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MicroLending Academy Newsletter: Commitment to Scale

 
The MLA newsletter is chock-a-block with articles, resources, technology, success stories, interviews, and big picture ideas on all Lending Academy features. This edition focuses on capacity building and lists several opportunities for training, whether they be peer calls, webinars or tools you can use.  
 
In this Issue…

  • Success Story:  Opportunity Fund, A Commitment to Scale
  • A Banker's Perspective: Fred Mendez, Union Bank
  • Excellence in Lending: Refining the Process for Efficiency
  • Best Practices: Cash Flow and Balance Sheets
  • MMS Update: Welcome Our Newest Lender
  • Research:  Crowdfunding by the Numbers
  • News
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Success Story: Opportunity Fund, A Commitment to Scale

1000947586Earlier this month, Opportunity Fund announced a collaboration to grow responsible lending with Lending Club, the world’s largest online credit marketplace. With a seamless technology integration forged between Opportunity Fund and Lending Club, the potential for scale is unprecedented and the customer experience will be unparalleled.

In fact, Opportunity Fund has said that they want to invest $100 million in microlending over the next five years.  Susan Brown, our microlending guru, spoke to several members of the Opportunity Fund staff about how they are well on their way to accomplishing their goal.

A Banker's Perspective: Fred Mendez, Union Bank

1000947586Fred Mendez, long known as a champion of micro business development and lending in California, recently assumed the position of Managing Director of Corporate Social Responsibility for the Americas for MUFG Union Bank, NA.  Prior to taking on this exciting new role, Fred ran the Community Development program for Rabobank for 8 years, creating a legacy of innovation in expanding small business lending in under-served rural regions.

Fred agreed to talk with Claudia Viek, our CEO, about his new job.  He was also willing to share his perspective on opportunities confronting CDFIs doing small business lending to LMI borrowers and why he thinks they should take more risk in this market.

Excellence in Lending: Refining the Process for Efficiency

1000947586Our Excellence in Lending program started with an assessment of operations and performance, and became the focus of our annual Microlending Forum in January.  We are following up with quarterly peer calls to discuss lending models and fine tune some metrics.

Our goal is to digest big picture topics important to our CDFI members: the frameworks, processes and goals that underlie programs and lead to greater success.  These calls are for the big picture thinker at each CDFI, to support greater competitiveness, volume and efficiency.

Brandon Napoli, Director of Microlending at VEDC, presented on how they close 300 deals per year with a modest staff and little automation.  Brandon has codified, in detail, all the steps in their lending process: who does what, how, and by when.  From packaging to assessment to underwriting to closing — VEDC is a well-oiled machine.  They can get a deal through their process in a week or two.  VEDC has also created a three-tiered incentive system, based on individual, team, and portfolio performance.  He said:  

We cultivate a mission-driven, sales culture.  We strive to meet community needs by increasing scale while maintaining quality.  We don't hide behind a non-profit orientation that doesn't call for efficiency.

Other successful CDFIs will present their secrets to success at future meetings – Working Solutions, Opportunity Fund, Fresno CDFI, to name a few. Please RSVP for our next call on Wednesday July 15 from 1:30 – 2:30pm.

Best Practices: Cash Flow and Balance Sheets

Register for our last MLA Best Practice Webinar on  July 8 – Balance Sheets Part II.  You will gain an understanding of how management decisions impact the balance sheet so trainers can steer clients in the right direction. 

You can watch the other three webinars in the series online (just click on the title)

Technology: MMS Update – New Lender

A big hearty welcome to Economic Development and Finance Corporation of Mendocino.

John Kuhry, Executive Director of EDFC, was initiated into the wonders of LiftFund's (formerly Accion Texas) Microlending Management System on May 13, 2015.  John wants MMS to underwrite his deals so he can focus on increasing capitalization and outreach.  

