SBA proposes changes to its “Small Business Investment Company” program
The U.S. Small Business Administration (SBA) has published proposed reforms to its “Small Business Investment Company” (SBIC) program that are designed to reduce financial barriers and increase access and diversity in the U.S. small business investment ecosystem.
Known as the “SBIC Investment Diversification and Growth” rule, the purpose of the change is to address structural aspects of the SBIC program which have historically limited the flow of SBIC regulatory capital to small businesses and start-ups not adequately served by private investors alone. The proposed reforms include:
- Reducing barriers to SBIC program participation for new private fund managers and private funds focused on equity and longer-term debt investments in small businesses and start-ups, especially those in underserved communities and geographies, capital-intensive industries, and technologies critical to national security; and
- Establishing an alternative borrowing structure to the traditional Debenture SBIC, specifically constructed to align with the cash flow patterns of equity-oriented investment funds and longer-duration strategies.
The proposed rule was placed on public inspection and made available in the Federal Register on October 19 with comments due by December 19. SBA says the proposed reforms are planned to take effect with a final rule to be published in 2023.