This bill amends the Small Business Investment Act of 1958 to increase the maximum amount of outstanding leverage (i.e., borrowing power) made available to any licensed small business investment company from $150 million to $175 million. This bill was signed into law on June 21, 2018.
According to a press release from the Small Business Investor Alliance (SBIA), “Small Business Investment Companies (SBICs) are highly regulated private equity funds that invest exclusively in domestic small businesses. Created in 1958, the small businesses backed by SBICs have created 3 million new jobs and supported an additional 6.5 million jobs, according to a recent Library of Congress study.
The individual fund limit was last raised in 2009 to $150 million; the current push to $175 million keeps pace with inflation and increases the amount of capital fund managers can deploy to small businesses nationwide.”
While this may not seem like much, remember that many of the small businesses that are being invested in by these funds are fairly small, and the investments are correspondingly small. Also, it is worth remembering that these SBICs are not singular companies, but multiple entities that are available for small business investment start-up capital.
This is a case of Congress remembering that small businesses are the engine of job growth, and although larger businesses create numbers, this is how the economy grows.
If you’re looking for investment capital, particularly if your business model seeks outside capital, these SBICs are a good alternative to private equity or even outside investors.