EDFC has historically been a small business lender with an average deal size of $60,000.  They will be the first MMS user in the CAMEO group to use the system for bigger deals up to $250,000.  But he is also looking forward to building up his microloan portfolio, now that he has MMS to help.  

Contact Susan Brown if you're interested in learning more or participating.  

Research: Crowdfunding by the Numbers

Dr. Richard Swart directs the research program in Entrepreneurial and Social Finance at UC Berkeley. He also is a partner and directs research for Crowdfund Capital Advisors, the world's leading advisory firm in Crowdfunding and Alternative Finance.

He spoke at the CrowdFunding Beat Conference in 2014.  He shares his observations on crowdfunding activity and where the challenges and opportunity lie. His first observation is crowdfunding "is an extremely successful and viable way of funding low-risk equity investment into microenterprises." Start the video at 4:00.

Also, the SBA recently published an Issue Brief – "Equity-based Crowdfunding: Potential Implications for Small Business Capital".

Demystify crowdfunding with this primer.

News

Micro Lending Academy: Balance Sheet Basics

Balance Sheet Basics

We don’t often get to analyze Balance Sheets with our microenterprise clients, but it’s important for all business consultants and trainers to understand them to provide quality advice on cash management, structuring debt, inventory management and much more. This webinar, the first of a two-part series, will be an introduction to Balance Sheets accounts, what they mean and how they work together. We have a fun exercise (you can use it in your classes!) that demonstrates how the Balance Sheet changes with each business transaction. We’ll also take a read on what additional Balance Sheet topics the group would like for the “Balance Sheets Part II” webinar in July.

Watch and listen to the webinar (65 minutes)

About the Presenter

SusanBrownSusan Brown is a Business & Community Development Specialist with a specific focus on Business Finance and Rural Microenterprise. CAMEO engaged Susan to implement our Rural Initiative in 2008 and is now managing our partnerships with Kiva and LiftFund’s MMS platform. Through her consulting service Susan provides strategic planning, facilitation, program development and grant writing services to non-profit organizations and government agencies as well as consulting services to small business owners.

A Banker’s Perspective: Fred Mendez of Union Bank

Fred Mendez, long known as a champion of micro business development and lending in California, recently assumed the position of Managing Director of Corporate Social Responsibility for the Americas for MUFG Union Bank, NA. Previous to taking on this exciting new role, Fred ran the Community Development program for Rabobank for 8 years, creating a legacy of innovation in expanding small business lending in under-served rural regions.

Fred agreed to talk with Claudia Viek, our CEO, about his new job. He was also willing to share his perspective on opportunities confronting CDFIs doing small business lending to LMI borrowers and why he thinks they should take more risk in this market.

Claudia Viek: Now that Union Bank has expanded into not only a national, but global arena, tell us what your role entails in promoting corporate social responsibility [CSR].

Fred Mendez: Right now I am managing all the outreach staff for the Foundation as well as the Corporate Communication and Government Affairs staff. I see my role as a bridge between everything a global bank has to offer in terms of products and services, and the needs of the communities where we have a presence – from Canada to Argentina. I hope to define what CSR can mean in the whole of the bank, but always keeping in mind the importance of supporting and strengthening processes in the U.S., of course. For example, we would like to explore how to open more TRAC [Technical Resource and Assistance Center] centers, such as we did in Fresno. And we are really excited about the branches we have opened in three high schools where we also offer financial capability training.

CV: What is your take on current opportunities for nonprofit CDFIs that do microlending?

FM: Speaking pragmatically, borrowers are engaging in the disruptive, online lending, so CDFIs need to connect more with these disruptors, these platforms. While banks will continue to provide capital funding to CDFIs, banks are limited in how innovative they can be, and can’t easily reach the micro borrower. CDFIs need to look beyond banks and towards virtual and customized products and find a way to provide financial education and credit technical assistance as their value added.

CV: Can you suggest ways CDFIs can better reach Low-Mod Income borrowers?

