’s total administrative costs (anticipated to be $6.4 million in FY2021) are
funded through the SBA’s salaries and expenses and business loan administration accounts. In
addition, each year the SBA receives an appropriation for credit subsidies for its direct lending
(Microloan) program.
Business loan credit subsidies represent the net present value of cash flows to and from the SBA
over the life of the loan portfolio. For guaranteed loans, the credit subsidy is primarily affected by
the difference between the cost of purchasing loans that have defaulted and the revenue generated
from fees and collateral liquidation. For direct (Microloan) lending, the credit subsidy is primarily
affected by the cost of offering below market interest rates to intermediaries because the
program’s default rate is typically relatively low because intermediaries are required to maintain a
loan loss reserve. In addition, the SBA does not charge intermediaries fees.14
The Microloan program received an appropriation of $12 million for loan credit subsidies to
support up to $110 million in Microloans in FY2021 ($5 million in regular appropriations and $7
million in supplemental appropriations).15 In addition, the SBA was provided an appropriation of
$85 million for the Microloan Technical Assistance program in FY2021 ($35 million in regular

industries will receive an additional three monthly payments. Loans approved from February 1, 2021, through
September 30, 2021, will receive three monthly payments beginning with the first payment due. See SBA, “Adjustment
to Number of Months of Section 1112 Payments in the 7(a), 504 and Microloan Programs Due to Insufficiency of
Funds,” SBA Procedural Notice, 5000-20095, February 16, 2021, at https://www.sba.gov/document/procedural-notice-
5000-20095-adjustment-number-months-section-1112-payments-7a-504-microloan-programs-due-insufficiency-funds.
11 For information and analysis concerning the SBA’s 7(a) and 504/CDC programs, see CRS Report R41146, Small
Business Administration 7(a) Loan Guaranty Program
, by Robert Jay Dilger, and CRS Report R41184, Small Business
Administration 504/CDC Loan Guaranty Program
, by Robert Jay Dilger.
12 P.L. 111-240, the Small Business Jobs Act of 2010, increased the loan limit for borrowers from $35,000 to $50,000.
13 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, pp. 36, 165, at
https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report. For a list of
Microloan intermediaries, regardless of lending volume, see SBA, Microloan Program: Partner Identification &
Management System Participating Intermediary Microlenders Report
, June 21, 2017, at https://www.sba.gov/sites/
default/files/articles/microlenderrpt5_20170621.pdf.
14 The SBA’s Office of Financial Analysis and Modeling is responsible for ensuring that the computation of subsidy
rates for the SBA’s credit programs are in compliance with the Federal Credit Reform Act of 1990 (FCRA). As
indicated on its website: “SBA develops its subsidy rates by creating models that incorporate data on loan maturity,
borrowers’ interest rates, fees, grace periods, interest subsidies, delinquencies, purchases or defaults, recoveries,
prepayments, advances and borrower characteristics.” See SBA, Office of Financial Analysis and Modeling, “Summary
of Responsibilities,” at https://www.sba.gov/offices/headquarters/ocfo/resources/13299.
15 P.L. 116-260, the Consolidated Appropriations Act of 2021, and P.L. 116-260, the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021, §329).
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link to page 8 Small Business Administration Microloan Program

appropriations and $50 million in supplemental appropriations). 16 These grants are awarded to
selected Microloan intermediaries and qualified “non-lending technical assistance providers” to
provide Microloan borrowers and prospective borrowers marketing, management, and technical
training assistance.
As shown in Table 1, Microloan intermediaries provided counseling services to 22,100 small
businesses in FY2019. The data indicate that the number of small businesses served by the
Microloan Technical Assistance program generally has increased in recent years.
Table 1. Microloan Technical Assistance Program Counseling Services,
FY2010-FY2019
Number of Small Businesses Provided
Microloan Technical Assistance
Fiscal Year
Counseling Services
2010
14,916
2011
15,900
2012
15,892
2013
19,368
2014
15,668
2015
17,200
2016
17,948
2017
19,600
2018
21,800
2019
22,100
Sources: U.S. Small Business Administration, Fiscal Year 2017 Congressional Budget Justification and FY2015 Annual
Performance Report
, p. 99, at https://www.sba.gov/sites/default/files/FY17-CBJ_FY15-APR.pdf; and U.S. Small
Business Administration, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report,
p. 36, at https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report.
Intermediary Microloan Lender Eligibility Standards
To become a qualified intermediary Microloan lender, an applicant must
 be organized as a nonprofit community development corporation or other entity,
a consortium of nonprofit community development corporations or other entities,
a quasigovernmental economic development corporation, or an agency
established by a Native American Tribal Government;
 be located in the United States, including the Commonwealth of Puerto Rico, the
U.S. Virginia Islands, Guam, and American Samoa;
 have made and serviced short-term, fixed rate loans of not more than $50,000 to
newly established or growing small businesses for at least one year; and

16 P.L. 116-260, the Consolidated Appropriations Act of 2021, and P.L. 116-260, the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021, §329).
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 have at least one year of experience providing technical assistance to its
borrowers.17
If accepted into the program by the SBA, an intermediary may borrow no more than $750,000
from the SBA during its first year of participation. In an effort to assist small businesses adversely
affected by the COVID-19 pandemic, P.L. 116-260, the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations
Act of 2021, §329), increased the annual maximum loan amount available to Microloan
intermediaries after their first year in the program from $2.5 million to $4.5 million in FY2021.
This amount will revert to $3 million on October 1, 2021. The act also increased the maximum
aggregate outstanding loan amount available to Microloan intermediaries from $6 million to $10
million in FY2021. This amount will revert to $7 million on October 1, 2021.
The SBA approves and lends funds, subject to the availability of appropriations, to intermediaries
based on the order in which applications are received. The amount provided is subject to two
statutory limitations:
 No more than 300 intermediaries may participate in the Microloan program at
any given time.18
 During the first six months of each fiscal year, subject to the availability of
appropriations, at least $800,000 or 1/55th of available loan funds (whichever is
less) is required to be made available for loans to intermediaries in each state
(including the District of Columbia, the Commonwealth of Puerto Rico, the
United States Virgin Islands, Guam, and American Samoa).19
Any applications that cannot be funded during the first six months “due to geographic limitations
will be kept on file in the order they were received” and, subject to the availability of funds, “will
be funded during the seventh month of the fiscal year [April].”20 If the amount of requested loan
funds exceeds the amount of available funds, the SBA “may hold back up to 20% of available
loan funds to ensure that due consideration is given to new intermediaries and those having the
greatest impact to underserved markets.”21 Also, if the amount of requested loan funds from new
intermediaries exceeds the amount of available funds, the SBA “may choose to select a new
intermediary in an underserved location (a location that is currently unserved by an SBA
Microloan Program Intermediary Lender), as determined by the Agency, over a new applicant in
an area that is already served by one or more existing Intermediaries.”22
Intermediary Microloan Lender Program Requirements
Intermediaries are not required to make any interest payments on the Microloan during the first
year, but interest accrues from the date that the SBA disburses the loan proceeds to the

