As private equity funds seek advantageous resources for capital in today's high-interest-rate environment, Bass, Berry & Sims attorneys Bryan Bylica, Philip Kassel, and Danny Harris authored an article for Crowdfund Insider providing an in-depth look at opportunities available from the Small Business Investment Company (SBIC) Program.
The SBIC Program enables private equity fund managers to access government leverage at lower rates than traditional lending sources. The SBIC Program is focused on growing small businesses by facilitating access to growth capital for lower middle-market companies. Since its establishment, SBIC funds have provided billions of dollars of investment and financing, helping to create or preserve hundreds of thousands of jobs. SBIC funds are owned and operated by private equity fund managers, who are solely responsible for their investment decisions.
"One of the most compelling benefits of the SBIC Program is that licensed SBIC funds gain access to long-term financing through securities known as 'Debentures,' which are sold in the public market and guaranteed by the U.S. government," explained the authors.
Typical investors in SBIC funds are third-party investors that provide the necessary private capital to SBIC funds, and SBIC funds are subject to oversight by the SBA and regulatory review by its Office of SBIC Examinations no less than every two years to ensure compliance.
The attorneys concluded by exploring qualifying small business investments. "SBIC funds may invest only in what the SBA defines as 'Small Business Concerns,' which generally include companies, together with its affiliates, with a tangible net worth of less than or equal to $24 million and average after-tax profits in the prior two years of less than or equal to $8 million," the attorneys noted. "These limitations are subject to periodic adjustments by the SBA to account for inflation."
The full article, "Small Business Investment Company (SBIC) Program & Accessing Lower Loan Rates: A Primer," was published by Crowdfund Insider on May 7 and is available online.
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