FM: Boy, I’d love to see the State Loan Guarantee Program, the FDCs, cover the total capital investment, the EQ2s, rather than just individual loans to borrowers. It would increase efficiency and allow CDFIs to take more risk. Let’s remember that CDFIs are chartered to take more risk and more losses than conventional lenders. Also, banks could be serving more high-risk markets, served by the FDCs, because these loans have performed extremely well.

Opportunity Fund, A Commitment To Scale

Thanks to Susan Brown, CAMEO’s microloan consultant for this post.

OppFundforPostFor Opportunity Fund, the desire for meaningful community impact means a commitment to scale.

  • They close 1,500 loans per year, adding up to $26.5 million.
  • To date, they have lent $100 million to 4,000 clients who have a median income of $28,000.
  • They close about 45 deals per staff per year at a cost of $3,400 per loan, that’s with little automation for risk assessment or underwriting.
  • They serve all of California, with offices in Los Angeles, San Francisco and San Jose.
  • Their loan consultants (read: officers) are mostly home-based and spend 75% of their time in the field, finding deals and working with potential borrowers.
  • They are competing with the merchant cash (MCA) advance industry with their Easy Pay loan product, which, unlike MCA lenders, is structured to support business success.
  • In the next five years they plan to invest in $100 million microloans!

These numbers are impressive and set them apart from the rest of their CDFI peers in California.

How are they doing it?

Let’s start with their commitment to a sales culture. Twenty five to forty percent of loan consultant compensation is tied to loan closings and portfolio performance. Opportunity Fund intentionally hires staff with a sales background and mentality. “We use incentive compensation to promote sales,” said Eric Weaver, Opportunity Fund Founder and CEO. “Few people will be high producers without financial incentives.”

Second, Opportunity Fund focuses on lending and leaves other services, like training, to partner organizations. Their goal is to reach out to as many borrowers as possible. “We strive to bring working capital to working people,” said Marco Lucioni, OF’s Executive Vice President of Lending. “We achieve impact through scale.”

In 2012 Opportunity Fund merged with Financiera Confianza, founded by Marco, a for-profit lending company, several years ago which brought in production-oriented people, infrastructure and culture. “This allowed us to amplify our action radius, offer more competitive rates, write bigger loans and offer major benefits to our clients,” Marco said.

Opportunity Fund offers four products.

  • EasyPay loans, which aim to be an affordable alternative to merchant cash advances, with fixed interest rates between 8.5% and 15% and a longer repayment term of up to 3 years.
  • Small business loans, which range from $20,000 to $100,000 at interest rates between 8.5% and 12%, with up to five-year repayment terms and no early repayment penalty.
  • Opportunity Loans range from $2,600 to $20,000 and are suited for inventory, equipment and vehicle purchases. Rates are 8.5% to 18%, with up to two-year repayment terms and no early repayment penalty.
  • Equipment and vehicle financing, like loans for food trucks, taxis, limos, fleet vehicles and vans. Focusing on vehicle financing, a market that Opportunity Fund identified as having scalability, is also part of their growth strategy.

The Easy Pay product is another feature that sets Opportunity Fund apart in the CDFI industry. The loan is repaid by automatically deducting a small share of daily credit- and debit-card sales. It allows Opportunity Fund to take more risk by weighing the cash flow side more heavily. Through underwriting Opportunity Fund ensures that no more than 10 percent of a business’ revenues go to covering debt payments, and provide a payback period of up to 36 months, rather than the average eight month payback period of MCAs. Finally, because EasyPay is structured as a loan rather than as a cash advance, all repayment is reported to the credit bureaus.

Opportunity Fund is clear about their sustainability plan. Sixty percent of the loan program is funded through earned revenue, which Eric sees as increasing modestly over the years.

Our core competence is that we’re trusted to target subsidized credit to underserved small business owners in an efficient way that both policy makers and philanthropists care about. Our goal is not to get 100% cost recovery.