17 13 C.F.R. §120.701; and 13 C.F.R. §120.702. P.L. 111-240, the Small Business Jobs Act of 2010, increased the loan
limit for borrowers from $35,000 to $50,000.
18 15 U.S.C. §636 (m)(7)(A).
19 15 U.S.C. §636 (m)(7)(B)(i).
20 SBA, “SOP 52 00 B: Microloan Program,” (effective July 1, 2018), pp. 20, 21, at https://www.sba.gov/document/
sop-52-00-microloan-program. (Hereinafter cited as SBA, “SOP 52 00 B: Microloan Program.”)
21 SBA, “SOP 52 00 B: Microloan Program,” p. 21.
22 SBA, “SOP 52 00 B: Microloan Program,” p.21.
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intermediary. After that, the SBA determines the schedule for periodic payments. Loans must be
repaid within 10 years.23
The SBA charges intermediaries an interest rate that is based on the five-year Treasury rate,
adjusted to the nearest one-eighth percent (called the Base Rate), less 1.25% if the intermediary
maintains an historic portfolio of Microloans averaging more than $10,000, and less 2.0% if the
intermediary maintains an historic portfolio of Microloans averaging $10,000 or less. The Base
Rate, after adjustment, is called the Intermediary’s Cost of Funds. The Intermediary’s Cost of
Funds is initially calculated one year from the date of the note and is reviewed annually and
adjusted as necessary (called recasting). The interest rate cannot be less than zero.24
Intermediaries are required to contribute not less than 15% of the loan amount in cash from
nonfederal sources and, as security for repayment of the loan, must provide the SBA first lien
position on all notes receivable from any microloans issued under the program.25 Unlike the
SBA’s 7(a) and 504/CDC loan guarantee programs, the SBA does not charge intermediaries
upfront or ongoing service fees under the Microloan program.26
P.L. 111-240 temporarily allowed the SBA to waive, in whole or in part through FY2012, the
intermediary’s 15% nonfederal share requirement under specified circumstances (e.g., the
economic conditions affecting the intermediary and the intermediary’s performance) for up to a
fiscal year.27
Intermediaries are required to deposit the proceeds from the SBA’s loans, their 15% contribution,
and payments from their Microloan borrowers into a Microloan Revolving Fund. Intermediaries
may only withdraw from this account funds necessary to make microloans to borrowers, repay
the SBA, and establish and maintain a Loan Loss Reserve Fund to pay any shortage in the
Microloan Revolving Fund caused by delinquencies or losses on its microloans.28 They are
required, until they have been in the program for at least five years, to maintain a balance in the
Loan Loss Reserve Fund equal to 15% of the outstanding balance of the notes receivable from
their Microloan borrowers.29 After five years, if the intermediary’s average annual loss rate during
the preceding five years is less than 15% and no other factors exist that may impair the
intermediary’s ability to repay its obligations to the SBA, the SBA Administrator may reduce the
required balance in the intermediary’s Loan Loss Reserve Fund to the intermediary’s average
annual loss rate during the preceding five years, but not less than 10% of the portfolio.30
Intermediaries are required to maintain their Loan Loss Reserve Fund until they have repaid all
obligations owed to the SBA.
The SBA does not maintain detailed data necessary to determine an aggregate default rate for
Microloan borrowers. However, a Government Accountability Office (GAO) analysis of 23,000
SBA microloans issued from 2014 through 2017 found that about 3% of Microloan borrowers

23 13 C.F.R. §120.706.
24 15 U.S.C. §636(m)(3)(F)(iii); and SBA, “SOP 52 00 B: Microloan Program,” (effective July 1, 2018), pp. 22, 23, at
https://www.sba.gov/document/sop-52-00-microloan-program. In recent years, the Intermediary’s Cost of Funds has
been either zero or close to zero.
25 13 C.F.R. §120.706. Note: The 15% contribution must be from nonfederal sources and may not be borrowed. For
purposes of this program, Community Development Block Grants are considered nonfederal sources.
26 13 C.F.R. §120.706.
27 P.L. 111-240, the Small Business Jobs Act of 2010, §1401. Matching Requirements Under Small Business Programs.
28 13 C.F.R. §120.709.
29 13 C.F.R. §120.710.
30 13 C.F.R. §120.710.
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were delinquent (payments were more than 30 days late but up to 120 days late) and 7% had
defaulted on their loans to intermediaries.31 Because the Loan Loss Reserve Fund is used to
contribute toward the cost of borrower defaults, and is often sufficient to cover the entire cost of
such defaults, the SBA’s loss rate for intermediary repayment is typically less than 3% each
year.32
An intermediary may be suspended or removed from the Microloan program if it fails to comply
with a specified list of program performance standards. For example, intermediaries are required
to close and fund at least 10 microloans per year, cover the service territory assigned by the SBA,
honor the SBA determined boundaries of neighboring intermediaries and nonlender technical
assistance providers, fulfill reporting requirements, maintain a loan currency rate of 85% or more
(where loans are no more than 30 days late in scheduled payments), maintain a default rate of
15% or less, and “satisfactorily provide” in-house technical assistance to microloan clients and
prospective microloan clients.33
Intermediary Marketing, Management, and Technical
Training Assistance
As mentioned, the SBA has received an appropriation of $85 million in FY2021 for grants to
Microloan intermediaries and qualified “non-lending technical assistance providers” to provide
Microloan borrowers and prospective borrowers marketing, management, and technical training
assistance (see Appendix for previous funding levels).
Intermediaries are eligible to receive a Microloan Technical Assistance grant “of not more than
25% of the total outstanding balance of loans made to it under this subsection.”34 In an effort to
assist small businesses adversely affected by the COVID-19 pandemic, P.L. 116-260 the
Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of
the Consolidated Appropriations Act of 2021, §329), increased this percentage to not more than
30% in any fiscal year in which the amount appropriated for the program is sufficient to provide
each intermediary a grant of not less than 25% of the total balance of loans made to the
intermediary.
Grant funds may be used only to provide marketing, management, and technical assistance to
Microloan borrowers, except that no more than 50% of the funds may be used to provide such

31 U.S. Government Accountability Office (GAO), SBA Microloan Program: Opportunities Exist to Strengthen
Program Performance Measurement, Collaboration, and Reporting
, GAO-20-49, November 19, 2019, p. 11, at
https://www.gao.gov/products/GAO-20-49. In 2007, the SBA estimated that the borrower default rate for the
Microloan program was about 12%. See U.S. Congress, House Committee on Small Business, Full Committee
Hearings on the Small Business Administration’s Microloan Program
, 110th Cong., 1st sess., June 14, 2007, H.Hrg.
110-30 (Washington: GPO, 2007), p. 15. However, a study released on December 28, 2009, by the SBA’s Office of the
Inspector General concluded that Microloan intermediaries may be under-reporting the default rate. See SBA, Office of
the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” December 28,
2009, at https://www.sba.gov/document/report-rom-10-10-rom-10-10-sbas-administration-microloan-program-under-
recovery-act.
32 In FY2019, the Microloan program’s intermediary default rate was 2.31%. See SBA, Agency Financial Report,
Fiscal Year 2019
, p. 70, at https://www.sba.gov/sites/default/files/2019-11/SBA-AFR-fy2019.pdf.
33 13 C.F.R. §120.716. A new Microloan intermediary is not required to meet the minimum loan requirement during the
year it enters the program.
34 15 U.S.C. §636(m)(4)(A). Note: The SBA’s Program for Investment in Microentrepreneurs Act (PRIME) program
also provides nonprofit organizations grant funding to assist low-income entrepreneurs with training assistance. See,
SBA, “PRIME Program,” at https://www.sba.gov/offices/headquarters/oca/resources/11416.
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assistance to prospective Microloan borrowers. Grant funds may also be used to attend training
required by the SBA.35 Also, intermediaries must contribute, solely from nonfederal sources, an
amount equal to 25% of the grant amount. In addition to cash or other direct funding, the
contribution may include indirect costs or in-kind contributions paid for under nonfederal
programs.36 Intermediaries may expend no more than 50% of the grant funds on third-party
contracts for the provision of technical assistance.37
P.L. 116-260 waived the Microloan Technical Assistance program’s matching requirement and
the limitations on the use of those funds to provide training to prospective borrowers and on
contracts to third party providers in FY2021.
The SBA does not require Microloan borrowers to participate in the Technical Assistance
program. However, intermediaries typically require Microloan borrowers to participate in the
training program as a condition of the receipt of a microloan. Combining loan and intensive
training assistance is one of the Microloan program’s distinguishing features.
Intermediaries are eligible for an additional training grant equal to 5% of “the total outstanding
balance of loans made to the intermediary” if the intermediary
 provides at least 25% of its loans to small businesses located in or owned by one
or more residents of an economically distressed area;38
 has a portfolio of loans made under the program “that averages not more than
$10,000 during the period of the intermediary’s participation in the program”
(i.e., it is a Specialized Intermediary); or
 provides at least 25% of its loans in rural areas “during the period of the
intermediary’s participation in the program.”39
Intermediaries are not required to make a matching contribution as a condition of receiving these
additional grant funds.
Nonlending Technical Assistance Providers
Each year, the SBA is authorized to select qualified nonprofit, nonlending technical assistance
providers to receive grant funds to provide marketing, management, and technical assistance to
Microloan borrowers. Any nonprofit entity that is not an intermediary may apply for these
funds.40

