News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release
June 14, 2007  

CONTACT: Kate Gilman/ Austin Bonner,  (202) 225-4038

Committee Seeks to Strengthen Key Initiatives for Economic Development
Changes to Microloan Program Will Ensure Future Businesses Thrive in Underserved Areas

WASHINGTON – In many underserved neighborhoods, small businesses are an important engine of growth and revitalization, bringing much needed jobs and commerce. Oftentimes, the individuals wishing to start these businesses have difficulty securing adequate finances, leaving their aspirations stalled in the planning phase. Today, the Committee on Small Business examined two key initiatives that support economic revitalization in some of these disadvantaged communities: the Microloan program and the Program for Investment in Micro-Enterprise (PRIME.)

“There are many budding entrepreneurs who strive to open their own business, but due to a lack of experience or limited credit history, cannot secure capital,” said Chairwoman of the Committee on Small Business, Nydia M. Velázquez. “The Microloan and PRIME programs have been instrumental in turning their dreams into reality.”

Since it’s inception in 1994, the Microloan program has provided credit to over 70,000 small firms, many headed by women, minorities and others who are facing challenges getting their ventures off the ground. These businesses have helped bring economic growth to areas where it is desperately needed, creating or retaining about 10,000 jobs in 2006, according to the Small Business Administration (SBA).  With a default rate of less than two percent, these investments have not only increased prosperity, but have done so while maintaining a better repayment record than traditional loans made by commercial lenders.

“These programs have been vital in moving people not just from welfare to work, but from welfare to business ownership – an amazing accomplishment,” Chairwoman Velázquez said.

Despite this record of success, the Bush administration has proposed to eliminate the Microloan program each year for the past four years. In its latest budget request, it has recommended increasing the cost of the loans for the borrowers, and to completely eliminate PRIME. At the hearing, members rejected these proposals and outlined ways to strengthen the current programs, making capital more affordable for borrowers. Currently, microloan recipients cannot use their repayment history to improve their credit score. Building a strong credit history is a challenge for many business ownder, but by changing the current system, borrowers could improve their credit records, increasing the stability of their business and ability to obtain future funding. The Committee also proposed reducing costs and providing greater flexibility, allowing lenders to better meet the needs of their clients. In striving for these goals, members seek to make loans more accessible for the next generation of entrepreneurs.

“For many aspiring business owners, a microloan is their only option, and we simply cannot allow these entrepreneurs to be left behind.” Chairwoman Velázquez said. “The answer is simple: these programs must be permitted to continue and any proposal to diminish them must be firmly rejected.”

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