“Were trying to balance efficiency and effectiveness to insure positive community impact,” said Caitlin McShane, Director of Communications. “We don’t price based on what the market can bear. Many customers could and would pay more. We want to make a good impact on the business and the community.”

The Opportunity Fund team is clear that for many of their borrowers this is a business transaction, and not all are aware of or care about Opportunity Fund’s nonprofit mission. Opportunity Fund is competing with many online lenders and want to appear as an attractive business alternative, with all the speed and ease the MCAs offer.

“If you are willing to focus on scale and decide that maximizing impact is your mission,” said Marco, “then any CDFI could do what we do.”

What future innovations does Eric see for the CDFI business lending industry?

Due to technology, the process of lending is getting chopped up into smaller pieces where players are creating expertise and efficiency in one part of the lending process. The current model of one agency doing everything from start to finish may not be the best way to go in the future. CDFIs may want to partner with more efficient organizations to manage parts of the lending process. The more efficient we can be, the better we can attract subsidies to support our work.

Micro Lending Academy: Cash Flow Basics

This webinar will help train your staff on projections and give you a format for teaching projections to your business clients. We’ll answer questions such as: What is a cash flow projection? Why does a business owner need one? How is it different than a P&L projection? If cash is tight, what are some cash management strategies to stretch each dollar further? We’ll provide a couple of sample spreadsheets to ‘take with you’ to use with clients.

Watch and listen to the webinar (61 minutes)

About the Presenter

SusanBrownSusan Brown is a Business & Community Development Specialist with a specific focus on Business Finance and Rural Microenterprise. CAMEO engaged Susan to implement our Rural Initiative in 2008 and is now managing our partnerships with Kiva and Accion Texas’ MMS platform. Through her consulting service Susan provides strategic planning, facilitation, program development and grant writing services to non-profit organizations and government agencies as well as consulting services to small business owners.

2015 Annual Member Meeting Prep

For the member meeting we ask that you do two things: 1) make appointments with your legislators for the morning; and 2) read AEO’s white paper on Understanding the State of Technical Assistance for the afternoon discussion.

Meetings with Legislators

In the morning, after a short member meeting, we will give you tips, training and talking points for our key advocacy issues this year. Then, you will be off to visit your legislators between 10:45 and 12:15. Please make your own appointments; here’s how:

  • Find contact information for your assembly member(s) and your senator.
  • Send a written request to the scheduler as well as call the office.
  • If the legislator is not available, ask for a meeting with the chief of staff.

If you are from an area that only has one representative in each house, coordinate with other CAMEO members who may be attending. If you are from a large area that has many representatives, we will divide and conquer. Contact Andrew, who will help coordinate with other members who will be going.

The topics of your legislative visits include the importance of the microbusiness sector to local economies and three crucial issues – depending with whom you meet:

  • SB 197 (Block), co-sponsored by CAMEO and Opportunity Fund, will help small businesses be more aware of capital resources offered by mission-driven microlenders. This bill has passed through Senate appropriations and is likely to pass the Senate floor, which means the Assembly is the next stop. It will be crucial to educate your assembly members on the merits of this bill. You will thank your Senators for their support.
  • AB 184 (Garcia) will codify business technical assistance (SBDCs, WBC, SCORE, VBOC and PTAC) and allow state agencies to directly contract with them and fund them. Right now it is in the Assembly Appropriations Committee.
  • We are looking for a champion for the importance of women’s business ownership in closing the wealth gap.

For more information and a full agenda for the day, visit the annual meeting page on our website.

Re-imagine TA Business Assistance Services

At the recent AEO Leadership Summit, a big topic of conversation was the possibilities and future of the microbusiness industry. We’re going to engage in an interactive exercise to ponder these questions.

  • In what ways does business assistance need to change for the industry?
  • In what ways does it need to change to support the entrepreneurs of the future?
  • What obstacles must the industry overcome to redesign business assistance delivery to support the future Main Street?

Read AEO’s white paper on Understanding the State of Technical Assistance for background.

