SBIC

A Short History Of The SBIC Program

Lenders operating under the auspices of the SBA are given licenses to provide their own investment capital for long-term loans offered to small business. The program was launched in 1958 and since then the SBICs have provided $28 billion of long-term debt and equity growth capital to approximately 90,000 small companies according to the Small Business Administration (SBA).

Where Do the Funds Come From?

Small Business Investment Companies loan their own capital, and can also borrow additional money from the SBA at very favorable rates. While startups can qualify, most SBICs prefer existing companies that have ample growth potential, who need additional capital for expansion or establishing a stronger market presence with new products or services. Most of these investment companies specialize in an industry they know. Because of this knowledge and hands-on experience, these investment companies can work with businesses in those industries struggling to make a profit. While SBICs are similar to venture capital firms, the main difference is that the SBA limits SBIC ownership to 49% allowing entrepreneurs to retain control.

How Much Can You Get?

Qualifying businesses can obtain loans from $100,000 to $5 million. Interest rates are fairly high, around 17 or 18 percent. SBIC loan funds are not grants and must be paid back no matter what. Small Business Investment Companies tend to tolerate more risk unlike many banks or conventional venture capital companies. Because many SBICs specialize in an industry or a region that they understand, they can take a second look at an entrepreneur whose current profit picture is not as good as it could be.

What Businesses Qualify

Your company’s net worth must be $18 million or less, with a two-year average of after-tax net income at $6 million or less. Specialized SBICs have an established relationship with the Small Business Administration, they can offer favorable loans to small businesses owners they consider socially or economically disadvantaged, meaning minorities and women.

A detailed application process is required concerning all aspects of your business and your management staff. For information on how to apply, see SBIC: How to apply.

How To Find An SBIC

Call the SBA at 800-827-5722. You can also search list of licensed offices online at SBICs, or contact the National Association of Small Business Investment Companies, an industry trade association.

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