Obtaining and Operating an Impact SBIC License
Applying for an Impact SBIC License
Fund managers seeking to obtain an Impact SBIC License must follow the same application process, submit the same documentation and meet the same high standards as other applicants to the SBIC Program. However, because Impact SBIC applicants hold the potential of generating enhanced social returns through their investments in underserved communities and sectors of national priority, SBA is committing to process Impact SBIC applications on an expedited basis:
Phase I: Initial Review (60 Days)
During this phase, SBA reviews the qualifications of the fund managers, the viability of the investment strategy and assesses the likelihood the proposed SBIC will be able to deploy at least 50% of its total invested capital into Impact Investments.
Phase II: Capital Raise (Unique to each Fund)
Impact SBIC applicants approved at Phase I will receive a "green light" letter inviting them to submit a License Application and begin Phase III once they have raised a minimum amount of private capital. Once a "green light" is received, if an Impact SBIC applicant determines, for any reason, that it would prefer to be considered for licensing as a Standard SBIC and no longer as an Impact SBIC, it will be required to return to Phase I and restart the application process without assurance of an expedited processing time.
Phase III: Licensing (90 Days)
With a minimum, acceptable level of private capital raised, an Impact SBIC applicant may finalize the licensing process with the submission of a License Application. In order to process the License Application as quickly as possible, SBA suggests that all applicants adhere closely to SBA's model limited partnership agreement and the additional guidance in Technote 15 and Attachment 2 in Technote 14.
Operating an Impact SBIC
Impact SBICs are no different from other SBICs in that they must comply with the regulations and policies that govern the SBIC Program. However, they also face some unique operating requirements. These are outlined below:
- Impact Investment SBICs must identify those investments that qualify as Impact Investments in the comments section of the financing form they are required to file with SBA (Form 1031).
- All SBICs are expected to adhere, throughout their lives, to the investment strategy they proposed at licensing. Impact Investment SBICs are unique in that they also commit to deploy 50% of their investable capital into qualifying Impact Investments. As with other SBICs that depart substantially from their initial investment strategy, an Impact Investment SBIC that materially deviates from the business plan presented during the licensing process may not be given access to subsequent commitments of debenture leverage.
- Each fiscal year, through FY 2016, SBA will issue no more than $200 million in debenture leverage commitments to Impact Investment SBICs. These commitments will be made available on a first-come-first-served basis until SBA has issued an aggregate amount of $1 billion in debenture leverage commitments to Impact Investment SBICs.
- Although Impact Investment SBICs may ultimately receive leverage up to three times regulatory capital, SBA will commit no more than one tier of debenture leverage to any Impact Investment SBIC in any twelve month period. One year following SBA's issuance of a commitment for a tier of debenture leverage, the Impact Investment SBIC may apply for an additional tier of debenture leverage, subject to SBA regulations, credit policies and available leverage.
- Some Impact Investment SBICs may have an interest in using the Energy Savings Debentures, a financing instrument available to all licensed SBICs. If demand for Energy Savings Debentures exceeds availability, SBA will develop procedures which give priority to Impact Investment SBICs seeking to issue these types of debentures.