35 13 C.F.R. §120.712.
36 13 C.F.R. §120.712. Intermediaries may not borrow their contribution.
37 13 C.F.R. §120.712. Intermediaries may not borrow their contribution.
38 Economically distressed is defined as “a county or equivalent division of local government of a State in which the
small business concern is located, in which, according to the most recent data available from the Bureau of the Census,
Department of Commerce, not less than 40% of residents have an annual income that is at or below the poverty level.’’
See P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III
of the Consolidated Appropriations Act of 2021, §329).
39 13 C.F.R. §120.712; 15 U.S.C. §636(m)(4)(C)(i); and P.L. 116-260, the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021, §329).
Prior to P.L. 116-260, the additional 5% was available only if the intermediary had a portfolio of loans that averages
not more than $10,000 during the period of the intermediary’s participation in the program.
40 13 C.F.R. §120.714.
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The SBA may award up to 55 grants each year to qualified nonlending technical assistance
providers to deliver marketing, management, and technical assistance to Microloan borrowers.
The grants may be for terms of up to five years and may not exceed $200,000.41 The nonprofit
entity must contribute, solely from nonfederal sources, an amount equal to 20% of the grant. In
addition to cash or other direct funding, the contribution may include indirect costs or in-kind
contributions paid for under nonfederal programs.42
The SBA stopped awarding these grants at the beginning of FY2005. The SBA determined at that
time that the nonlending technical assistance providers duplicated much of what was already
being provided by Microloan intermediaries and other SBA entrepreneurial development
programs.43
Microloan Borrower Eligibility Standards
With one exception, Microloan borrowers must be an eligible, for-profit small business as defined
by the Small Business Act. P.L. 105-135, the Small Business Reauthorization Act of 1997,
expanded the Microloan program’s eligibility to include borrowers establishing a nonprofit
childcare business.
Microloan Borrower Program Requirements
Intermediaries are directed by legislative language to provide borrowers “small-scale loans,
particularly loans in amounts averaging not more than $10,000.”44 They are also directed, “to the
extent practicable ... to maintain a microloan portfolio with an average loan size of not more than
$15,000.”45 Microloans for more than $20,000 are allowed “only if such small business concern
demonstrates that it is unable to obtain credit elsewhere at comparable interest rates and that it has
good prospects for success.”46 The maximum loan amount is $50,000 and no borrower may owe
an intermediary more than $50,000 at any one time.47
Microloan proceeds may be used only for working capital and acquisition of materials, supplies,
furniture, fixtures, and equipment. Loans cannot be made to acquire land or property, and must be
repaid within eight years (reverts to seven years on October 1, 2021).48 Within these parameters,

41 13 C.F.R. §120.714.
42 13 C.F.R. §120.714.
43 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” August 2, 2012.
44 15 U.S.C. §636(m)(1)(A)(iii)(I).
45 15 U.S.C. §636(m)(6)(B).
46 15 U.S.C. §636(m)(3)(E).
47 13 C.F.R. §120.707. P.L. 111-240, the Small Business Jobs Act of 2010, increased the loan limit for borrowers from
$35,000 to $50,000.
48 13 C.F.R. §120.707. The SBA increased the Microloan program’s maximum loan term for borrowers from six years
to seven years, effective March 11, 2020, in an interim final rule that included changes to numerous SBA lending
programs. See SBA, “Express Loan Programs; Affiliation Standards,” 85 Federal Register 7632, February 10, 2020.
That interim final rule was rescinded in P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act), §1102(e) for reasons not related to the Microloan program’s maximum loan term for borrowers. P.L.
116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the
Consolidated Appropriations Act of 2021, §329), increased the Microloan program’s maximum loan term to eight years
for new borrowers and allowed existing borrowers to extend their loan term to up to eight years in FY2021. The act
directed the SBA to set the Microloan program’s maximum loan term at seven years “or such other amount established
by the Administrator,” starting on October 1, 2021.
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loan terms vary depending on the loan’s size, the planned use of funds, the requirements of the
intermediary lender, and the needs of the small business borrower.
On loans of more than $10,000, the maximum interest rate that can be charged to the borrower is
the interest rate charged by the SBA on the loan to the intermediary, plus 7.75 percentage points.
On loans of $10,000 or less, the maximum interest rate that can be charged to the borrower is the
interest charged by the SBA on the loan to the intermediary, plus 8.5 percentage points.49 Rates
are negotiated between the borrower and the intermediary, and typically range from 6% to 9%. In
FY2020, the average interest rate charged was 6.5%.50
Each intermediary establishes its own lending and credit requirements. However, borrowers are
generally required to provide some type of collateral (consistent with prudent lending practices),
and a personal guarantee to repay the loan.51 The SBA does not review the loan for
creditworthiness.52
Intermediaries are allowed to charge borrowers reasonable packaging fees limited to 3% of the
loan amount for loans with terms of one year or more, and 2% for loans with terms of less than
one year. Intermediaries are also allowed to charge borrowers “actual, paid and documented out-
of-pocket closing costs ... such as filing or recording fees, collateral appraisals, credit reports, and
other such direct charges related to loan closing.”53 These fees may be added to the loan amount

