- General Information
- Program Overview
- Reports and News
- Key Initiatives
- Early Stage SBIC
- Impact SBIC
- Energy Saving Debentures
- Contact Us
- Applying to be an SBIC
- Operating an SBIC
- Investing in an SBIC
- SBIC Resource Library
- Funding the SBIC Program
- Funding the SBIC Program: An Overview
- Financing Options Explained
- Discounted Debentures
- Interest Rates, Annual Charge & Other Fees
- Information for Trust Certificate Investors
- SBIC Pool Offering Circulars
- SBIC Debentures Offering Circulars
- SBIC 2013-10 B, CUSIP 831641 EZ4
- SBIC 2013-10 A, CUSIP 831641 EY7
- SBIC 2012-10 B, CUSIP 831641 EX9
- SBIC 2012-10 A, CUSIP 831641 EW1
- SBIC 2011-10 B, CUSIP 831641 EV3
- SBIC 2011-10 A, CUSIP 831641 EU5
- SBIC 2010-10 B, CUSIP 831641 ET8
- SBIC 2010-10 A, CUSIP 831641 ES0
- SBIC 2009-10 B, CUSIP 831641 ER2
- SBIC 2009-10 A, CUSIP 831641 EQ4
- SBIC 2008-10 B, CUSIP 831641 EN1
- SBIC 2008-10 A, CUSIP 831641 EL5
- SBIC 2007-10 B, CUSIP 831641 EJ0
- SBIC 2007-10 A, CUSIP 831641 EG6
- SBIC 2006-10 B, CUSIP 831641 ED3
- SBIC 2006-10 A, CUSIP 831641 EB7
- SBIC 2005-10 B, CUSIP 831641 DZ5
- SBIC 2005-10 A, CUSIP 831641 DX0
- SBIC 2004-10 B, CUSIP 831641 DV4
- SBIC 2004-10 A, CUSIP 831641 DT9
- SBIC 2003-10 B, CUSIP 831641 DR3
- SBIC 2003-10 A, CUSIP 831641 DN2
- SBIC 2002-10 B, CUSIP 831641 DL6
- SBIC 2002-10 A, CUSIP 831641 DJ1
- SBIC 2001-10 B, CUSIP 831641 DG7
- SBIC 2001-10 A, CUSIP 831641 DE2
- SBIC Participating Security (PS) Offering Circulars
- SBIC-PS 2009-10 A, CUSIP 831641 EP6
- SBIC-PS 2008-10 B, CUSIP 831641 EM3
- SBIC-PS 2008-10 A, CUSIP 831641 EK7
- SBIC-PS 2007-10 B, CUSIP 831641 EH4
- SBIC-PS 2007-10 A, CUSIP 831641 EF8
- SBIC-PS 2006-10 B, CUSIP 831641 EC5
- SBIC-PS 2006-10 A, CUSIP 831641 EA9
- SBIC-PS 2005-10 B, CUSIP 831641 DY8
- SBIC-PS 2005-10 A, CUISP 831641 DW2
- SBIC-PS 2004-10 B, CUISP 831641 DU6
- SBIC-PS 2004-10 A, CUSIP 831641 DS1
- SBIC-PS 2003-10 B, CUSIP 831641 DQ5
- SBIC-PS 2003-10 A, CUSIP 831641 DM4
- SBIC-PS 2002-10 B, CUSIP 831641 DK8
- SBIC-PS 2002-10 A, CUSIP 831641 DH5
- SBIC-PS 2001-10 B, CUSIP 831641 DF9
- SBIC-PS 2001-10 A, CUSIP 831641 DD4
- SBIC Debentures Offering Circulars
- SBIC Pool Deal Factors & Payment Summaries for both Debenture and Participating Security Pools
- Trust Certificate Rates: SBIC Debenture Pools
- Trust Certificate Rates: SBIC Participating Security Pools
- SBIC Pool Offering Circulars
- Financing your Small Business
- What is the SBIC Program?
- What is the current size of the program?
- Who benefits from the SBIC Program?
- How does the SBA fund the SBIC Program?
- What are Low/Moderate Income ("LMI") Debenture Securities?
- What are the requirements for obtaining an SBIC license?
- What is the status of the Participating Securities Program?
- What types of investment styles and fund types fit best with the SBIC Program?
- How do I know if I have what it takes to receive an SBIC license?
- Does the SBA participate in the management of SBICs?
- What kinds of companies are eligible to receive financing from an SBIC?
- What are the rules governing an SBIC's ability to take control of a small business?
- What are the benefits to fund managers of forming an SBIC?
- How does the SBA prevent fraud or wrongdoing in the SBIC Program?
- What are the historical returns of SBICs as an asset class?
For F.A.Q.s related to the SBA's Form 468, please refer to our SBIC Licensee section.
The Small Business Investment Company (SBIC) program, administered by the U.S. Small Business Administration (SBA), is a private-public partnership created in 1958 to fill the gap between the availability of growth capital and the needs of small businesses. The SBA's Investment Division licenses qualified private equity fund managers and provides them with access to low-cost, government-guaranteed capital to make investments in U.S. small businesses.
At the end of FY 2011, SBA had over $8.2 billion invested in 299 funds. Together with private capital of approximately $8.8 billion, the program totals over $17 billion in capital resources dedicated to America’s entrepreneurs.
