Small Business Investment Companies contribute equity and/or debt investment capital to small businesses. SBICs may be viewed as small, regionally-focused private equity firms that typically focus on much smaller transactions compared to more traditional private equity firms.
How many SBIC firms are in the database?
We currently track 417 SBIC firms. Collectively, these firms provide over 2,100 unique businesses with investment capital annually.
What is the purpose of the SBIC program?
SBICs operate under the Investment Division of the U.S. Small Business Administration (SBA) with the intent to stimulate the flow of private equity capital and long-term loans to small businesses.
How do SBICs work?
SBICs may receive up to 300% additional leverage on their private capital from SBA-guaranteed debentures. To obtain this leverage, SBICs issue debentures or participating securities, which are guaranteed by the SBA. Separate pools of either SBA-guaranteed debentures or participating securities are formed and sold to investors through securities offerings. SBIC fund managers must qualify for an SBIC license to participate in the SBIC program and are subject to an annual regulatory audit.
In what companies may SBICs invest?
Only companies defined as “small” are eligible for SBIC financing. The SBIC Program defines "small” as a net worth less than $18.0 million and an average after tax net income for the prior two years less than $6.0 million. Further, SBICs are prohibited from investing in project finance such as real estate and motion pictures.
What is typically the purpose of SBICs capital?
Over 90% of SBIC financing typically goes to operating capital (~50%) and acquisition capital (~40%). Other uses of investment capital include plant modernization, refinancings, new building construction, purchase of new equipment and machinery, land acquisition, marketing activities and research and development.
Do SBICs typically contribute equity or debt?
Approximately half of all SBIC financings are straight equity, about 25% are straight debt and the remaining 25% are a debt-with-equity structure.
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