49 15 U.S.C. §636(m)(6)(C)(i) and 15 U.S.C. §636(m)(6)(C)(ii) indicate that the threshold average loan amount for
determining the maximum interest rate charged to borrowers is $7,500. The SBA increased the threshold average loan
amount used to determine the maximum interest rate charged to borrowers from $7,500 to $10,000 in 2001, citing
authority provided in P.L. 106-554, the Consolidated Appropriations Act, 2001 (2000 legislation–Small Business
Reauthorization Act of 2000): “SBA is amending § 120.707(c) [the section in the U.S. Code of Federal Regulations
concerning the threshold average loan amount for determining the maximum interest rate charged to borrowers] to
reflect the statutory change which increased the dollar amount to $10,000 up from $7,500.” See SBA, “Microloan
Program,” 66 Federal Register 47877, September 4, 2001. However, P.L. 106-554 included language amending
Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) “in paragraphs (1)(A)(iii)(I), (3)(A)(ii), and (4)(C)(i)(II),
by striking “$7,500” each place it appears and inserting “$10,000.” The three sections cited in P.L. 106-554 referred to
encouraging intermediaries to make “loans in amounts averaging not more than $7,500;” directing the Administration
to “give priority to those applicants that provide loans in amounts averaging not more than $7,500;” and eligibility for
technical assistance grants “the intermediary has a portfolio of loans made under this subsection that averages not more
than $7,500 during the period of the intermediary’s participation in the program.” According to the SBA, “at the time
of the change in the law, SBA staff believed that Congress intended to raise all of the microloan thresholds to $10,000
from $7,500, as evidenced by the fact that Congress revised the general purpose language in §7(m)(1)(A)(iii). That
provision was revised to state that one of the purposes of the Microloan program is to enable intermediaries to provide
small-scale loans, ‘particularly in amounts averaging not more than $10,000.’ In addition, the legislative history
indicates that the loan amounts were increased to reflect inflation, but does not explain why only some loan amounts
were adjusted and not others.... Furthermore, it would be confusing to have different thresholds in the several
provisions that incentivize intermediaries to make small loans, especially when those thresholds had been the same
prior to the changes implemented by P.L. 106-554.... For these reasons, SBA staff believed that increasing all of the
microloan thresholds to $10,000 from $7,500 would achieve the Congressional purpose in making more small loans
available. The regulations implemented the legislative changes in 2001. There is Congressional awareness of these
longstanding microloan program regulations, which have never been challenged or questioned. There is also
Congressional awareness of the discrepancies in the statute, as evidenced by the 13 bills that have been introduced
since 2001 to correct them.” SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,”
November 14, 2013.
50 SBA, “Nationwide Loan Report, October 1, 2019 through September 30, 2020,” November 18, 2020.
51 The SBA urges intermediaries in its Microloan SOP “to temper collateral requirements with strong technical
assistance and to be creative in their definition of acceptable collateral.” See SBA, “SOP 52 00 B: Microloan Program,”
(effective July 1, 2018), pp. 52, 53, at https://www.sba.gov/document/sop-52-00-microloan-program.
52 SBA, “Microloan Program,” at https://www.sba.gov/content/microloan-program.
53 SBA, “SOP 52 00 B: Microloan Program,” (effective July 1, 2018), p. 53, at https://www.sba.gov/document/sop-52-
00-microloan-program.
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and financed over the life of the loan “provided the total loan amount, including the fee, does not
exceed $50,000.”54
Microloan Program Statistics
Table 2
provides the number and amount of Microloan intermediary loans that the SBA
approved, the number and amount of Microloans that intermediaries provided small businesses,
and the unpaid principal balance for the Microloan program from FY2010 through FY2020.
As shown in Table 2, in FY2019, the SBA approved 53 loans to Microloan intermediaries
totaling $42.3 million. The average approved intermediary loan amount was $797,471.55 In
FY2019, microloan intermediaries provided 5,532 loans to small businesses totaling $81.5
million. The average Microloan amount was $14,735.56
In FY2020, microloan intermediaries provided 5,890 loans to small businesses, totaling $85.0
million. The average Microloan amount was $14,434.57
Table 2. Microloan Program Statistics, FY2010-FY2020
($ in millions)
# of
Amount of
# of Approved SBA Amount of Approved
Microloans
Microloans
Unpaid
Loans to
SBA Loans to
to Small
to Small
Principal
FY
Intermediaries
Intermediaries
Businesses
Businesses
Balance
2010
78
$40.5
3,729
$44.1
$110.3
2011
76
$37.6
4,002
$46.8
$116.8
2012
43
$24.6
3,973
$44.7
$127.9
2013
72
$43.9
4,426
$51.2
$132.7
2014
36
$26.5
3,917
$55.5
$136.7
2015
61
$35.0
3,694
$52.1
$137.5
2016
50
$35.0
4,506
$61.2
$144.7
2017
57
$44.4
4,958
$68.5
$157.3
2018
58
$35.9
5,457
$76.7
$165.3
2019
53
$42.3
5,532
$81.5
$168.1
2020
NA
NA
5,890
$85.0
$171.9
Sources: U.S. Small Business Administration, “Small Business Administration (SBA) Loan Program Performance:
WDS Table 1—Unpaid Principal Balance (UPB) By Program, WDS Table 2—Gross Approval Amount by
Program, and WDS Table 3—Number of Approved Loans by Program,” at https://www.sba.gov/document/
report—small-business-administration-loan-program-performance; U.S. Smal Business Administration,
“Nationwide Loan Report, October 1, 2009 through September 30, 2010,” January 14, 2011; “Nationwide Loan
Report, October 1, 2010 through September 30, 2011,” November 2, 2011; “Nationwide Loan Report, October
1, 2011 through September 30, 2012,” October 15, 2012; “Nationwide Loan Report, October 1, 2012 through
September 30, 2013,” October 28, 2013; “Nationwide Loan Report, October 1, 2013 through September 30,

54 SBA, “SOP 52 00 B: Microloan Program,” p. 53.
55 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 36, at
https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report.
56 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 36.
57 SBA, “Nationwide Loan Report, October 1, 2019 through September 30, 2020,” November 18, 2020.
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2014,” June 4, 2015; “Nationwide Loan Report, October 1, 2019 through September 30, 2020,” November 18,
2020; and U.S. Small Business Administration, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual
Performance Report
, pp. 35, 36, at https://www.sba.gov/document/report—congressional-budget-justification-
annual-performance-report.
Note: The unpaid principal balance for FY2020 is as of March 31, 2020.
The Microloan program is open to all small business entrepreneurs, but targets new and early-
stage businesses in “underserved markets, including borrowers with little to no credit history,
low-income borrowers, and women and minority entrepreneurs in both rural and urban areas who
generally do not qualify for conventional loans or other, larger SBA guaranteed loans.”58 An
analysis conducted by the Urban Institute found that about 9.9% of conventional small business
loans are issued to minority-owned small businesses and about 16% of conventional small
business loans are issued to women-owned businesses.59 In FY2020, of those reporting their race,
minority-owned or -controlled firms received 51.5% of the number of microloans issued and
38.7% of the amount issued.60 Women-owned or -controlled firms received 46.6% of the number
of microloans issued and 38.0% of the amount issued.61
More than three-quarters of all Microloan borrowers (81.1%) in FY2020 were located in an urban
area. Also, in FY2020, startup companies received 30.0% of the number of microloans issued and
28.2% of the total amount of microloans issued.62
As mentioned, the Microloan program’s estimated borrower default rate is about 7%. Because the
Loan Loss Reserve Fund is used to contribute toward the cost of borrower defaults, and is often
sufficient to cover the entire cost of such defaults, the SBA’s loss rate for intermediary repayment
is typically less than 3% annually. For example, the Microloan program’s intermediary default
rate was 1.60% in FY2016, 2.26% in FY2017, 2.29% in FY2018, and 2.31% in FY2019.63
Microloans are often used for more than one purpose. In FY2020, they were most commonly
used for working capital (80.3%), equipment (20.5%), materials (12.0%), supplies (3.7%), and
inventory (0.3%).64
Congressional Issues
Critics of the SBA’s Microloan program argue that it is duplicative of other available programs,
expensive relative to alternative programs, and subject to administrative shortfalls. The program’s

58 SBA, “Microloans Help Small Businesses Start, Grow and Succeed” (no longer available online).
59 Kenneth Temkin, Brett Theodos, with Kerstin Gentsch, Competitive and Special Competitive Opportunity Gap
Analysis of the 7(A) and 504 Programs
(Washington: The Urban Institute, 2008), p. 13, at http://www.urban.org/
UploadedPDF/411596_504_gap_analysis.pdf.
60 SBA, “Nationwide Loan Report, October 1, 2019 through September 30, 2020,” November 18, 2020. 843 of 5,890
Microloan borrowers (14.3%) did not report their race. These borrowers received $10.4 million in loans. Because the
race of these borrowers is unknown, their borrowing was removed from the calculation of the proportional share
percentage figures provided for minority-owned or -controlled firms.
61 SBA, “Nationwide Loan Report, October 1, 2019 through September 30, 2020,” November 18, 2020.
62 SBA, “Nationwide Loan Report, October 1, 2019 through September 30, 2020,” November 18, 2020.
63 SBA, Agency Financial Report, Fiscal Year 2016, p. 68, at https://www.sba.gov/sites/default/files/2018-06/
SBA_2016_AFR.pdf; SBA, Agency Financial Report, Fiscal Year 2017, p. 71, at https://www.sba.gov/sites/default/
files/2018-06/SBA_FY_2017_AFR_.pdf; SBA, Agency Financial Report, Fiscal Year 2018, p. 70, at
https://www.sba.gov/sites/default/files/2018-11/SBA%20FY%202018%20AFR.pdf; and SBA, Agency Financial
Report, Fiscal Year 2019
, p. 70, at https://www.sba.gov/sites/default/files/2019-11/SBA-AFR-fy2019.pdf.
64 SBA, “Nationwide Loan Report, October 1, 2019 through September 30, 2020,” November 18, 2020. Percentages
add to more than 100% as proceeds may be used for more than one purpose.
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advocates argue that it provides assistance that “reaches many who otherwise would not be served
by the private sector or even the SBA’s 7(a) loan program” and “has provided an important
source of capital for low-income women business owners and minority borrowers.”65
Program Duplication
Critics of the SBA’s Microloan program argue that its direct lending program is duplicative of the
SBA’s 7(a) loan guarantee program and its marketing, management, and technical training
assistance grant program is duplicative of the SBA’s training assistance provided through Small
Business Development Centers, SCORE (Service Corps of Retired Executives), and Women
Business Centers. For example, President George W. Bush proposed to eliminate all funding for
the Microloan program in his FY2005, FY2006, and FY2007 budget requests to Congress,
arguing that “the 7(a) program is capable of serving the same clientele through the Community
Express programs for much lower cost to the Government.”66 President Bush also proposed to
terminate the Microloan Technical Assistance program in his FY2008 and FY2009 budget
requests to Congress.67
Critics argued in 2007 that about 44% of the SBA’s 7(a) program’s loan guarantees at that time
were for loans under $35,000 (the Microloan program’s former loan limit for borrowers),
representing more than 17 times the number of loans issued through the SBA’s Microloan
program.68 In their view, the 7(a) program had demonstrated that it can service the needs of small
businesses targeted by the SBA’s Microloan program.69 They also argued that the Microloan
Technical Assistance program was not necessary because the SBA “already supports a nationwide
network of resource partners who provide counseling and training to entrepreneurs, including
Small Business Development Centers, Women’s Business Centers, and SCORE.”70 They argued
that about 94% of Microloan intermediaries are located within 20 miles of a Small Business
Development Center, a Women’s Business Center, or a SCORE partner.71

