Small Business Administration: A Primer on Programs Page: 20 of 24
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Small Business Administration: A Primer on Programs
Small Business Investment Company (SBIC) Loan Guarantee Program37
The SBIC program enhances small business access to venture capital by stimulating and
supplementing the flow of private equity capital and long term loan funds available to small
businesses to encourage their growth, expansion, and modernization. The SBA does not make
direct investments in small businesses. It works with over 300 privately owned and managed
small business investment companies (SBICs) licensed by the SBA to provide financing to small
businesses with private capital the SBIC has raised and with funds the SBIC borrows at favorable
rates because the SBA guarantees the debenture (loan obligation).
A licensed SBIC in good standing, with a demonstrated need for funds, may apply to the SBA for
financial assistance (called leverage) of up to 300% of its private capital. However, most SBICs
are approved for a maximum of 200% of its private capital and no fund management team may
exceed the allowable maximum amount of leverage, currently $150 million per SBIC and $225
million for two or more licenses under common control.
SBICs pursue investments in a broad range of industries, geographies, and stage of investment.
Some SBICs specialize in a particular field or industry in which their management has expertise,
while others invest more generally. Most SBICs concentrate on a particular stage of investment
(i.e., start-up, expansion, or turnaround) and identify a geographic area in which to focus.
The SBIC program currently has invested about $15.0 billion in small businesses, with about $8.7
billion raised from private capital and $6.3 billion guaranteed by the SBA. In FY2010, the SBA
guaranteed $931 million in SBIC small business investments, and SBICs provided another $1.1
billion in investments from private capital, for a total of more than $2.0 billion in financing for
1,331 small businesses.38
Only businesses that meet the SBA's definition of small may participate in the SBIC program.
They must meet either the SBA's size standard for the industry in which they are primarily
engaged, or a separate financial size standard which has been established for the SBIC program.
SBICs use the size standard that is most likely to qualify the company, typically the financial size
standard for the SBIC program. It is currently set as a maximum net worth of no more than $18
million and average after-tax net income for the preceding two years of not more than $6 million.
All of the company's subsidiaries, parent companies, and affiliates are considered in determining
if it meets the size standard.39
New Market Venture Capital
New Market Venture Capital is a program that encourages equity investments in small businesses
in low-income areas that meet specific statistical criteria established by regulation. A tax credit is
available on a competitive basis.
37 For additional information, see CRS Report R41456, SBA Small Business Investment Company Program, by Robert
Jay Dilger and Oscar R. Gonzales.
38 U.S. Small Business Administration, "Fiscal Year 2011 Congressional Budget Justification and FY2009 Annual
Performance Report," Washington, DC, 2010, pp. 19, 51; and U.S. Small Business Administration, "FY2010
Congressional Budget Justification," Washington, DC, 2009, pp. 17, 42.
s9 13 C.F.R. 107.700; 13 C.F.R. 107.710; 13 C.F.R. 301(c)(2); and 13 C.F.R. 301(c)(1).
Congressional Research Service
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Small Business Administration: A Primer on Programs, report, June 22, 2011; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc805667/m1/20/: accessed April 26, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.