To establish privately owned and managed investment
companies, which are licensed and regulated by the U.S. Small Business
Administration; to provide equity capital and long term loan funds to small
businesses; and to provide advisory services to small businesses.
TYPES OF ASSISTANCE:
Direct Loans. Place Cursor Here for Definition
Guaranteed/Insured Loans. Place Cursor Here for Definition
Advisory Services and Counseling. Place Cursor Here for Definition
USES AND USE RESTRICTIONS:
The investment companies provide management and financial assistance on a
continuing basis to eligible small business concerns. Financial assistance is
provided by making long-term loans to these small concerns, and/or by the
purchase of debt or equity type securities issued by these firms. Emphasis is
on providing assistance to the pioneering, innovating-type concerns developing
new products, processes, and markets. Specialized investment companies
organized/licensed under former Section 301(d) of the authorizing statute (SSBICs)
must restrict eligibility of small concerns financed by such investment
companies to those owned and operated by individuals whose participation in
the free enterprise system has been hampered by social or economic
disadvantages. Debentures are issued by the SBIC and guaranteed by SBA for a
term not to exceed 10 years, and participating securities for a 15-year
maximum. All investment companies generally may not self-deal, take control,
finance "big business," or invest over 20 percent (30 percent for
SSBICs) of private capital in any single small concern.
ELIGIBILITY REQUIREMENTS:
Applicant Eligibility: Any chartered small business
investment company having private capital of not less than $3,000,000, having
qualified management, and giving evidence of sound operation, and establishing
the need for SBIC financing in the geographic area in which the applicant
proposes to operate.
Beneficiary Eligibility: Individual businesses
(single proprietorship, partnership or corporation) which satisfy the
established criteria of a small business. SSBICs beneficiary must also be a
business owned and operated by socially or economically disadvantaged
individuals.
Credentials/Documentation: Investment company
must be chartered as a corporation, limited partnership (with individuals,
corporation, partnership, or limited liability company as general partner), or
limited liability company. Determination is made as to need in area, general
business reputation and character of proposed owners and management and
probability of successful operations. All loans to small concerns shall be of
such sound value, or so secured, as reasonably to assure repayment.
Pre-application Coordination: None. This program is
excluded from coverage under E.O. 12372.
Application Procedure: Request information and
appropriate forms from SBA Central office. Complete application requirements
and submit with a minimum application fee payment of $10,000 to SBA Central
Office.
Award Procedure: Applicant is notified by
issuance of a license from the Investment Division of the Small Business
Administration.
Deadlines: None.
Range of Approval/Disapproval Time: Average of
120 days.
Appeals: Proponents may reapply at any time.
Renewals: None.
ASSISTANCE CONSIDERATIONS:
Formula and Matching Requirements: An SBIC or an
SSBIC in good standing, with a demonstrated need for funds, may receive
leverage based on its private capital. An SBIC or SSBIC may receive leverage
of as much as 300 percent of its private funds. The maximum amount of leverage
varies according to the SBIC's private capital. For private funds that do not
exceed $17.5 million, maximum leverage is 300 percent of the private funds.
For private capital over $17.5 million but not exceeding $35.1 million,
leverage shall not exceed $52.5 million plus 200 percent of the amount over
$17.5 million. If private capital is over $35.1 million, leverage shall not
exceed $87.7 million plus 100 percent of the amount of private capital over
$35.1 million, up to a maximum of $105.2 million. These private capital
brackets are adjusted annually for increases in the Consumer Price Index. To
obtain leverage, regular SBICs issue their debentures or participating
securities which are guaranteed by SBA. Pools of the SBA-guaranteed debentures
or participating securities are formed, and SBA-guaranteed participation
certificates, representing an undivided interest in the pools, are sold to
investors through a public offering. Under current procedures, regular SBIC
debentures have a term of 10 years, and they provide for semi-annual interest
payments and a lump-sum principal payment at maturity. Debentures may be
prepaid with a penalty during the first five years of their term or without
penalty thereafter. The debenture rate is determined by market conditions at
the time of the sale. SSBICs may issue their debentures on the same terms as
regular SBICs, for inclusion in the aforementioned guaranteed debenture pools
and public offerings of the guaranteed participation certificates. As with
debentures, the rate on participating securities is based on the 10-year
Treasury-yield curve. However, the participating security provides for payment
of dividends or interest and profit participation to SBA only when an SBIC has
earnings, as defined by regulation. A unique feature of the participating
securities is that SBA shares in the profits of the SBIC. SSBICs also may
issue participating securities.
Length and Time Phasing of Assistance: Not
applicable.
POST ASSISTANCE REQUIREMENTS:
Reports: Financial report (annual); program
financing reports; any other report furnished stockholders.
Audits: Annual audit by a certified public
accountant and periodic examinations by SBA personnel.
Records: Current financial records, minutes of
meetings of stockholders, general partners, directors, executive committees,
and time spent and charges made for management consulting services performed
must be maintained for 6 years.
FINANCIAL INFORMATION:
Account Identification: 73-1154-0-1-376.
Obligations: FY 01 $1,367,200,000; FY 02 est
$1,564,000,000; and FY 03 est $2,200,000,000.
Range and Average of Financial Assistance: SBIC
and SSBIC Leverage: $50,000 to $90,000,000. Average: $14,323,000.
As of September 2001, the SBA portfolio of active companies was composed of
325 SBICs with capital resources of $12.9 billion and 59 Specialized SBICs (SSBICs)
with capital resources of $256 million.
REGULATIONS, GUIDELINES, AND LITERATURE:
13 CFR Chapter I, Part 107.
INFORMATION CONTACTS:
Regional or Local Office: None.
Headquarters Office: Associate Administrator for
Investment, Investment Division, Small Business Administration, 409 Third
Street, SW., Washington, DC 20416. Telephone: (202) 205-6510. Use the same
number for FTS.