65 U.S. Congress, House Committee on Small Business, Full Committee Hearing on the Small Business
Administration’s Microloan Program
, 110th Cong., 1st sess., June 14, 2007, H.Hrg. 110-30 (Washington: GPO, 2007),
pp. 1, 2.
66 U.S. Office of Management and Budget (OMB), Budget of the United States Government: Fiscal Year 2005, p. 334,
at https://www.govinfo.gov/content/pkg/BUDGET-2005-BUD/pdf/BUDGET-2005-BUD-31.pdf; OMB, Budget of the
United States Government: Fiscal Year 2006
, p. 313, at https://www.govinfo.gov/content/pkg/BUDGET-2006-BUD/
pdf/BUDGET-2006-BUD-30.pdf; and OMB, Budget of the United States Government: Fiscal Year 2007, p. 283, at
https://www.govinfo.gov/content/pkg/BUDGET-2007-BUD/pdf/BUDGET-2007-BUD-28.pdf.
67 OMB, Budget of the United States Government: Fiscal Year 2008, pp. 139, 140, at https://www.govinfo.gov/content/
pkg/BUDGET-2008-BUD/pdf/BUDGET-2008-BUD-28.pdf; and OMB, Budget of the United States Government:
Fiscal Year 2009
, p. 130, at https://www.govinfo.gov/content/pkg/BUDGET-2009-BUD/pdf/BUDGET-2009-BUD-
29.pdf. The Bush Administration also proposed to increase the interest rate charged to intermediaries.
68 U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan
and Trade Programs
, 110th Cong., 1st sess., July 12, 2007, H.Hrg. 110-35 (Washington: GPO, 2007), p. 37 (hereinafter
U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan and
Trade Programs
, 110th Cong., 1st sess., July 12, 2007).
69 U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan
and Trade Programs
, 110th Cong., 1st sess., July 12, 2007, p. 37.
70 U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan
and Trade Programs
, 110th Cong., 1st sess., July 12, 2007, pp. 37, 38.
71 U.S. Congress, House Committee on Small Business, Full Committee Hearing on the Small Business
Administration’s Microloan Program
, 110th Cong., 1st sess., June 14, 2007, H.Hrg. 110-30 (Washington: GPO, 2007),
p. 7.
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Advocates argue that the SBA’s Microloan program is complementary, not duplicative, of the
SBA’s 7(a) loan guarantee program. They assert that Microloan borrowers are particularly
disadvantaged when seeking access to capital, often having no credit history or lower credit
scores than most applicants for the SBA’s 7(a) loan guarantee program.72 In their view, it is
important that the SBA has a program whose sole focus is to assist Microloan borrowers in
starting microbusinesses and have in place intermediaries that “have essential expertise on the
needs of this key demographic.”73
Advocates also argue that the SBA’s Microloan Technical Assistance program is “a crucial
element which enables intermediaries to assist microbusiness owners step by step through their
development and growth” and “not only increases the likelihood of full repayment of the loan, but
augments business survival and success.”74 As mentioned, intermediaries typically require
Microloan borrowers to participate in the training program as a condition of the receipt of the
microloan.
Program Cost
Critics of the SBA’s Microloan program argue that it is expensive relative to other SBA
programs, with total administrative costs of about $7,517 per small business assisted in FY2019,
compared to $1,986 per small business assisted in the SBA’s 7(a) loan guarantee program.75
President George W. Bush cited the program’s higher expense when he recommended in his
FY2005, FY2006, and FY2007 budget requests to Congress that the program be terminated and
when he recommended in his FY2008 and FY2009 budget requests to Congress that the interest
rate charged to Microloan intermediaries be increased to make the program “self-financing.”76
Advocates argue that the program’s higher cost per small business assisted is unavoidable given
the relatively unique nature of the program and the special needs of its borrowers. They assert
that intermediaries often have to spend a significant amount of time with Microloan borrowers
because those borrowers tend to have less experience with the credit application process and a
more difficult time documenting their qualifications for assistance than borrowers in the SBA’s
loan guaranty programs. Also, in their view, raising the interest rate charged to intermediaries to
make the program self-financing would reduce the program’s cost, but could also defeat the
program’s purpose. They assert that because microloans are small, it is difficult for intermediaries

72 U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan
and Trade Programs
, 110th Cong., 1st sess., July 12, 2007, H.Hrg. 110-35 (Washington: GPO, 2007), p. 27 (hereinafter
U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan and
Trade Programs
, 110th Cong., 1st sess., July 12, 2007).
73 U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan
and Trade Programs
, 110th Cong., 1st sess., July 12, 2007, p. 7.
74 U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan
and Trade Programs
, 110th Cong., 1st sess., July 12, 2007, p. 7.
75 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, pp. 27, 28, 35,
at https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report.
76 OMB, Budget of the United States Government: Fiscal Year 2008, pp. 139, 140, at https://www.govinfo.gov/content/
pkg/BUDGET-2008-BUD/pdf/BUDGET-2008-BUD-28.pdf; OMB, Budget of the United States Government: Fiscal
Year 2009
, p. 130, at https://www.govinfo.gov/content/pkg/BUDGET-2009-BUD/pdf/BUDGET-2009-BUD-29.pdf;
U.S. Congress, House Committee on Small Business, Full Committee Legislative Hearing on the SBA’s Microloan and
Trade Programs
, 110th Cong., 1st sess., July 12, 2007, H.Hrg. 110-35 (Washington: GPO, 2007), p. 38; and U.S.
Congress, House Committee on Small Business, Subcommittee on Finance and Tax, Subcommittee Hearing on
Improving the SBA’s Access to Capital Programs for our Nation’s Small Businesses
, 110th Cong., 2nd sess., March 5,
2008, H.Hrg. 110-76 (Washington: GPO, 2008), p. 33.
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to generate enough interest income to cover their costs. As a result, if the interest rate charged to
intermediaries is increased, they contend that intermediaries would have to pass the increase on to
Microloan borrowers. In their view, increasing the program’s cost to Microloan borrowers “will
create an economic hardship for them and make it more difficult for them to grow their
businesses” and “lead to fewer jobs created and fewer tax dollars paid.”77
Program Administration
On September 28, 2017, the SBA’s Office of Inspector General (OIG) released an audit of the
SBA’s administration of the Microloan program, following up on an earlier audit released on
December 28, 2009. The OIG reported a number of deficiencies that it argued needed to be
addressed “to ensure effective operation of the Microloan program.”78
In 2009, the OIG found that
 the SBA’s oversight of the Microloan program was focused on the
intermediaries’ ability to repay their SBA loans and was limited to a cursory
review of quarterly financial reports supported by only one monthly bank
statement. The bank statements were used to simply verify the outstanding
balances reported on the intermediaries’ quarterly reports. This review process
did not allow the SBA to analyze the sources and uses of funds “which is
necessary to detect inappropriate fund transfers between the intermediaries’
[Microloan Revolving Funds and Loan Loss Reserve Funds] accounts.”79
 onsite reviews were conducted only when an intermediary defaulted on its SBA
loan.
 the program was inadequately staffed, operating at that time “with 6 analysts who
oversee more than 160 intermediaries, 460 intermediary loans, and
approximately 2,500 microloans per year.”80
 the reported Microloan borrower default rate of 12% “appeared low given the
high-risk nature of the program.”81
 the audit identified duplicate loan reporting and 92 Microloan borrowers with
outstanding microloan balances exceeding the then-$35,000 limit.
 the SBA’s output performance metrics “do not ensure the ultimate program
beneficiaries, the microloan borrowers, are truly assisted by the program” and
“without appropriate [outcome performance] metrics, SBA cannot ensure the

