Apply to be an SBIC

As a licensed SBIC, you can be eligible for low-cost, government-backed capital that you can use to increase private investments in U.S. small businesses and startups.


About the SBIC program

Since 1958, the mission of the Small Business Investment Company (SBIC) program has been to stimulate and supplement the flow of private equity capital and long-term debt financing that American small businesses need to operate, expand and modernize their businesses.

SBA does this by licensing and providing capital to professionally managed equity and debt investment funds as Small Business Investment Companies. SBA capital comes in the form of, a government-guaranteed loan to the fund to match privately raised capital. The SBA-guaranteed loan, paired with private capital, increases access to financing for qualifying U.S. small businesses and startups while potentially improving risk-adjusted returns for private investors.

Types of SBICs

Standard Debenture SBICs: The Standard Debenture SBIC license is designed to align with the cash flows of mezzanine, private credit and other investment strategies with a current pay component that may have a more internal rate of return (IRR) orientation. Standard Debenture SBICs are eligible to receive SBA-guaranteed loans with interest payments on SBA loans due semi-annually. Because of the semi-annual interest component, Standard Debenture SBICs have historically been a strong fit for funds pursuing strategies that invest in small businesses that have consistent cash flows over the term of the fund, such as private credit or mezzanine investing strategies.

Accrual SBICs: The Accrual SBIC license is designed to align with the cash flows of longer duration equity funds with a more long-term focus and multiple orientation. Accrual SBICs are eligible for SBA-guaranteed loans, Accrual Debentures, where accrued interest and principal are due upon maturity and may be prepaid upon a distribution event.

Reinvestor (Fund-of-Funds) SBICs: The Reinvestor SBIC license is based on a fund-of-funds model to invest equity in underlying funds with an underserved focus that, in turn, invest directly into small businesses and start-ups. Fund-of-funds Reinvestor SBICs:

  • Utilize the Accrual Debenture instrument
  • Are eligible for a match of 2x private capital raised (Up to a maximum of $175 million in guaranteed principal and interest)
  • Must invest ≥ 50% of the portfolio in underlying funds

Non-Leveraged SBICs: Non-Leveraged Licenses are SBA licensed private funds that do not apply for funding from SBA. There are several benefits to obtaining an SBIC license without SBA leverage commitment, including eligibility for Community Reinvestment Act (CRA) credit for bank investors.

Benefits of forming an SBIC

As a licensed SBIC, funds can leverage their private investment dollars with SBA-guaranteed debt that allows them to increase their investments in U.S. small businesses and startups. When it’s time to realize its investment, the SBIC repays the SBA-guaranteed debt plus interest and distributes returns to its private investors.

For more than a decade, SBICs have delivered returns to their investors that are in line with those available from other private equity funds in the market. Since 1998, SBICs that benchmark in the top half of private equity have delivered a 5 to 10-point boost in the IRR delivered to LPs as a result of SBA leverage.

Here are some additional benefits beyond the potential for enhanced returns of becoming an SBIC:

Rapid fund deployment: The potential to capitalize on as much as two-thirds of a fund with SBA leverage means managers spend less time fundraising and more time investing.

Access to long-term capital: SBA provides long-term funding, which is often patient capital that aligns with the long-term growth plans of small businesses and startups. This type of capital is essential for businesses that need time to grow and establish themselves.

Flexible terms and investment opportunities: The duration of SBA’s financing instruments can be matched up with short- or long-term investments. SBICs have the flexibility to invest in a wide range of industries and sectors, promoting diversity in their investment portfolio. This flexibility allows managers to adapt to market trends and capitalize on emerging opportunities.

Exempt from SEC registration: SBICs are exempt from SEC registration, yet LPs benefit from SBA’s careful monitoring of each fund’s performance and regulatory compliance.

Exempt from Volcker Rule: SBICs are exempt from the bank investment limitations set forth in the Volcker Rule as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Increased financial scale: SBA leverage allows funds to scale up their strategies and extend their financings to more businesses.

Tax advantages for LPs: An SBIC’s LPs may be eligible for tax benefits as investments in SBICs are presumed to be a “qualified investment” for Community Reinvestment Act credit.

Characteristics of a successful SBIC

Investment funds licensed as SBICs typically have four basic characteristics:

  1. Experienced management team: Team members have complementary skills and a history of working with each other.
  2. Proven investment strategy: Fund pursuing a familiar strategy that the principals have successfully pursued as investors or operators in the past.
  3. Track record of success: Demonstrated prior track record of successful investments in the targeted strategy, possibly augmented by analogous, relevant operations management, entrepreneurial or other commercial experience.
  4. Appealing fund structure: The SBIC’s structure aligns the incentives of the SBIC’s managers and investors with the overall mission of SBA.

Regulations governing SBICs

The full regulations governing the SBIC program can be found in Section 13 CFF 107.720, but in summary, SBICs must invest in U.S. small businesses, which are defined as having the following: 

  • Tangible net worth of less than $24 million and average net income after Federal income taxes for the preceding two completed years of less than $8 million. 
  • Or, the industry size standard covering the industry in which the applicant is primarily engaged. 

At least 25% of an SBIC’s financings must be in smaller enterprises, defined as having the following: 

  • Net worth less than $6 million and average net income after Federal income taxes for the preceding two years of less than $2 million. 
  • Or, the size standard for the industry in which it is primarily engaged. 

SBICs may not invest in, with certain exceptions (for more detail review section 13 CFF 107.720), any of the following:

  • Passive businesses 
  • Real estate businesses 
  • Project financing 
  • Farm land purchases 
  • Businesses contrary to public interest 
  • Foreign investments 
  • Associated suppliers 

Distribution waterfall guidelines

Standard Debenture SBICs: Can distribute returns to their investors over the lifecycle of the fund, provided they are current with the semi-annual interest payments on the 10-year loan.

