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How Should You Approach an SBIC for Financing?
Seeking Financing from an SBIC
If you have visited Is SBIC Financing Right for your Business? and you believe your small business would be a good candidate for SBIC financing, the following steps will help you successfull approach one of the many licensed SBICs.
1) Research SBICs
You should research SBICs to identify those funds whose investment profiles best fit your business needs. Consider the stage of the companies in which it has invested, the size of its investments and any geographic or industry concentration it maintains. You should also be sure to verify that the SBIC is actively investing. Most SBICs stop making new investments in small businesses roughly five years after they obtain an SBIC license.
Entrepreneurs have three sources to search for active SBICs.
- Our SBIC Directory: A directory of active SBICs organized by state.
- The Small Business Investor Alliance: An association of private equity funds and investors that target the lower middle market.
- National Association of Investment Companies (NAIC): An association dedicated to promoting investment in an ethnically diverse marketplace.
Most SBICs have a website where you can find out more information on their investment profile and some of their existing portfolio companies.
2) Prepare your Business Plan
SBICs typically require a business plan to help them evaluate whether or not they should provide your company with financing. You should visit How to Prepare a Business Plan for assistance.
3) Present your Business Plan
SBICs, like most private equity and venture capital funds, receive hundreds of business plans from entrepreneurs every year. Simply e-mailing an investment fund your business plan or calling their offices is unlikely to yield results. Entrepreneurs seeking capital from an SBIC will benefit most from a qualified introduction to the fund managers. Talk to accountants, attorneys, executives in your industry and other business colleagues to establish a connection with the SBIC. If one of these business professionals can introduce you to the fund, your business plan will have a much greater chance of being considered.
As a special note, SBA personnel are not permitted to make referrals on behalf of small businesses seeking SBIC financing.