77 U.S. Congress, House Committee on Small Business, Subcommittee on Finance and Tax, Subcommittee Hearing on
Improving the SBA’s Access to Capital Programs for our Nation’s Small Businesses
, 110th Cong., 2nd sess., March 5,
2008, H.Hrg. 110-76 (Washington: GPO, 2008), p. 46.
78 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
3, at https://www.sba.gov/sites/default/files/oig/om10-10.pdf (hereinafter SBA, Office of the Inspector General,
“SBA’s Administration of the Microloan Program under the Recovery Act”).
79 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
1.
80 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
1.
81 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
4. The OIG found that 1 intermediary made 1,182 microloans valued at over $11 million since 1993 and only reported
slightly more than a 1% historical default rate, and 39 other intermediaries that reported that none of their loans had
defaulted.
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Microloan program is meeting policy goals.”82 The OIG recommended that the
SBA “develop additional performance metrics to measure the program’s
achievement in assisting microloan borrowers in establishing and maintaining
successful small businesses.”83
In its 2017 audit, the OIG found that the SBA had taken several actions (see footnote below) to
improve its oversight of the Microloan program since the 2009 audit but that the agency still had
“internal control weaknesses” that prevented it from conducting “adequate program oversight to
measure program performance and ensure program integrity.”84
Specifically, the OIG audited 14 intermediary lenders and 52 microloan files and found
documentation deficiencies, or differences between the information contained in the lender’s loan
file versus that in the SBA Microloan Program Electronic Reporting System (MPERS) in 44 of
the 52 files. The OIG also argued that the audit revealed that inadequate documentation exists to
show that the “no credit elsewhere” test had been properly administered; that, in some cases,
inadequate supporting documentation existed to show how the microloan funds were used by the
borrower; and that, in some cases, interest rates and fees were charged that exceeded the limits
allowed under the program rules and regulations.85
The identified internal control weaknesses
were due to the SBA not having an overall site visit plan, an adequate information system,
available funding for system improvements, or clear Standard Operating Procedures
(SOPs). Additionally, SBA management focused on output-based performance measures
instead of outcome measures.86

82 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
6.
83 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
7.
84 SBA, Office of the Inspector General, “Audit of SBA’s Microloan Program,” executive summary, at
https://www.sba.gov/sites/default/files/oig/SBA_OIG_Report_17-19.pdf. The SBA provided the OIG a list of actions
taken to improve Microloan program oversight in recent years, including the following: “In 2010, the program office
implemented a comprehensive quarterly reporting analysis, which has been completed on a quarterly basis for each
active intermediary in the Microloan Program since that time.... This information enables SBA to understand each
Intermediary’s relative health by displaying historical default rate, delinquency rate, collateral coverage rate, loan loss
reserve coverage rate and other valuable risk indicators. Performing this quarterly analysis on every Intermediary has
enabled SBA to minimize its losses due to Intermediary non-payment by providing warning signs well before
performance issues reach a non-recoverable level. Also in 2010, OEO [the Office of Economic Opportunity]
implemented an annual financial statement analysis that OEO staff has completed annually for each Intermediary. This
analysis also allows SBA to see potential financial issues well in advance of becoming a problem in order to limit the
risk of Intermediary non-payment to SBA. Further, in 2012 OEO designed its first Site Visit Checklist to be used by
SBA District Office personnel when conducting annual site visits to the Microloan intermediaries.... In 2013 OEO
published its first Microloan Standard Operating Procedure (SOP) since the Program’s inception in 1992. This SOP
provides guidance to both SBA staff who are involved in managing the Program and the Intermediary lenders who
participate. This SOP was updated in 2015 to incorporate changes made to the Microloan Program regulations. In 2014,
the Microloan Program Office designed and implemented a grant calculator spreadsheet that is used by both OEO staff
and each Intermediary as a project management tool for the technical assistance grants and the Intermediary’s quarterly
expense billings and performance reports.... OEO conducts monthly webinar sessions with all participating lenders in
order to provide Program-related updates, ongoing training and allow for presentation of best practices.” See SBA,
Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” pp. 13,
14.
85 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
14.
86 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
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The OIG recommended that the SBA (1) continue efforts to improve the information system to
include outcome-based performance measurements and ensure the data captured can be used to
effectively monitor the Microloan Program compliance, performance, and integrity; (2) develop
and implement a site visit plan to comprehensively monitor microloan portfolio performance and
ensure program results can be evaluated program-wide; (3) update the Microloan program’s SOP
52 00 A to clarify requirements regarding evidence for use of proceeds and credit elsewhere; and
(4) update the microloan reporting system manual to reflect current technology capabilities.
The SBA concurred with the four recommendations and targeted September 30, 2019, for full
implementation.87 For example, the Microloan program’s SOP 52 00 B, effective July 1, 2018,
clarified requirements regarding evidence for use of proceeds and credit elsewhere and, in 2018,
the SBA developed a standardized checklist that district office officials use for carrying out
intermediary site visits.88
In 2019, GAO examined the Microloan program and recommended that the SBA
 “ensure definitions of data collected, such as income, are clear and instructions
are comprehensive for data needed, such as for borrower business outcomes and
technical assistance,”
 “develop a performance target to assess the Microloan program’s progress in
achieving its statutory purpose of assisting women, low-income, veteran, and
minority entrepreneurs,”
 “ensure that appropriate advance planning occurs during the development of the
new [planned] Microloan program data reporting system ... and considering data
needed to assess program performance,”
 “explore opportunities for additional interagency collaboration and information
sharing with other federal agencies that engage in microlending activities, such as
Treasury and USDA,” and
 “examine ways to incorporate public reporting of additional Microloan program
information into the design of the new data reporting system.”89
The SBA agreed to review and enhance Microloan program guidance, including by clearly
defining low-income (recommendation 1); involve relevant SBA offices in the design and
development of the new data reporting system and consider data needed to assess program
performance within the SBA (recommendation 3); and examine ways to incorporate public
reporting of additional program information (recommendation 5).
The SBA also agreed to provide aggregate demographic and socioeconomic data collected from
borrowers, but cited challenges with data collection because of the voluntary nature of the
information provided by loan applicants. The SBA did not commit to creating a performance

7.
87 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,” p.
8.
88 U.S. Government Accountability Office (GAO), SBA Microloan Program: Opportunities Exist to Strengthen
Program Performance Measurement, Collaboration, and Reporting
, GAO-20-49, November 19, 2019, p. 16, at
https://www.gao.gov/products/GAO-20-49 (hereinafter GAO, SBA Microloan Program: Opportunities Exist to
Strengthen Program Performance Measurement, Collaboration, and Reporting
).
89 GAO, SBA Microloan Program: Opportunities Exist to Strengthen Program Performance Measurement,
Collaboration, and Reporting
, pp. 36, 37.
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target to assess the program’s progress in achieving its statutory purpose of assisting women,
low-income, veteran, and minority entrepreneurs (recommendation 2).
The SBA also indicated that it would continue to seek additional collaboration opportunities with
other federal agencies that operate similar programs, but did not commit to systematically collect
information on intermediaries’ participation in other similar programs (recommendation 4).90
Legislation
As mentioned, during the 111th Congress, P.L. 111-240, the Small Business Jobs Act of 2010,
increased the Microloan program’s loan limit for borrowers from $35,000 to $50,000, and
increased the loan limit for Microloan intermediaries after their first year of participation in the
program from $3.5 million to $5 million.91 It also temporarily allowed the SBA to waive, in
whole or in part through FY2012, the nonfederal share requirement for loans to the Microloan
program’s intermediaries and for the Microloan Technical Assistance program under specified
circumstances (e.g., the economic conditions affecting the intermediary and the intermediary’s
performance) for up to a fiscal year.92
No bills were introduced during the 112th Congress concerning the Microloan program.
During the 113th Congress,
 H.R. 3191, the Expanding Opportunities to Underserved Businesses Act, would
have increased the Microloan program’s loan limit for borrowers from $50,000 to
$75,000.
 S. 2487, the Access to Capital, Access to Opportunity Act, would have increased
that limit to $100,000.
 S. 2693, the Women’s Small Business Ownership Act of 2014, and its House
companion bill, H.R. 5584, would have increased the Microloan program’s
aggregate loan limit for intermediaries after their first year of participation in the
program from $5 million to $7 million. These bills would have also removed the
requirements that no more than 25% of Microloan Technical Assistance funds
may be used on prospective borrowers or on third-party providers.
During the 114th Congress,
 S. 1445, the Microloan Act of 2015, would have removed the requirements that
no more than 25% of Microloan Technical Assistance funds may be used on