Accrual and Reinvestor SBICs:  Can distribute capital to their investors over the lifecycle of the fund provided accrued interest and annual charges due to SBA are paid off prior to distributions to private investors. Accrual and Reinvestor SBICs can make tax distributions without first paying down accrued interest. 

Non-Leveraged Licensees: Can distribute profits to their investors without seeking prior approval from SBA, but only if they maintain enough "Regulatory Capital" to meet minimum capital requirements specified in §107.210 or its SBA-approved "Wind Down Plan."

SBIC application process

Applying for an SBIC license is a three-part process: 

  1. Pre-screening review 
    (Short Form 2181) 
  2. Management Assessment Questionnaire (MAQ) and MAQ fee 
    (Long Form 2181 or Subsequent Fund Form 2181 and Form 2181 Exhibits) 
  3. Final License Application and Licensing fee


Applicants may consider completing and submitting a Pre-screen Form 2181 to SBA to receive feedback. This an optional step, but one that is highly recommended for first-time applicants to the SBIC Program.  The feedback is informal and non-binding, but it helps prospective applicants better understand SBA’s underwriting criteria and reassess their own fit with the program.

The Pre-screen 2181 contains a subset of forms contained in the full MAQ. Specifically, the Short Form 2181 contains the following:

  • The Overview
  • Narrative
  • Investment Track Record
  • Principal Biographies 

Completing this form can help prospective applicants prepare for the MAQ without incurring the cost of the MAQ Application Fee. This information gives background context to aid SBA in providing informal feedback.

Management Assessment Questionnaire (MAQ)

Once you have decided to move forward with the application process, the next step is to prepare and submit the MAQ, which consists of the following:

  • Form 2181 (Long Form or Subsequent Fund Form)
  • Form 2181 Exhibits A - D 
  • Attachments/Supplemental Materials
  • Payment of Initial Licensing Fee / “MAQ Fee”),

After receipt of your MAQ (including payment of the Initial Licensing Fee / “MAQ Fee”), a Licensing Investment Analyst and SBA Legal Counsel will be assigned to review your application. 

Once the application has been filed and accepted for processing, Licensing and SBA Legal will review the MAQ submission, performing operational and investment due diligence and legal review of the relevant documents. Upon completion of due diligence and reviews, Licensing will recommend to the Investment Committee whether the applicant appears to have the minimum qualifications necessary to manage the proposed SBIC.

If the Investment Committee concludes, by majority vote, that the management team appears to be qualified, the applicant is invited for a one-hour formal interview. After the interview, the Investment Committee will consider whether your management team has the experience and skills necessary to manage an SBIC.  If they vote affirmatively, your application will be reviewed by the SBA Agency Licensing Committee for approval. If the SBA Agency Licensing Committee votes affirmatively, the SBA Administrator will vote on your application. If approved by both Committees and the SBA Administrator, your application will be approved for a “Green Light” letter inviting you to submit a final License Application once sufficient capital has been raised to hold an initial closing. 

An Applicant may hold multiple closings within 12 months of its initial closing based on the date of formal SBA license approval. A final close must be held within 12 months of receipt of formal SBA license approval. A fund may not accept additional capital commitments 12 months after the date of formal SBA license approval.

Subsequent funds

Applicants who meet all eligibility criteria under 13 CFR § 107.305 for Expedited Subsequent Funds Licensing, may apply using the Subsequent Funds Form 2181 which is comprised of a subset of the forms required in the Long Form 2181.

License Application

The License Application is submitted when the applicant has sufficient Regulatory Capital to hold a close and has completed all required forms. The application builds upon the previously submitted MAQ and includes additional forms and documentation. The entire package includes the following:

  • Form 2181 (UPDATED to include any changes since the Green Light Letter)
  • Form 2181 Exhibits A - D (UPDATED to include any changes since the Green Light Letter)
  • Form 2181 Exhibits E - G
  • Copies of all final legal documents + redlined copies detailing any and all changes to previously submitted legal documents
  • Payment of all application and Final Licensing Fee and other fees which may at that time be due (e.g., the Resubmission Penalty Fee, if applicable and if not already paid)

Upon receipt of the License Application and full payment all Licensing Fees, a Licensing Investment Analyst and SBA Legal Counsel will review the materials and recommend whether the SBA’s Agency Licensing Committee and SBA Administrator vote stands or whether there is evidence of material adverse changes which would trigger a revote.  If no material adverse changes are identified, the License Application will be submitted to the SBA Administrator for formal final approval. 

Throughout this process, from Pre-screening through Licensing, you will work closely with the analysts and managers of SBA’s Office of Investment and Innovation. At various times, you may receive both informal questions and formal SBA Comment Letters.  Prompt and courteous replies will minimize delays in licensure.

Licensing fees

Initial Licensing Fees as of the publish date of this document are as follows:

Fund Sequence

Initial Licensing Fee

Fund I


Fund II


Fund III


Fund IV+


The Final Licensing Fee as of the publish date of this document is calculated as the “Final Licensing Base Fee” plus 1.25 basis points multiplied by the Leverage dollar amount being requested by the applicant and conditionally approved by SBA, communicated as the “Total Intended Leverage Commitment.” As the fee is based on the amount being requested, the Applicant will multiply the Total Intended Leverage Commitment dollar amount provided at the time of Green Light approval by 1.25 basis points and add this amount to the Final Licensing Base Fee, where the Final Licensing Base Fee is based on the applicant’s Fund Sequence as follows:

Fund Sequence

Final Licensing Base Fee

Fund I


Fund II


Fund III


Fund IV+


Detailed application instructions and forms

Stay current with the latest SBIC news and updates.

Last updated May 30, 2024