The U.S. Small Business Administration (SBA) recently announced the Federal Register publication of SBA-proposed reforms to the Small Business Investment Company (SBIC) program.
Small Business Investment Company Reforms Proposed by SBA to Address Diversity
The proposed reforms are designed to reduce financial barriers while increasing access and diversity in the small business investment ecosystem in the United States. Structural aspects of the SBIC program will addressed by the reforms with the aim of improving the flow of SBIC regulatory capital to small businesses and start-ups deemed inadequately served by private investors alone.
Small Businesses to Benefit from Reforms
The proposed reforms will help small businesses and start-ups from underserved communities benefit from reduced barriers to SBIC program participation, especially with new private fund managers and private funds which will focus on equity and longer-term debt investments. As well as underserved communities and geographies, businesses in capital-intensive industries and technologies critical to national security will be prioritized.
The SBA also want to establish an alternative borrowing structure to the traditional Debenture SBIC. The new alternative will be constructed to align with the cash flow patterns of equity-oriented investment funds and longer-duration strategies.
Diversifying the SBIC Network
The SBA’s Administrator Isabella Casillas Guzman said: “SBA’s SBIC program has helped generations of entrepreneurs bridge capital gaps to build and scale resilient businesses. Despite the program’s impact, we still see underinvestment in communities across America, and the Biden-Harris Administration is committed to filling those capital gaps.
“Our proposed reforms to the SBIC program aim to diversify our SBIC network and portfolio, and incentivize patient capital to support critical industries as we build a better America. I look forward to working with our private investment partners and receiving important feedback to make this vital program even stronger.”
Small Business Deals
The Associate Administrator for Investment and Innovation, Bailey DeVries, added: “SBA’s proposed rulemaking presents an opportunity for the Agency to evolve how we fulfill this mission by strengthening, expanding, and diversifying the reach and impact of the SBIC program. We look forward to hearing from industry as we work to advance a shared mission of solving our nation’s access to capital challenges.”
Next Steps of Proposed Reforms
The proposed reforms were placed on public inspection and made available in the Federal Register on October 19. Comments are due by December 19, after which the proposed reforms will be finalized and republished in the new year.