SBA Invites Licensing Applications for New $1 Billion Early Stage SBIC Initiative

The Small Business Administration (SBA) is now accepting the first stage of the licensing process for the new five-year $1 billion Early Stage Small Business Companies (Early Stage SBICs) initiative. In 2012, the SBA may commit up to $150 million to support eligible investments funds focused on early/seed stage investments. By licensing and guaranteeing leverage to these investment funds, SBA intends to help early stage small business overcome the valley of death, the period when it is difficult for early stage businesses to access capital due to the lack of necessary assets or cash flow for traditional bank funding.

Interested investments funds must complete the four-step licensing process starting with a Management Assessment Questionnaire (MAQ). Once licensed, Early Stage SBICs may receive SBA-guaranteed debenture leverage of up to 100 percent of their regulatory capital, maximum of $50 million per fund. Licensed Early Stage SBICs are required to have a 1:1 match with private capital for all investments in U.S. based small businesses and must pay SBA fees (1 percent commitment fee, 2 percent draw fee, examination fees and licensing fee). To become a licensed Early Stage SBIC, an investment fund must:

• Have a minimum of $20 million in regulatory capital when they submit their licensing application in July 2012;
• Commit to invest at least 50% of their investment dollars in early stage small businesses; and,
• Pass the MAQ.

Applicants must submit their Management Assessment Questionnaire by June 19.