Michael Shuman Biography

Michael Shuman is an economist, attorney, author, and entrepreneur, and a globally recognized expert on community economics. He is one of the architects of the crowdfunding reforms that became the “JOBS Act,” signed into law by President Obama in April 2012. Michael is currently Director of Community Portals for Mission Markets and a Fellow at Cutting Edge Capital (a CAMEO Member), and Post-Carbon Institute. He is a founding board member of the Business Alliance for Local Living Economies (BALLE – a CAMEO reciprocal member). He is also an adjunct instructor in community economic development for Simon Fraser University in Vancouver. Michael has authored or coauthored eight books on the topic.

“Dream Big” This National Small Business Week, May 4-8

This post courtesy of:

Maria Contreras-Sweet
Administrator, U.S. Small Business Administration

MariaCS1With apologies to baseball and your mother’s apple pie, nothing is more American than National Small Business Week.

Our country was founded by risk-taking pioneers in search of new horizons. More than two centuries later, what sets America apart in the world is the willingness of our entrepreneurs to take risks. Small businesses allow Americans to be their own boss and improve their lot in life through hard work – a core American value.

Every year since 1963, the President of the United States has issued a proclamation declaring National Small Business Week to recognize the critical contributions of America’s entrepreneurs, who create nearly two out of every three net, new U.S. jobs each year. Federal Reserve Chair Janet Yellen said it was our small businesses that powered our recovery after the Great Recession.

National Small Business Week, themed “SBA: Dream Big, Start Small,” will be held May 4-8. Special events will take place in Miami/Boca Raton, Los Angeles, San Antonio, New York, and Washington. D.C.

Tune in all week for live-streaming, beginning at 1 p.m. ET Monday with a panel discussion on small business financing followed by a conversation with Joyce Rosenberg of the Associated Press. Or join me @MCS4Biz at #DreamSmallBiz. I promise you’ll learn a lot.

America is one of the few countries that give entrepreneurs a seat at the President’s cabinet table. This allows the U.S. Small Business Administration (SBA) to speak with one voice on behalf of 28 million small businesses with divergent interests.

The SBA also offers an extensive national network of small business lenders and counselors that’s unmatched anywhere in the world. Many entrepreneurs with great ideas and great potential do not begin with great wealth, so they need a great government partner to support their success.

The SBA offers the “three Cs” to help the best and brightest start or grow a business, secure capital, and commercialize their ideas to benefit society:

  • Capital: SBA fill gaps in the commercial lending marketplace so success in the small business sector is based on merit, not family wealth. To inquire about a small business loan, click here.
  • Counseling: SBA provides free consultation and advice to help businesses on Main Street succeed. To find a small business counselor near you, click here.
  • Contracts: SBA levels the playing field with big business by helping small businesses capture new revenue and new customers by winning government contracts, joining corporate supply chains, and exporting beyond our borders. To learn about contracting opportunities, click here.

This year, during National Small Business Week, we recommit ourselves to those fearless entrepreneurs who plan well, work hard, and dream big. Every business starts small. Nike, Apple, FedEx, Ben & Jerry’s, Under Armour and Outback Steakhouse were all once small businesses, until they found an SBA lender or investor to work with them.

I came to this country as a 5-year old immigrant who didn’t speak a word of English. Today, I serve in the cabinet of the President of the United States. My story is possible only because of the entrepreneurial spirit.

Success in business comes one small step at a time. So dream big, but take that next small step today, because the next great American success story could be staring back at you in the mirror.

SBA Administrator Maria Contreras-Sweet started three businesses in Los Angeles, including a community bank, before joining President Obama’s cabinet in April 2014.

MicroLending Academy Newsletter – Building Capacity

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 Hi {FIRST_NAME|Friend},
 
The MLA newsletter is chock-a-block with articles, resources, technology, success stories, interviews, and big picture ideas on all Lending Academy features. This edition focuses on capacity building and lists several opportunitties for training, whether they be peer calls, webinars or tools you can use.  
 
