Bloomberg Gov't: H.R. 6504, Loan Guarantees to Small Business

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Washington, Dec 18, 2012 | comments

Bloomberg Government: Bill Summary: H.R. 6504, Loan Guarantees to Small Business
December 18, 2012
By Timothy R. Homan

Limits for guaranteeing loans to participants in the Small Business Investment Company Program would be increased by $125 million under H.R. 6504.

The measure would increase to $350 million, from $225 million, the cap on the amount of outstanding leverage allowed for two or more SBIC licenses that are under common control.

The Small Business Administration’s SBIC Program is designed to boost small-business access to venture capital by supplementing the flow of private-equity capital and long-term loan funds. It’s designed to operate on a zero-subsidy basis, meaning that no tax dollars are used to fund the program, according to the SBA.

The SBA guarantees loans made by companies licensed by the SBIC Program and is authorized to provide as much as $3 billion in leverage to SBICs annually. There were 301 licensed companies at the end of the last fiscal year, according to a Dec. 11 report by the Congressional Research Service. Those SBIC investments supported 1,094 small businesses.

SBIC licenses expire after 10 years. Management teams that want to continue participation in the program must apply for a second license. The 10-year periods for the license can overlap, allowing a fund to hold two licenses. The measure would increase the limit on how large the second fund can be.

Companies would still need to meet existing requirements for participation in the program -- namely, that they are financially sound when it comes to levels of capital.

Most participants in the SBIC Program support companies in the startup, expansion or turnaround phase and focus on a particular geographic area, according to the CRS report. The measure would boost investments in private industry.

“Access to capital continues to be a challenge for many small businesses around the nation who want to grow and create jobs,” Missouri Republican Sam Graves, chairman of the House Small Business Committee, said in a Dec. 18 e-mailed statement to Bloomberg News.

He said the measure “will help infuse much needed investment capital into the private sector, at a time when our economy needs small-business growth most. In the midst of a federal spending problem, this bill is the type of policy Washington should be producing, as there is no additional cost to the taxpayer.”

The Congressional Budget Office hasn’t published a cost estimate for the bill.

Steve Chabot, an Ohio Republican and a member of the Small Business Committee, introduced the measure on Sept. 21. It was referred to the Small Business Committee, which hasn’t taken action on the bill.

There are several broader Senate bills -- S. 2136, S. 3442 and S. 3572 -- with provisions that would increase the lending cap by the same amount as the House measure.

The House is scheduled to consider the measure under suspension of the rules, which limits debate to 40 minutes, bars amendments and requires a two-thirds majority of voting members for passage. The bill has seven co-sponsors, mostly Democrats.

While the White House hasn’t issued a statement of administration policy on the measure, the administration included the increase to $350 million in its small-business agenda in January.

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