90 GAO, SBA Microloan Program: Opportunities Exist to Strengthen Program Performance Measurement,
Collaboration, and Reporting
, p. 37.
91 P.L. 111-240, the Small Business Jobs Act of 2010, §1113. Maximum Loan Limits Under Microloan Program.
92 P.L. 111-240, §1401. Matching Requirements Under Small Business Programs. During the 111th Congress, H.R.
3854, the Small Business Financing and Investment Act of 2009, passed by the House by a vote of 389-32, on October
29, 2009, would have increased the Microloan program’s loan funding to “such sums as may be necessary” to support
$110 million in direct microloans in FY2010 and $110 million in FY2011, increased funding for the Microloan
Technical Assistant program to $80 million in FY2010 and $80 million in FY2011, authorized $20 million ($10 million
in FY2010 and $10 million in FY2012) for a new Microloan interest assistance grant program, broadened the eligibility
requirements for Microloan intermediaries to qualify for lower interest rates, increased the program’s maximum loan
amount to intermediaries during their first year in the program from $750,000 to $1 million, and in later years from an
aggregate of $3.5 million to $7 million, and increased the percentage of Microloan Technical Assistance funds that an
intermediary can spend on prospective borrowers from 25% to 35%, and on third-party providers from 25% to 35%.
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prospective borrowers or on third-party providers. It would have also eliminated
the Microloan program’s minimum state allocation formula.
 H.R. 2670, the Microloan Modernization Act of 2015, and its companion bill in
the Senate (S. 1857) would have increased the Microloan program’s aggregate
loan limit for intermediaries after their first year of participation in the program
from $5 million to $6 million, increased the program’s repayment terms from not
more than 6 years to not more than 10 years for loans greater than $10,000, and
require the SBA Administrator to establish a rule enabling intermediaries to apply
for a waiver of the requirement that no more than 25% of Microloan Technical
Assistance funds may be used on prospective borrowers. The House passed H.R.
2670 on July 13, 2015. S. 1857 was reported by the Senate Committee on Small
Business and Entrepreneurship on July 29, 2015.
 S. 2850, the Microloan Program Modernization Act of 2016, would have
increased the Microloan program’s aggregate loan limit for intermediaries after
their first year of participation in the program from $5 million to $6 million;
eliminated the requirements that intermediaries spend no more than 25% of
Microloan Technical Assistance funds on prospective borrowers and no more
than 25% of those funds on third-party providers; required the SBA to study and
report on the operations of a representative sample of Microloan intermediaries
and other intermediaries and make recommendations on how to reduce costs
associated with intermediaries’ participation in the program and to increase
intermediary participation in the program; and required the Government
Accountability Office to study and report on the SBA’s oversight of the program,
SBA’s processes to ensure intermediary compliance with program rules and
regulations, and the program’s overall performance.
During the 115th Congress,
 P.L. 115-141, the Consolidated Appropriations Act, 2018, relaxed the
requirements that intermediaries spend no more than 25% of Microloan
Technical Assistance funds on prospective borrowers and no more than 25% of
those funds on third-party providers by increasing those percentages to 50%.
These provisions were originally in H.R. 2056, the Microloan Modernization Act
of 2017, and S. 526, its companion bill in the Senate (as amended in committee).
 P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal
Year 2019, among other provisions, increased the Microloan program’s aggregate
loan limit for intermediaries after their first year of participation in the program
from $5 million to $6 million. These provisions were originally in H.R. 2056, the
Microloan Modernization Act of 2017, and S. 526, its companion bill in the
Senate.
During the 116th Congress,
 P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act), among other provisions, appropriated $17 billion ($7.1 billion was spent) to
pay the principal, interest, and any associated fees that are owed on an existing
7(a), 504/CDC, or Microloan that is in a regular servicing status for a six-month
period starting on the next payment due date.93

93 For additional information about the CARES Act, see CRS Report R46284, COVID-19 Relief Assistance to Small
Businesses: Issues and Policy Options
, by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry.
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 P.L. 116-139, the Paycheck Protection Program and Health Care Enhancement
Act, among other provisions, increased the Paycheck Protection Program’s
(PPP’s) authorization limit from $349 billion to $659 billion. The act also
required that no less than $30 billion of that amount be set aside for loans issued
by “community financial institutions,” including community development
financial institutions; minority depository institutions; SBA-certified
development companies; microloan intermediaries; and small insured depository
institutions and credit unions, defined as having consolidated assets of less than
$10 billion.94 This provision was designed to provide underserved populations
greater access to PPP loans.
 P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and
Venues Act (Division N, Title III of the Consolidated Appropriations Act of
2021), among other provisions, waived the Microloan Technical Assistance
program’s matching requirement in FY2021; increased the Microloan
intermediaries’ aggregate loan amount after their first year of participation in the
program from $6 million to $10 million in FY2021 (reverts to $7 million on
October 1, 2021); increased the intermediaries’ annual maximum loan amount
after their first year in the program from $2.5 million to $4.5 million (the first
year remained at $750,000) in FY2021 (reverts to $3 million on October 1,
2021); and appropriated (1) an additional $50 million for the Microloan
Technical Assistance program (for a total of $85 million in FY2021), (2) $7
million for Microloan credit subsidies (for a total of $12 million in FY2021 to
support up to $110 million in Microloans), and (3) $3.5 billion to continue SBA
debt relief payments for 7(a) loans, 504/CDC loans, and Microloans.
Concluding Observations
In recent years, congressional debate concerning proposed changes to the SBA’s loan guaranty
programs, including the Microloan program, has centered on the likely impact the proposed
changes will have on small business access to capital, job retention, and job creation. As a general
proposition, some have argued that it is imperative that the SBA be provided additional resources
to assist small businesses in acquiring capital necessary to start, continue, or expand operations
and create jobs.95 Others have worried about the long-term adverse economic effects of spending
programs that increase the federal deficit. They advocate business tax reduction, reform of
financial credit market regulation, and federal fiscal restraint as the best means to assist small
business economic growth and job creation.96
In terms of specific program changes, the provisions enacted in P.L. 111-240 (allowing the SBA
to temporarily waive the Microloan program’s nonfederal share matching requirements,

