Recovery Act Changes To SBIC Program Mean Increased Funding Available For Small Businesses

WASHINGTON--(Business Wire)--
Effective today, small businesses that would otherwise have difficulty securing
private equity or venture capital may find funding easier to get as a result of
changes made as part of the American Recovery and Reinvestment Act to the U.S.
Small Business Administration`s Small Business Investment Company program.

"The Recovery Act expands SBA`s venture capital program to increase the pool of
investment funding available to the Small Business Investment Companies licensed
by SBA," said SBA Administrator Karen G. Mills. "We believe those companies will
be better equipped by these changes to help sustain and grow small businesses
for their next important growth steps."

SBICs are privately owned and managed venture capital firms which are licensed
and regulated by SBA. SBICs use a combination of funds raised from private
sources and money raised through the use of SBA guarantees to make equity and
mezzanine capital investments in small businesses. There are approximately 338
SBICs with $17.4 billion in capital under management.

The changes made as part of the Recovery Act are:

* The Recovery Act makes SBICseligible for greater SBA guaranteed funding and
requires SBICs to invest 25 percent of their investment dollars into "smaller"
businesses. Also, the amount of funding an SBIC may invest in a single small
business is set at 10 percent of an SBIC`s total capital rather than the
previous limit of 20 percent of an SBIC`s private capital only. This translates
to an effective 50 percent increase in funding available to a single business by
an SBIC.
* Maximum SBA funding levels to SBICs will increase up to three times the
private capital raised by the SBIC, up to a maximum of $150 million for single
SBICs, or up to $225 million for multiple SBICs that are under common control.
The cap for all licensees was set at $137.1 million before the Recovery Act.
* These limits are even higher for SBICs that are licensed after October 1,
2009, that certify that at least 50 percent of their investments will be made in
small businesses located in low-income areas, up to $175 million for single
licensees and up to $250 million for jointly controlled multiple licensees.
* Changes made to the SBIC program under the Recovery Act are permanent.

Industry associations have commended SBA for these changes and SBA continues to
encourage new SBICs to apply for licensing and actively participate in the
program.

The SBIC program was created to stimulate the growth of America`s small
businesses by supplementing the long-term debt and private-equity capital
available to them. Since the SBIC program`s formation in 1958 through April
2009, it has invested approximately $56 billion in more than 106,000 small
businesses in the United States. For more information about the SBA`s Investment
Division and SBIC program, go to www.sba.gov/INV or call 1-800-U ASK SBA.

Release Number: 09-47

U.S. Small Business Administration
Dennis Byrne, 202-205-6567
http://www.sba.gov/news

Copyright Business Wire 2009