In this tough fund-raising climate, venture capital, venture debt and private equity firms are increasingly turning to the federal government’s Small Business Investment Co. (SBIC) program as a source of capital.
In fact, this may be one of the best times to apply for SBIC funding, since the economic stimulus bill increased the maximum amount of SBIC leverage to $225 million for affiliated funds, up from $137 million previously.
As such, next week, Thomson Reuters (publisher of peHUB.com) are hosting a webinar to help guide prospective applicants through the SBIC process. More information about the webinar can be accessed here.
For a little more background, here’s a Q&A with Alan Roth, a partner at Wildman Harrold and one of the four panelists. Roth’s practice is focused primarily in the areas of venture capital and private equity representation, including SBIC licensing, investment and compliance, fund formation, corporate acquisitions, and representation of closely-held corporations.
Q: How has the economic climate affected interest in the SBIC program?
A: There has been an increased level of activity because the fundraising environment is still very difficult out there.
Q: Are there efforts to expand or streamline the program to meet increasing demand?
A: There are a number of legislative initiatives to expand it that are currently floating through Congress right now in both the House and the Senate. To make the program more attractive to the business community, they’re also really working hard at the SBA to make the agency user-friendly. They’ve tried to speed up the process for new applicants and for groups going for subsequent licenses.
Q: Is it working?
A: I talk to people all over the country regarding the SBIC program, and the issue that bogs people down is the length of time it takes from beginning to end to get licenses. I tell qualified candidates it’s probably a year process from initial application to final approval.
Q: What trends are you seeing in terms of the types of groups seeking SBIC fufnding?
A: The pool is limited by the fact that it is a loan program. You borrow money from the government at a low interest rate and pay it back over a ten year period. The trend is that the SBA is embracing applicants with a variety of strategies, including equipment leasers and venture debt providers. What in essence the government is looking to see is if the groups are qualified and if their strategies fit in with the qualities of a loan program.