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SBIC Program: Seeking Financing for your Small Business

The following information is intended primarily for small business owners seeking financing for their business.  For prospective SBIC fund managers, limited partners, current SBIC licensees or other stakeholders, please refer to the SBIC Program Page.

 

The U.S. Small Business Administration and Investment Division welcome your interest in obtaining SBIC financing for your company. Since 1959, Small Business Investment Companies (SBICs) have supplied equity capital, long term loans and management assistance to qualifying small businesses.

General Information

The SBIC Program is one of many financial assistance programs available through the U.S. Small Business Administration. The structure of the program is unique in that SBICs are privately owned and managed investment funds, licensed and regulated by SBA, that use their own capital plus funds borrowed with an SBA guarantee to make equity and debt investments in qualifying small businesses. The U.S. Small Business Administration does not invest directly into small business through the SBIC Program. 

We encourage you to review the information below to better understand the program and process for accessing SBIC capital. As you review the information, keep in mind that SBIC financing is not appropriate for all types of businesses and financing needs. The U.S. Small Business Administration offers a wide variety of financial assistance programs designed to suit the varied needs of America’s small businesses. To learn more about other financing options available through the U.S. Small Business Administration, refer to the Loans and Grants section or call 1-800-UASK-SBA (1-800-827-5722).

Seeking SBIC Financing

Only companies defined by SBA as “small” are eligible for SBIC financing. Generally, the SBIC Program defines a company as “small” when its net worth is $18.0 million or less and its average after tax net income for the prior two years does not exceed $6.0 million. All of the company’s subsidiaries, parent companies and affiliates are considered in determining the size standard and for certain industries alternative size standards may apply. Details regarding regulatory size limitations are included in the Small Business Size Regulations.

SBICs may not invest 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 or casual businesses (those not engaged in a regular and continuous business operation), or companies which will use the proceeds to acquire farm land. SBICs may not provide funds for a small concern whose primary business activity is deemed contrary to the public interest.

There are over 300 licensed SBICs in operation today. SBICs pursue investments in a broad range of industries and geographies. Some SBICs invest in a particular field or industry in which their management has expertise, while others invest more generally.

The SBIC program currently offers its licensees access to debt capital with a 10-year maturity and semi-annual interest payments. The structure of this financing means that most SBICs focus primarily on providing small businesses with debt or debt with equity features. SBICs will typically focus on companies that are mature enough to make current interest payments on the investment so that, in turn, the SBIC can meet its interest obligations to the SBA.

Resources

There are extensive educational resources available to entrepreneurs that want to evaluate different risk capital options and what type may best fit their financing needs. Be sure to review the resource links below and our website.

After you have taken time to familiarize yourself with the SBIC Program, venture capital, mezzanine lending and private equity, if you believe your business would be a good fit for SBIC financing, you should first research and identify existing SBICs that may be interested in financing your company. In choosing an SBIC, consider the type of investments it makes, stage of investments, industry focus and geographic concentration.

Entrepreneurs have three sources to search for active SBICs.

  1. Our SBIC Directory – A directory of operating SBICs organized by state.

  2. Small Business Investor Alliance (SBIA)

  3. National Association of Investment Companies (NAIC) which dedicates financial resources to investment in an ethnically diverse marketplace.

Once you have identified the SBICs that are best suited to provide the type of financing required, you should take steps to present your business plan to them. For information on how to prepare a business plan see the resources above or access entrepreneurial assistance through the U.S. Small Business Administration. Note that the average SBIC receives hundreds of business plans per year. Entrepreneurs can benefit greatly from a personal referral or introduction to the particular SBIC fund manager being targeted. A qualified introduction by a business professional increases the likelihood that your business plan will be carefully considered. Talk to accountants, attorneys, executives in your industry and other business colleagues to arrange an introduction. Of course, you can always submit your business plan directly if you are unable to find a qualified referral.

Importantly, Investment Division personnel are not permitted to make referrals on behalf of small businesses seeking SBIC financing.

If you would like more detailed information about the SBIC Program, please visit our program page.

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