Investing in Small Businesses: The SBIC Program
WASHINGTON—Today, Members of the Subcommittee on Agriculture, Energy, and Trade heard from a panel of witnesses from all over the country who participate in the Small Business Administration’s (SBA) Small Business Investment Company (SBIC) Program.
“As a way to inject more equity into the small business ecosystem to address the gap in long-term financing, the SBA created the Small Business Investment Company Program, also known as the SBIC Program, in 1958,” said Subcommittee Chairman Rod Blum (R-IA). “Like many of the SBA’s financial programs…robust and thorough Congressional oversight is required to ensure taxpayer money is safeguarded and protected.”
A Successful Private-Public Sector Solution
The SBIC program is a vital source of capital for small businesses and is a leading example of how the federal government and the private sector can work together to grow the economy and create jobs.
“The 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,” said Brett Palmer, President of the Small Business Investor Alliance in Washington, DC. “It is a mark of SBIC industry pride that the program continued to maintain its zero-subsidy throughout the Great Recession.”
“A hallmark of the SBIC Program is its rigorous licensing process for prospective SBIC funds, ensuring taxpayer protection and safeguarding the program’s reputation,” said Thies Kolln, Partner at Aavin Private Equity in Cedar Rapids, IA. “Because of our location and our firm’s investing principles, we have a particular impact on small businesses in Iowa. In our firm’s history, we have made 26 investments in Iowa small businesses, one as recently as the end of October.”
“Our growth has been driven by doing more of the same investments in small businesses. We invested in 28 small businesses through our first SBIC fund and expect to invest in 40 – 50 small businesses over the life of Plexus Fund IV,” stated Michael Painter, Managing Partner at Plexus Capital in Raleigh, NC. “While many peers have found great success moving up market to serve larger companies, we have been intentional about staying focused on smaller businesses who have limited access to capital where we can make a meaningful impact on growth.”“The SBIC program is one of the most innovative, financially successful and well-structured government programs in existence,” said Mark Walsh, Managing Director at Ruxton Ventures in Chevy Chase, MD. “The license application and approval process is extraordinarily rigorous, and creates an efficient “filter” for mismanaged or ill-targeted funds from receiving taxpayer dollars.”