U.S. Small Business Administration Administrator Isabella Casillas Guzman reported the SBA Small Business Investment Company’s (SBIC) Diversification and Growth Final Rule is now in effect. Private market fund managers can now initiate applications for SBIC licenses specifically tailored for investing in American small businesses and startups with equity-focused or long-duration strategies, according to an Aug. 18 news release.
"The Biden-Harris Administration is steadfast in its commitment to ensuring that small businesses can access capital to foster growth, particularly in alignment with our emphasis on equity, manufacturing and innovation that will drive our economy forward," Guzman said in the release. "SBA's collaborations with private funds within the SBIC program facilitate opportunities for America's small businesses to thrive as the President invests in the nation, and these transformative reforms dismantle the structural barriers within the SBIC Program to amplify the flow of equity and debt financing into underserved communities, capital-intensive industries and technology sectors vital to U.S. national security and economic progress."
This new regulation, aligned with the economic and equity priorities of the Biden-Harris administration, will prompt the SBA to execute reforms in regulations and policies, aiming to bolster accessibility to private equity and debt capital for underserved small businesses and startups, undercapitalized critical technologies, diverse and emerging fund managers, as well as innovation investments, the release reported.
The introduction of two novel SBIC licenses, namely the Accrual SBIC and the Reinvestor (Fund-of-Funds) SBIC, will broaden the SBIC program network of private market financing partners and extend the SBA's reach to historically marginalized small businesses and startups. Notably, these regulatory and policy reforms are designed to alleviate the financial burden for new program applicants while streamlining the application process, the release said.
"By reinforcing, diversifying and broadening our network of SBIC-licensed private funds, these reforms will address funding gaps and unlock potential for underserved small businesses, innovative startups and companies developing technologies of strategic significance to national security," SBA Associate Administrator for Investment and Innovation Bailey DeVries said in the release.
Since its inception in 1958, the SBA has been responsible for licensing and regulating private market investment funds as SBICs. These SBICs channel equity investments or lend private capital, in addition to funds borrowed with an SBA guarantee, to make equity and/or debt investments in small businesses and startups, according to the release.
Presently, the SBIC program comprises more than 308 distinct private funds covering mezzanine, private credit, buyout, growth, venture and multi-strategy categories, collectively managing upwards of $40 billion in combined public and private assets under management. In the previous year, SBICs allocated $8 billion in more than 1,500 enterprises, fostering the creation and sustenance of more than 103,000 jobs across the U.S., the release said.
