The Office of Investment has instituted a Fast Track process for reviewing applications for Small Business Investment Company ("SBIC") licenses for successor funds to be operated by managers of current SBICs that have met certain criteria. The Fast Track applies only to (i) applicants whose previous SBICs have been licensed to issue Debenture leverage only ("Debenture SBIC Applicants") or (ii) applicants who are not seeking leverage for their subsequent SBIC ("Non-leveraged SBIC Applicants").
This TechNote describes the criteria for Fast Track. Please note that management teams may be licensed for a subsequent SBIC even if they do not qualify for the Fast Track process. Similarly. qualifying for a Fast Track does not guarantee that the applicant will be licensed.
SBA uses a three step process to license an SBIC: Phase I - Initial Review; Phase II - Capital Raising; and Phase III - Licensing. The Fast Track is anticipated to shorten the Phase I process to 2 weeks from receipt of SBIC notification and the Phase III process to 60 days from the date SBA accepts the licensing application. (Note: Due to the shortened timeline, Fast Track applicants will not be allowed to make pre-licensing investments)
Phase I: Initial Review (2 Weeks)
Debenture SBIC Applicants and Non-leveraged SBIC Applicants should notify their Operations Analyst in writing (email is acceptable) with a copy to the Area Chief, providing the following information:
- Name of new fund;
- Amount of leverage being sought;
- Anticipated private capital size (include hard-circled and soft-circled commitments, if any);
- Minimum targeted capital required to execute strategy;
- Anticipated closing date to raise minimum targeted capital required to execute strategy;
- Estimated date applicant expects to file application, if known (specifically identifying if you expect to file immediately)
- Any anticipated changes in the management team from the current SBIC(s); and
- A brief description of the proposed fund's strategy with regards to industry, geography, size of investments, investment structure, portfolio company initial stage/revenue range/EBITDA range; and a discussion regarding how this strategy differs from its current strategy
Phase 2: Capital Raising Process
An applicant who receives either “Green Light” letter has up to 1 year from the date of the letter to raise capital and submit its licensing application. The SBIC application remains the same regardless of whether an applicant qualifies for Fast Track processing. Applicants seeking to qualify for the Fast Track need to raise the minimum targeted capital required to execute the strategy prior to submitting its licensing application to the SBA. Applicant managers should keep their Operations Analyst updated on their capital raising progress and advise them at least 30 days prior to filing the application as to when they expect to file. (This will allow Operations to provide current information on the applicant to the Licensing staff prior to filing.)
Phase 3: Fast Track Licensing Process
Within 3 to 4 weeks after submitting its application, the SBA will send a “comment letter” to the applicant containing any comments, questions, and concerns. Applicants will be given 1 week from the date of the letter to respond. During the response timeframe, the applicant must also provide SBA with an executed capital certificate and bank letter showing the minimum $2.5 million of leverageable capital, as well as fully executed legal documents. If the legal documents have been signed under a power of attorney, executed copies of each power of attorney must also be submitted. If the applicant requires more time than 1 week to provide the capital certificate and bank letter and respond to the comment letter or the applicant provides an insufficient response, additional time to resolve these issues will not be counted towards the 60 day licensing goal.
Once all issues are resolved and documents are submitted, the application will be presented to the Divisional SBIC Licensing Committee and then to the Agency Licensing Committee.