In this Issue…

  • Take Action: Increase Capital Access for Microbusinesses
  • Excellence in Lending Step Two – Definitions
  • MMS Update: Peer Calls
  • Success Story:  VEDC – 36 Deals Per Staff
  • Best Practices:  Projecting Loan Capital
  • Research:  Joint Small Business Credit Report
  • News
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Take Action: Increase Capital Access for Microbusinesses

  1000947586 We are co-sponsoring SB 197 (Block) with Opportunity Fund. The bill will allow California's microlenders to pay referral fees to consultants, non-profits (e.g. TA providers), and others who refer successful loans. It will give your clients more information about affordable lending products and enable microlenders to more easily compete with online alternative lenders.  

The hearing is April 29th in front and we need your letters of support if you haven't send them in already!

Download the SB 197 Support Letter Template and put it on your letterhead. Edit appropriately, then email to: Senator.Block@senate.ca.gov, and cc Eileen.Newhall@sen.ca.gov and me by April 21, 2015!

For more information check out the Must Know from February 19, 2015.  

Excellence in Lending Step Two – Definitions

 1000947586Our Excellence in Lending (EiL) program, focuses on the elements needed for a high-quality loan fund poised for growth.  Using Kiva’s Field Partner metrics as a starting point, we created an assessment that was the basis for a rich discussion at our 2015 MicroLenders Forum at the Federal Reserve Bank of San Francisco in mid-January. 

Susan Brown said of the assessment:

The reception of the assessment went beyond my expectations.  I was so happy to hear several people say that they wanted to revisit the assessment and have quarterly peer meetings to discuss, address issues revealed in the reports. 

Our discussion revealed the need to better define some terms so that organizations measure performance in the same way. Other issues that arose included creat benchmarks and operational standards and how to add sustainability and scale while reducing risk.  Once determined organizations' key ratios can be valuable to better position microlending to funders and policy makers.  

There was so much food for thought that we're holding our first EiL Peer Call on April 2 from 1:30-2:30pm.

Read Susan Brown's blog post about what the assessment measured and what topics showed a wide variety of standard of practice.

Technology: MMS Update – Peer Calls

Speaking of peer calls, one of the benefits of joining the MMS cohort are peer calls to help get the most out of your lending program.  Our first call for 2015 is on April 30th to talk about MMS reporting capacity. MMS has some horse power that we haven't tapped.  We will have a couple of sample reports and walk you through the report creating process.  For example, we can use MMS to look at demographic information about loan applicants or build reports on how your referral partnerships are working.

We'll also talk about future Peer Learning topics such as: your individualized underwriting grid,  application fees, staffing to maximize MMS, and identifying loan delay points.

To keep you updated on the progress of the MMS cohort — they made 92 loans for a total of $1.58 million for the program-year-to-date, and they are on pace to make an estimated 133 loans for $2.28 million, a 50% increase over last year.

Contact Susan Brown if you're interested in learning more or participating.  

Success Story: VEDC – 36 Deals Per Staff

 1000947586 VEDC’s microloan program has surpassed all its California CDFI peers in staff efficiency, averaging 36 loans closed per FTE staff person last year.

“We have an operational plan that has helped us gain efficiency,” says Brandon Napoli, Valley Economic Development Corporation’s Director of Microlending.  “We have agreements on who does what and how long each step should take.  We can monitor when things get off track.”

So far VEDC has implemented little automation.  “We’ve had a pretty manual process up to this point,” says Brandon.

Susan Brown talked to Brandon about how VEDC has scaled and how they plan to expand further in her latest blog post.
 

Best Practices: Projecting Loan Capital

CAMEO has developed a tidy 'Loan Capital Projection spreadsheet tool to project how much loan fund capital you will need based on loan volume, interest rate and loan loss rates. Susan Brown, our microlending guru, led a webinar to explain how it works on March 11,2015. We receieved several suggestions on how to improve it to meet your loan fund operational needs and will be updating the spreadsheet.  If you are interested in receiving an updated copy, email Andrew Cole, our data guy who created the spreadsheet. 

