Question: How Has the Recovery Act Helped Provide Small Business Financing Through SBIC's?
The American Recovery and Reinvestment Act of 2009 has provided some relief for small business borrowers through changes to Small Business Administration program. One area of relief is changes to SBA loan program with Small Business Investment Companies (SBIC's). SBIC's are private lenders who provide venture capital funding to small businesses, and who are licensed and regulated by the SBA. Here are some details of those changes, which the SBA says are permanent:
Answer:
Recovery Act Changes to Make SBIC Funding Easier
- The Recovery Act makes SBIC's eligible for greater SBA guaranteed funding.
- The Act also encourages SBIC investment in small business by requring SBICs to invest 25 percent of their dollars into "smaller" businesses.
- The amount of funding an SBIC may invest in a single small business is set at 10 percent of an SBIC's total capital, rather than the previous 20 percent; this translates to an effective 50 percent increase in funding available to a single business by an SBIC.
- Maximum SBA funding levels to SBIC's 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.
- More incentives are given to SBIC's that invest after October 1, 2009, in small businesses located in low-income areas.
