Invest in an SBIC
The success of the SBIC program depends on the participation of private investors. Learn how you can benefit by investing in an SBIC.
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Advantages of an SBIC
Limited partners (LPs) of SBIC-licensed funds benefit from several advantages that aren’t available to other types of investment funds.
Regulatory benefits
Certain exemptions from registration requirements with the SEC are available to SBICs and their advisers.
Rapid deployment of funds
With a leverage commitment from the U.S. Small Business Administration (SBA) up to two times the private capital raised, fund managers are able to minimize the time spent on fundraising and focus on making investments.
Flexible fund structure
SBICs are allowed to organize themselves as stand-alone entities, drop-down vehicles, or side-car vehicles.
Strong, stable returns
The low cost of SBA capital provides fund managers with pricing flexibility across cycles, while the 10-year term on SBA debentures avoids the problems of duration mismatch.
Community Reinvestment Act credit
Investments in SBICs may be eligible for Community Reinvestment Act credit.
Underlooked opportunity to invest in small business
Despite being the bedrock of the American economy, U.S. small businesses remain underserved and represent a value opportunity for investors.
SBIC Executive Summary
The Small Business Investment Company (SBIC) Program, administered by the U.S. Small Business Administration (SBA), is a multi-billion investment program created in 1958 to bridge the gap between entrepreneurs’ need for capital and traditional sources of financing. Over the past seven years, the program has channeled $25 billion of capital to more than 6,990 U.S. small businesses representing a variety of industries across the country. These results were achieved through a proven public-private partnership that leverages the full faith and credit of the U.S. government to increase the pool of investment capital available to small businesses.
The SBIC Public-Private Partnership at Work
The SBIC Program harnesses the talent of professional investment fund managers to identify and finance promising small businesses. Qualified fund managers that complete the SBIC Program’s rigorous application process are granted a license to operate their fund as an SBIC. The SBIC can then leverage capital raised from private investors, such as banks, pension funds or high net-worth individuals, with government-guaranteed debt obtained through the program. For every $1 the fund raises from investors, SBA will commit up to $2 of debt, subject to a cap of $150 million. The SBIC manager can then assemble a portfolio of long-term investments in American small businesses. When the investments are realized and the fund begins to wind-down, the SBIC will repay its SBA-guaranteed debt and share the profits from its investments with the private investors that backed the fund.
https://www.sba.gov/partners/sbics/invest-sbichttps://www.sba.gov/document/support–sbic-executive-summary
