SBIC Program Overview
A multi-billion dollar program founded in 1958, the SBIC Program is one of many financial assistance programs available through the U.S. Small Business Administration. The structure of the program is unique in that SBICs are privately owned and managed investment funds, licensed and regulated by SBA, that use their own capital plus funds borrowed with an SBA guarantee to make equity and debt investments in qualifying small businesses. The U.S. Small Business Administration does not invest directly into small business through the SBIC Program, but provides funding to qualified investment management firms with expertise in certain sectors or industries.
This section provides an overview of the SBIC Program, providing information on the benefits to small businesses, how investment funds can participate and what the advantages are of investing in an SBIC. The content of this section is also provided in a PDF presentation available for download by clicking on the adjacent image.
Program Achievements & Success Stories
On September 30th, the last day of the U.S. Government's fiscal year, the SBIC Program closed a record year. Here are just a few of the results achieved:
- The SBA issued $1.82 billion in new commitments to SBICs
- $2.83 billion in financing dollars were invested in small businesses
- 1,339 small businesses were financed, 34% of which were in low-to-moderate income areas or were minority- or women-owned businesses
- An estimated 56,211 jobs were created
- ...all at ZERO cost to taxpayers...
Some of the country's most successful corporations received financing from SBICs during their early stages of growth. The program's "success stories" include thousands of small businesses, but here are a few of the more recognizable names:
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For more information on the performance of the SBIC Program and is portfolio of investment funds, visit our Program Data & Performance section.
The SBIC Life Cycle:
Types of Licenses:
Investment funds licensed as SBICs currently have the option of applying for two different types of license, with a third option coming in 2012:
- Standard Debenture License: Funds have been licensed as Standard Licensees since the program was founded in 1958. They have the broadest investment mandate, are licensed through a "rolling admissions" process and are eligible for two tiers of leverage capped at $150 M.
- Impact Investment License: The Impact license is for funds with an investment mandate targeted social as well as financial returns. The managers of these funds pledge to invest 50% of their capital in "impact" investments, are eligible for an expedited licensing process and may have access to two tiers of leverage, capped at $80 M. For more information about the Impact Investment License, please visit our Announcements & Initiatives section.
- Early Stage Innovation License (Coming 2012): The Standard and Impact licenses are most suitable for investors targeting later-stage companies with cash flow. The Early Stage Innovation License, by contrast, is being designed to attract investment fund managers with experience supporting companies in their earliest stages of growth. Unlike the other licensees, Innovation Licensees will likely be permitted to draw LP capital to cover the interest on their debentures. They are expected to have access to one tier of leverage, capped at $50 million and will be licensed through an annual call versus rolling basis.
SBA Leverage Products:
Regardless of the license they hold, SBICs can take advantage of a variety of leverage products, each with unique terms and conditions. They include the Standard Debenture, the Low-to-Moderate Income Debenture and the Energy-Savings Debenture. For more information on the specifics of each of these products, please refer to the SBIC Applicants section of our website.
SBIC Investment Requirements:
Every fund licensed as an SBIC agrees to abide by the regulations governing our program (available in our SBIC Licensees section). What follows are some of the major regulations prospective applicants, licensees, private investors and small business owners should be aware of:
| Regulation | Definition |
|---|---|
| SBICs must only invest in Small Businesses | Small Businesses are defined as businesses with tangible net worth of less than $18 million AND an average of $6 million in net income over the previous two years at the time of investment. A business may also be deemed "small" using SBA's N.A.I.C. code standards |
| SBICs must invest 25% of their capital in Smaller Businesses | Smaller Businesses are defined as businesses with tangible net worth of less than $6 million AND an average of $2 million in net income over the previous two years at the time of investment. |
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Regulation |
Instrument | Geography | Sector | Control |
|---|---|---|---|---|
| SBICs may... | Invest in small businesses using loans, debt securities with equity features & equity. | Invest in small businesses located in the U.S. or its territories | Invest in small businesses active in manufacturing, transportation, consumer products and other sectors that are not contrary to the public interest | Control small businesses for up to 7 years |
| SBIC may not... | Invest an amount greater than 30% of the SBIC'sprivate capital in any single portfolio company. With two tiers of SBA leverage, this means an SBIC may not invest more than 10% of their total capital (private + SBA) in any single portfolio company. | Invest in businesses with more than 49% of their employees located outside the U.S. | Invest in companies active in sectors deemed contrary to the public interest NOR may they invest in project finance, real estate or financial intermediaries | Control small businesses for longer than 7 years without first obtaining approval from the SBA |
The following sections of our website contain more information about:
- Applying to Become an SBIC
- Program Statistics & SBIC Performance
- The Advantages of an SBIC for Private Partners
- Contacting SBA
| Attachment | Size |
|---|---|
| SBIC Program Overview.pdf | 2.58 MB |
