1. Money
Jean   Murray

Need an Investor? Consider an SBA-Backed Venture Capital Firm

By July 13, 2009

Follow me on:

Another alternative for financing your business might be a private investor. Some people might call these venture capital firms or private equity financing. The Small Business Administration has a Small Business Investment program through which it works to stimulate and supplement the flow of private equity capital and long term loan funds, with Small Business Investment Companies.

What is an SBIC? An Small Business Investment Company (SBIC) is a private lender associated with and regulated by the Small Business Administration. The SBA provides these lenders with guarantees similar to those provided to commercial lenders, to encourage them to fund riskier start-up businesses. Recovery Act Changes. The American Recovery and Reinvestment Act ("the Recovery Act) included some changes enacted by the SBA to encourage more SBIC investment.
  • The formula for calculating the maximum amount of outstanding leverage that can be made available to a single SBIC and to two or more SBICs under common control was changed. This leverage is similar to the SBA guarantees for commercial lenders.

  • To encourage SBIC financing of smaller enterprises, the Recovery Act also requires that SBIC's must certify that at least 25 percent of all future financing dollars will be in smaller enterprises.

  • Maximum SBA funding levels to SBICs will increase up to three times the private capital raised by the SBIC, up to a maximum of $150 million for single SBICs, or up to $225 million for multiple SBICs that are under common control. The cap for all licensees was set at $137.1 million before the Recovery Act.

  • These limits are even higher for SBICs that are licensed after October 1, 2009, that certify that at least 50 percent of their investments will be made in small businesses located in low-income areas, up to $175 million for single licensees and up to $250 million for jointly controlled multiple licensees.
The SBA says these changes are permanent.

For More Information on SBIC's and how you can apply:
Read my FAQ on Getting Funding from an SBIC
See the SBA's Investment Division page for more information about SBIC's
Check out the list of SBA-licensed venture capital firms by state.

No comments yet. Leave a Comment
Leave a Comment

Line and paragraph breaks are automatic. Some HTML allowed: <a href="" title="">, <b>, <i>, <strike>

©2014 About.com. All rights reserved.