How does an SBIC make money?
So the SBICs hope to make their profits by acquiring options to own equity in the companies to which they make loans. An eight-year loan, usually subordinated to institutional lenders, on which only the interest is payable for three years, then both principal and interest for the remaining five years.
What is SBIC leverage?
SBICs can obtain SBA leverage of up to the lesser of $175 million or 3X the SBIC’s private capital raised. The maximum SBA leverage for a family of affiliated SBICs is $350 million. The SBA debentures are unsecured notes issued by the SBA that have ten-year maturities and bear interest payable twice a year.
What is the SBIC program?
The SBA’s Small Business Investment Company (SBIC) program seeks to stimulate and supplement the flow of private equity capital and long-term loan funds to small businesses, which small business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization when …
How does SBIC leverage work?
The SBIC Act authorizes SBIC funds to obtain long-term leveraged funds at favorable interest rates in order to fund loans to, and investments in, qualifying small businesses. This enables SBIC funds to make investments in greater amounts than would be possible solely with private funds.
Can banks invest in SBIC?
Banks and their holding companies are permitted to invest in SBICs under the regulations implementing the Volcker Rule pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
How many SBIC funds are there?
As of September 30, 2020, there were 302 licensed SBICs with approximately $18.505 billion of private capital and $10.554 billion of outstanding SBA leverage (of which $10.530 billion is debenture leverage and $24 million is “other” SBA leverage — none of which is participating securities leverage).
What is SBIC financing?
An SBIC, or Small Business Investment Company, is a privately owned and managed investment fund that’s licensed and regulated by SBA. An SBIC uses its own capital, plus funds borrowed with an SBA guarantee, to make equity and debt investments in qualifying small businesses.
What is the purpose of the SBIC?
The Small Business Administration’s (SBA’s) Small Business Investment Company (SBIC) program is designed to enhance small business access to venture capital by stimulating and supplementing “the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their …
How many SBICs are there?
There are presently almost 500 li- censed SBICs with over $15 billion in private capital. SBICs that are wholly owned by banks represent about half the industry and receive no capital from SBA.
What is an SBIC bank?
A Small Business Investment Company (SBIC) is a privately owned and operated company that makes long-term investments in American small businesses and is licensed by the United States Small Business Administration (SBA).
Can banks invest in SBICs?
Are SBICs profitable?
SBIC’s have been quite profitable in recent years. In FY2000, for ex- ample, SBICs overall had a 39% re- turn on invested capital (ROI) and Par- ticipating Security SBICs had an ROI of 99.4%.
How does the small business investment company ( SBIC ) program work?
The Small Business Investment Company (SBIC) Program has a long history of success helping small U.S. businesses access long-term, patient capital for growth and job creation. For more than 60 years, SBICs have been providing capital to American small businesses to help them expand their operations and create jobs.
Can a SBIC Fund provide debt or equity?
Non-leveraged SBICs funds can provide both debt or equity in whatever proportion they choose.
How is the SBIC program effective and distinct?
The SBIC program is effective and distinct because the private sector leads with its capital and investment expertise, and then SBIC leverage follows to augment the impact of the private investment. The government does not pick winners and losers, private investors guide capital to the companies with the best potential.
When did the SBIC program start and end?
Since the program’s inception in 1958 through December 2015, SBICs have deployed US$80.5 billion in capital (two-thirds from the private sector) into approximately 172,800 financings. 1