WASHINGTON - The President signed into law late yesterday a bill that improves and expands the Small Business Administration (SBA)'s venture capital program. Senator John F. Kerry (D-Mass.), the top Democrat on the U.S. Senate Committee on Small Business, authored the bill along with Committee Chairman "Kit" Bond (R-Mo.). Known as the Small Business Investment Company (SBIC) program, the legislation provides new and growing small businesses with government-guaranteed, long-term debt and venture capital. This program meets small companies' need for smaller venture capital investments not available through traditional venture capital means.
"SBICs help provide a critical infusion of capital to our fastest-growing small businesses," said Kerry. "Massachusetts has many good examples of SBIC successes, including Staples Inc., the national office supply chain based in Westborough, and Domain Inc., the designer home furnishings company that got its start in Norwood and is now in seven states on the East Coast and has 250 employees."
Among other technical changes, the legislation includes the following changes to the SBIC program:
- Responds to the growing demand for investment capital from high-growth small businesses. The program level for participating securities is increased from $800 million to $1.2 billion in FY 1999 and from $900 million to $1.5 billion in FY 2000.
- Changes the formula to more fairly determine whether companies of the same revenue size can qualify for SBIC financing.
- Strikes the requirement for SBA to reserve 50 percent of theleverage for SBICs with less than $20 million in private capital. (The 50-percent reserve was put in place to ensure sufficient leverage for small SBICs. Experience has been that virtually all SBICs have less than $20 million in private capital, so the reserve requirement is not necessary).