We even have one member who is using the tool to make the case for more loan capital which has impressed her investors!

Listen to the Loan Capital Projection webinar.

Mark your calendar for more MLA Best Practices Webinars

  • May 27:  Cash flow Projections will train your staff on projections and give them a format for teaching projections to business clients.
  • June 17:  Balance Sheet Basics is an introduction to balance sheet accounts, what they mean and how they work together.
  • July 8:  Balance Sheets Part II will provide an understanding of how management decisions impact the balance sheet so trainers can steer clients in the right direction.

Research: Joint Small Business Credit Report

The Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia studied small business lending in 10 states.  If we apply what they learned to California, we can conclude that the market for loans under $100,000 is huge.  

Eighteen percent of microbusinesses are looking for credit, which means more than 700,000 California businesses are looking for loans.  About half of them are looking for less than $100,000.  Collectively CAMEO members made over 2,000 loans.  A majority of small firms (under $1 million in annual revenues) and startups (under 5 years in business) were unable to secure any credit.  The top reason for denials was a low credit score.  

To us, this report spells opportunity Opportunity! for microlenders and business assistance providers.

The Federal Reserve will host a webinar – Key Findings from the Federal Reserve's 2014 Joint Small Business Credit Survey – on April 30, 2015 at 12:00pm PT.

News

WIPP’s Two Cents on SBA Contracting Rules

From our colleagues at Women Impacting Public Policy:

WIPP recently submitted comments to the Small Business Administration (SBA) on significant changes proposed for subcontracting. This blog accompanies those comments to help explain WIPP’s thinking.

The policymaking process is divided between the glitzy world of passing legislation and the often behind-the-scenes work of writing regulations. An important step in that process is the comment period, allowing the public, including the business community, to weigh in on the proposed regulations and – believe it or not – make changes.

WIPP comments on regulations affecting women entrepreneurs, including recent proposed rules to change subcontracting for federal contractors. WIPP generally supports the SBA’s implementation of contracting changes with comments in each section, some of which are described below. An important reminder, these are changes required by law already passed by Congress – this is not the SBA electing to make changes on their own, but instead the details of how those changes will be made.

Should you want to know more about WIPP’s positions, please look at the comments in their entirety.

 

New Limitations on Subcontracting

The new ruling would simplify the calculation of how much of a small business set-aside (including WOSB set-asides) can be subcontracted. Currently, it is 50% of the labor cost. The rule would make it 50% of the contract award.

While WIPP supports this change, WIPP is definitely aware of specific industries for which this change may not make sense. WIPP supports those industries reaching out to the SBA about their specific issues, which the SBA has said they will take into consideration. WIPP also asks a few clarifying questions, common to regulation comments.

 

Similarly Situated Entities

The rule allows an exception to the 50% described above: companies don’t count work subcontracted to similar companies (i.e. other small businesses, or WOSBs or HUBZones, depending on the set-aside) toward the 50%. This gives small businesses a great reason to work together on larger projects, one of the reasons WIPP testified in favor of this change.

 

Other Provisions

The rule deals with other changes – updating joint venture requirements, exempting the smallest of contracts from certain rules, additional roles for procurement center representatives (PCRs), and others – all of which WIPP supports. In those cases, our comments are included to explain the provision to other readers, and give reasoning behind WIPP’s support.

For many business owners, poring through regulations is not high on the priority list. Responding to proposed rules is a time consuming task – one that takes a lot of attention from WIPP’s Government Relations team. We are always looking for WIPP members’ views on regulation. By signing up for a WIPP committee that interests you or affects your business, you can stay informed on both legislative and regulatory changes. Remaining aware and being vocal about how your company may be impacted by any regulation is a key part of long-term success.