Small businesses which qualify for assistance from the SBIC program are able to receive equity capital, long-term loans, and expert management assistance. Investment managers participating in the SBIC program can supplement their own private investment capital with funds borrowed at favorable rates through the federal government. Most importantly, the Nation's economy benefits from the program as the small businesses financed by SBICs continue to create hundreds of thousands of jobs and generate tax revenues over the program’s life.
The SBIC Program is designed to operate on a "zero-subsidy" basis, meaning no tax dollars are used to fund the program. To obtain SBA capital, SBICs issue debentures guaranteed by the SBA. Pools of these SBA-guaranteed certificates are sold to investors through periodic public offerings. The debentures have a term of ten years and provide for semi-annual interest payments and a lump sum principal payment at maturity. The ten-year debenture allows for prepayment without penalty, but it must be pre-paid in whole, not in part, and can only be prepaid on a semi-annual payment date. The rate of interest on debentures is determined by market conditions and the rate of the 10-year treasury securities at the time of the sale. For information on past and current debenture rates, please visit the Funding the SBIC Program section of our website.
SBICs are eligible to use LMI Debentures, which are deferred interest debentures that are issued at a discount and require no interest payments or SBA annual charge for the first five years. LMI Debentures are available in 5 and 10 year maturities. The use of LMI Debentures is restricted to LMI qualified investments. Qualified investments are small businesses in which 50% or more of the employees or tangible assets are in a LMI Zone (as defined by applicable government agencies) or 35% of the full time employees of the small business have primary residences in a LMI Zone.
For more information on the LMI Debenture, please visit the LMI Debenture section of our website.
SBICs must be privately managed, for-profit investment funds formed to provide equity and/or debt capital to U.S. small businesses. SBICs are licensed by the SBA. For more information on the characteristics the SBA looks for in prospective SBIC fund managers, please refer to The SBIC Program: Application Process section of our website.
The Participating Securities program, which was established in 1994 to better match how SBICs were funded with the equity needs of entrepreneurs, ceased issuing new leverage commitments on October 1, 2004. Based on projected losses in excess of $2.7 billion, it was decided that while the Participating Securities program has provided benefits to small businesses in the past, the structure of the current program and related cost to the taxpayers cannot be supported.
The Debenture Securities program, which dates back to the inception of the SBIC program in 1958, continues to issue new leverage commitments and is most appropriate for investment management funds focused on providing later stage, expansion capital to cash-flow-positive or nearly cash-flow-positive companies.
Historically, no particular style or type of SBIC was preferred. Among the existing SBICs, there are multiple investment styles and fund types. Today, because only the program is only issuing debenture leverage commitments, the best fit for the program is funds focused on providing later stage, expansion capital to cash-flow-positive or nearly cash-flow-positive companies.
The full SBIC licensing process, including the qualifications expected of SBIC fund managers, is outlined in detail in the SBIC Program: Application Process section of our website.
No. The SBA is not involved in the management of SBIC funds. Instead, the SBIC Program is a public-private partnership in which qualified private equity fund managers access government-guaranteed capital to make investments in small businesses. The SBA is not involved in making investment or portfolio management decisions.
SBIC may invest only in qualifying small business concerns, which can generally be defined as businesses with less than $18 million of tangible net worth and less than an average of $6 million of net income over the prior two years, calculated at the time of investment. SBICs are also generally prohibited from investing in the following: other SBICs, finance and investment companies or finance-type leasing companies, unimproved real estate, companies with less than 51% of their assets and employees in the United States, passive businesses not engaged in regular and continues operation, or companies which will use the proceeds of an SBIC investment to purchase farm land. SBICs may not provide funds to a small concern whose primary business activity is deemed by the SBA to be contrary to the public interest. Detailed regulations are available in the SBIC Licensee section of our website.
An SBIC is permitted to control, either directly or indirectly, a small business for a maximum period of 7 years. With SBA’s prior written approval, an SBIC may retain control for such additional period as may be reasonably necessary to complete divestiture of control or to ensure the financial stability of the portfolio company.
SBICs supplement their own private capital by issuing debentures securities up to three times private capital, although typically this is limited to two times. This capital is provided at a significantly lower cost than traditional limited partner equity investments. The effect of the leverage can have a very powerful impact on return enhancement to fund managers.
Additional benefits to fund managers include:
- Concentration of a large portion of funding from one source reduces fundraising burden and administrative / reporting requirements.
- Community Reinvestment Act credits available to financial institutions that invest in SBICs open up a source of private funds to SBICs that they might not have otherwise.
- Enhanced deal sourcing through network of over 400 SBICs.
- SBIC MAQ application process helps to crystallize strategy and can be presented to private investors as part of a larger marketing package.
- SBA’s financial reporting criteria help SBICs develop standardized and comprehensive investor relations processes.
- SBA’s licensing process is well defined, with early milestones which help potential licensees assess their likelihood of funding early on.
Prior to receiving an SBIC license, the applicant must undergo a rigorous licensing process. Upon receiving a license, the SBIC is subject to an annual regulatory audit by the Office of SBIC Examinations. These audits are designed to ensure that SBICs are in compliance with the regulations or to uncover those instances when they have failed to do so. Potential fraud is often uncovered after an SBIC has been transferred to the Office of SBIC Liquidation. These cases are referred to the Office of the Inspector General for investigation and possible referral to the Assistant US Attorney for prosecution.
An analysis of historical SBIC returns along with other program data can be found in our Reports & News section.