Small Business Investment Companies (SBICs)

An SBIC is a privately owned investment company licensed and regulated by the SBA. The SBA provides funding to qualified SBICs with expertise in certain sectors or industries, and those SBICs then use their private funds alongside SBA-guaranteed funding to invest in small businesses. The SBA itself does not invest directly into small businesses. A typical SBIC investment is made over a three-year period.

• More than 300 SBICs licensed by SBA
• Privately owned, SBA-licensed and regulated
• SBA funds SBICs rather than businesses directly
• Typical investment period of three years

SBICs invest through debt, equity or a combination of the two. Debt is a loan that the business repays with interest, while equity is a share of ownership given in exchange for funding. A combined investment includes both loans and ownership shares.

SBICs typically target mature, profitable businesses with sufficient cashflow to pay interest. Each SBIC sets its own investment profile covering targeted industry, geography, company maturity, and the types and sizes of financing it provides. A few requirements apply universally across the programme.

• At least 51% of employees and assets within the U.S.
• Qualify as small under SBA size standards
• Operate in an approved industry
• Farmland, real estate and financing are among the industries that do not qualify

Businesses seeking SBIC financing apply to individual SBICs rather than to the SBA. The SBA publishes an online directory that can be used to identify SBICs actively investing in a particular region, business size and industry. Applicants are advised to prepare a business plan making the case that investing in the business would be profitable for the SBIC, and to seek an introduction through accountants, attorneys or executives in their network. Free business counselling is also available through the SBA.

• Research SBICs using the SBA online directory
• Prepare a business plan for the SBIC
• Contact the SBIC, ideally via an introduction
• Free business counselling available

SBICs are listed by the SBA under additional funding opportunities, as investment capital rather than a guaranteed loan programme. The SBA separately presents SBICs alongside public and private investment opportunities such as Small Business Innovation Research for manufacturers. This distinguishes SBIC financing from SBA loan programmes such as the 7(a) loan programme, the 7(a) Working Capital Pilot and 504 loans, which are accessed through participating lenders.

• Categorised as investment capital, not a loan guaranty
• Presented alongside Small Business Innovation Research for manufacturers
• Distinct from 7(a), 7(a) WCP and 504 loan programmes