94 For additional information about the set aside requirements, see CRS Insight IN11355, Paycheck Protection
Program (PPP) Lending Set Asides for Community Development Financial Institutions (CDFIs)
, by Sean Lowry.
95 Rep. Nydia Velázquez, Small Business Financing and Investment Act of 2009,” House debate, Congressional
Record
, daily edition, vol. 155, no. 159 (October 29, 2009), pp. H12074, H12075; Senator Mary Landrieu, “Statements
on Introduced Bills and Joint Resolutions,” remarks in the Senate, Congressional Record, daily edition, vol. 155, no.
185 (December 10, 2009), p. S12910; and The White House, “Remarks by the President on Job Creation and Economic
Growth,” December 8, 2009, at https://obamawhitehouse.archives.gov/the-press-office/remarks-president-job-creation-
and-economic-growth.
96 Susan Eckerly, “NFIB Responds to President’s Small Business Lending Initiatives,” October 21, 2009; and NFIB,
“Government Spending,” at https://www.nfib.com/content/issues/economy/government-spending-small-businesses-
have-a-bottom-line-government-should-too-49051/.
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increasing the loan limit for borrowers from $35,000 to $50,000, and increasing the loan limit for
intermediaries after their first year of participation in the program from $3.5 million to $5
million), P.L. 115-141 (relaxing restraints on the use of Technical Assistance program funds), P.L.
115-232 (increasing the loan limit for intermediaries after their first year of participation in the
program from $5 million to $6 million) and P.L. 116-136 and P.L. 116-260 (providing at least six
months of loan payments) all are designed to create jobs by enhancing micro borrowers’ access to
capital and technical training assistance.
Determining how specific changes in federal policy are most likely to lead to job creation is a
challenging question. For example, a 2008 Urban Institute study concluded that differences in the
term, interest rate, and amount of SBA financing “was not significantly associated with increasing
sales or employment among firms receiving SBA financing.”97 However, they also reported that
their analysis accounted for less than 10% of the variation in firm performance. The Urban
Institute suggested that local economic conditions, local zoning regulations, state and local tax
rates, state and local business assistance programs, and the business owner’s charisma or business
acumen also “may play a role in determining how well a business performs after receipt of SBA
financing.”98
As the Urban Institute study suggests, given the many factors that influence business success,
measuring the SBA’s Microloan program’s effect on job retention and creation is complicated.
That task is made even more challenging by the absence of performance-oriented measures that
could serve as a guide.
The SBA’s Office of Inspector General has recommended that the SBA adopt performance-
oriented measures, specifically recommending that the SBA track the number of Microloan
borrowers who remain in business after receiving a microloan to measure the extent to which the
Microloan program contributed to their ability to stay in business. It has also recommended that
the SBA require intermediaries to report the technical assistance provided to each Microloan
borrower and “use this data to analyze the effect technical assistance may have on the success of
Microloan borrowers and their ability to repay microloans.”99 Other performance-oriented
measures that Congress might also consider include requiring the SBA to survey Microloan
borrowers to measure the difficulty they experienced in obtaining a loan from the private sector;
the ease or difficulty of finding, applying, and obtaining a microloan from an intermediary; and
the extent to which the microloan or technical assistance received contributed to their ability to
create jobs or expand their scope of operations.

97 Shelli B. Rossman and Brett Theodos, with Rachel Brash, Megan Gallagher, Christopher Hayes, and Kenneth
Temkin, Key Findings from the Evaluation of the Small Business Administration’s Loan and Investment Programs:
Executive Summary
(Washington, DC: The Urban Institute, January 2008), p. 58, at http://www.urban.org/
UploadedPDF/411602_executive_summary.pdf (hereinafter Shelli B. Rossman and Brett Theodos, Key Findings from
the Evaluation of the Small Business Administration’s Loan and Investment Programs: Executive Summary
).
98 Shelli B. Rossman and Brett Theodos, Key Findings from the Evaluation of the Small Business Administration’s
Loan and Investment Programs: Executive Summary
, p. 58.
99 SBA, Office of the Inspector General, “SBA’s Administration of the Microloan Program under the Recovery Act,”
pp. 6, 7, at https://www.sba.gov/sites/default/files/oig/om10-10.pdf.
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Appendix. Microloan Technical Assistance
Program Funding

Table A-1. Microloan Technical Assistance Program Funding, FY2000-FY2021
(appropriations and actual expenditures, $ in millions)
Initial
Final
Actual
Fiscal Year
Appropriation
Modifications
Appropriation
Expenditures
2000
$23.200
($0.088)a
$23.112
$19.243
2001
$20.000
($0.044)b
$19.956
$18.385
2002
$17.500

$17.500
$17.742
2003
$15.000
($0.098)c
$14.902
$14.899
2004
$15.000
($0.089)d
$14.911
$14.655
2005
$14.000
($0.112)e
$13.888
$13.813
2006
$13.000
($0.130)f
$12.870
$12.792
2007
$13.000

$13.000
$12.800
2008
$15.000

$15.000
$14.816
2009
$20.000

$20.000
$19.813
2010
$22.000
$24.000g
$46.000
$43.220
2011
$22.000
($0.044)h
$21.956
$24.603
2012
$20.000

$20.000
$19.446
2013
$20.000
($0.191)i
$19.809
$19.985
2014
$20.000

$20.000
$19.267
2015
$22.300

$22.300
$22.247
2016
$25.000

$25.000
$24.340
2017
$31.000

$31.000
$23.535
2018
$31.000

$31.000
$31.567
2019
$31.000

$31.000
$34.019
2020
$34.500

$34.500
NA
2021
$35.000
$50.000j
$85.000
NA
Sources: SBA, Congressional Budget Justification, (FY2002-FY2009), no longer available on-line; SBA,
Congressional Budget Justification, [FY2010-FY2021], at https://www.sba.gov/document/report—congressional-
budget-justification-annual-performance-report; P.L. 109-148, the Department of Defense, Emergency
Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006;
P.L. 111-5, the American Recovery and Reinvestment Act of 2009; P.L. 112-10, the Department of Defense and
Ful -Year Continuing Appropriations Act, 2011; P.L. 112-25, the Budget Control Act of 2011; P.L. 112-74, the
Consolidated Appropriations Act, 2012, P.L. 112-175, the Continuing Appropriations Resolution, 2013; P.L. 113-
6, the Consolidated and Further Continuing Appropriations Act, 2013; P.L. 113-76, the Consolidated
Appropriations Act, 2014; P.L. 113-235, the Consolidated and Further Continuing Appropriations Act, 2015; P.L.
114-113, Consolidated Appropriations Act, 2016; P.L. 115-31, the Consolidated Appropriations Act, 2017; P.L.
115-141, the Consolidated Appropriations Act, 2018; P.L. 116-6, the Consolidated Appropriations Act, 2019;
P.L. 116-93, the Consolidated Appropriations Act, 2020; and P.L. 116-260, the Consolidated Appropriations Act,
2021.
Congressional Research Service

23

Small Business Administration Microloan Program

a. In FY2000, P.L. 106-113, the Consolidated Appropriations Act, 2000, required a 0.38% across-the-board
rescission for federal agencies in FY2000, resulting in a reduction of $0.088 mil ion from the Microloan
Technical Assistance program.
b. In FY2001, P.L. 106-554, the Consolidated Appropriations Act, 2001, imposed a 0.22% rescission on federal
agencies, resulting in a $0.044 mil ion reduction from the Microloan Technical Assistance program.
c. In FY2003, P.L. 108-7, the Consolidated Appropriations Resolution, 2003, imposed a rescission of 0.65% on
federal agencies, resulting in a $0.098 mil ion reduction from the Microloan Technical Assistance program.
d. In FY2004, P.L. 108-199, the Consolidated Appropriations Act, 2004, imposed a 0.59% rescission on federal
agencies, resulting in a reduction of $0.089 mil ion from the Microloan Technical Assistance program.
e. In FY2005, P.L. 108-447, the Consolidated Appropriations Act, 2005, imposed a 0.8% rescission on federal
agencies, resulting in a reduction of $0.112 mil ion from the Microloan Technical Assistance program.
f.
In FY2006, P.L. 109-148 imposed a 1.0% rescission on federal agencies, resulting in a reduction of $0.130
mil ion from the Microloan Technical Assistance program.
g. In FY2009, P.L. 111-5 provided the Microloan Technical Assistance program an additional $24 mil ion to
remain available until September 30, 2010. The funds were awarded in FY2010.
h. In FY2011, P.L. 112-10 imposed a 0.2% rescission on federal agencies, resulting in a reduction of $0.044
mil ion from the Microloan Technical Assistance program.
i.
In FY2013, P.L. 112-25 and P.L. 113-6 imposed in a federal government-wide sequestration process and a
required 0.2% across-the-board rescission, resulting in a $0.191 mil ion reduction from the Microloan
Technical Assistance program.
j.
In FY2021, P.L. 116-260 provided the Microloan Technical Assistance program an additional $50 mil ion to
remain available until expended.


Author Information

Robert Jay Dilger

Senior Specialist in American National Government



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Congressional Research Service
R41057 · VERSION 73 · UPDATED
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