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Senate SBIC Bills – and CohnReznick – Champion More Capital for Small and Medium Sized Businesses


6/20/13

More small businesses may soon be able to find long-term financing if Congress passes two bills now working their way through the Senate. The bills would expand the federal Small Business Investment Company (SBIC) program. This week, CohnReznick supported the bills that would further the sustenance and growth of small and mid-sized businesses. Accordingly, please click here to view CohnReznick’s letter to various Senators in support of the two SBIC bills.

The two bills have now been introduced in the 113th Congress and, once approved by the Senate Small Business Committee, will be presented to the full Senate floor for consideration. The bills are: S. 511, the EXCEL Act, introduced by Senator Mary Landrieu (D-Louisiana), and S. 550, SBIC legislation introduced by Senator Jim Risch (R-Idaho). Advocates are optimistic that these bills will be passed as they come up for a full debate in the Senate.

Impact of the SBIC Program

The SBIC program has grown to provide more financing to small business than ever before – with $2.95 billion provided to small businesses in fiscal year 2012. This represents an 85 percent increase from 2010, which was also a record year for SBIC. SBIC financing also has a major impact on the economy as financing to small businesses in fiscal 2012 created or sustained more than 68,000 jobs, according the U.S. Small Business Administration (SBA).

However, the $2.95 billion in activity in 2012 is also close to the limit of the SBIC’s Congressional mandate –currently set at $3 billion.

An amendment to the bills, passed by the Senate Small Business Committee on June 13, 2013, would raise the program’s funds limit from $225 million to $350 million. The amendment would also increase the SBIC program authorization level from $3 billion to $4 billion (and index it to inflation). This increase would help infuse small and mid-sized businesses with the capital they need to sustain and grow.

SBICs are private firms registered with the SBA that raise money from private sources to invest in small businesses. Once SBICs reach a certain threshold of private funding, they can apply for low-interest matching loans from the SBA equal to up to three times the private funding. The SBA pools these matching loans together with other debt and sells the loans to the public with a guarantee from the SBA. For example, SBICs raised $1 billion in private capital in fiscal 2012. The SBA then added to this capital by providing $1.92 billion in loan guarantees to SBICs.

A key benefit of the SBIC program is that it is self-funding – it needs no annual appropriations from Congress. An increase in the fund limits proposed by S. 511 and S. 550 does not tap into tax revenue or add to the federal deficit.

This isn’t the first time Congress has attempted to raise the fund limits for the SBIC program. A similar bill passed the House of Representatives in the last Congress but did not move forward in the Senate.

Voice Your Support

CohnReznick commends the SBIC for its efforts in helping small and mid-sized business grow. If you are a small or mid-sized business and have an interest in supporting the bills noted above, please contact your state senators and voice your support for either or both bills. For more information on this issue, please visit the Small Business Investment Alliance’s Take Action Center.


What Does CohnReznick Think?
Access to capital is a critical factor in the financial health of small and medium-sized businesses. When businesses are financially healthy, they create jobs and help to grow the economy. CohnReznick believes that passage of the SBIC bills is a critical component of job growth and access to capital for small and medium-sized businesses. Accordingly, CohnReznick supports the SBIC bills and has written to U.S. Senators in favor of this legislation.


Contact:
 
For more information, please visit CohnReznick’s Private Equity and Venture Capital Industry webpage and contact Chris Aroh, Partner, at 860-633-3000.


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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