In an era of budget slashing and belt tightening, the U.S. Small Business Administration has efficiently harnessed a public-private partnership through its Small Business Investment Company (SBIC) program, breaking records by channeling billions of dollars into the hands of small businesses and creating thousands of jobs. This and other success stories are highlighted in the SBIC Annual Report, which was released today and can be read here.
“Even with the economy still in recovery mode, this program serves as a model of a zero-subsidy, public-private partnership that has been extraordinarily successful for America’s small businesses,” said SBA Administrator Karen Mills. “This report, part of the agency’s ongoing efforts to deliver transparency, accountability and robust data collection in its programs, highlights the success and progress SBA has made over the last four years to streamline, simplify and strengthen its core programs.”
“Successful small businesses who have benefitted from SBA’s SBIC program in Region 3, like Hawke Aerospace of Morgantown, Pa. and Center Rock of Berlin, Pa. are just a few examples of the more than 1,000 small businesses SBA has helped finance which have created or sustained more than 65,000 jobs,” said Regional Administrator Natalia Olson-Urtecho. “SBA plans to continue to build on the success of this public-private partnership to reach more entrepreneurs and more industries across the region and across the country.”
In addition to SBA’s efforts to streamline and simplify this program, critical to its success has been attracting private capital to the funds. The Annual Report analyzes in detail the financial returns to private investors participating in the program and finds that returns compare very favorably to the private equity industry as a whole, demonstrating that private investors can significantly improve their return by accessing SBA leverage.
At the same time, enhancements to the program have attracted a more diverse array of top-tier investment managers to the funds, and SBA has expanded the program with new funds targeting promising companies in economically distressed regions and gaps in early stage investment. These new platforms are attracting institutional investors, pension funds, and multinational corporations, allowing the agency to expand investment and financing to more innovative small businesses outside of traditional start-up and investment hubs.
The report also highlights the records set by the SBIC debenture program. In Fiscal Year 2012, the SBIC program had its third consecutive record-breaking year. SBICs provided more than $3 billion in growth capital to over 1,000 small businesses, a 17 percent increase from FY 2011 and an 83 percent increase from FY 2010. SBA estimates these financings created or sustained over 65,000 jobs.
SBA also licensed 30 new funds in FY 2012, including a record 27 Debenture SBICs, bringing the total number of SBA-licensed funds to more than 300 SBIC-licensed funds, with more than $18 billion in capital.
The report also features the 2012 Small Business Investment Companies of the Year and stories of successful small businesses that benefited from SBIC investments. The featured SBICs are: Petra Capital Partners (Nashville, TN), Cephas Capital Partners (Pittsford, NY), Main Street Capital Corp. (Houston, TX) and Diamond State Ventures (Little Rock, AR).
Successful small businesses that benefited from SBIC investment in FY 2012 include: JSI Fixtures (Milo, ME), Hoffman Media, LLC (Birmingham, AL), Weber Knapp (Jamestown, NY), CB Restaurants, INC (Milburn, NJ), Gemcor (West Seneca, NY), Security Innovation (Wilmington, MA), Hawke Aerospace (Morgantown, PA), Custom Marketing Co. (Fargo, ND) and Center Rock (Berlin, PA).
The SBIC program was created in 1958 to stimulate the growth of America’s small businesses by supplementing the long-term debt and private-equity capital available to them. Since then, the SBIC program has helped fill these gaps and has invested approximately $63 billion in more than 110,000 small businesses in the United States.
SBICs are privately-owned and managed investment firms that are licensed and regulated by SBA. SBICs use a combination of funds raised from private sources and money raised through the use of SBA guarantees to make equity and mezzanine capital investments in small businesses.
For more information about the SBA’s SBIC program, and to contact its Investment Division, go to www.sba.gov/INV.
