Good morning!
It’s great to be with you here at SBIA - West Coast Capital Summit in my home state of California!
Thank you, Tim, for welcoming me, and for your leadership as Western Regional President and your advocacy directing investments to SBICs.
I’d also like to thank SBIA President Brett Palmer for his leadership and support, especially for his help gathering valuable stakeholder feedback to inform our modernization of the SBIC program.
And for all the capital allocators in the room – the Biden-Harris Administration values the impact you have on ensuring American small businesses have the funding they need to do what they do best – deliver the products and services that propel our economy.
Your investments help good ideas grow into great companies - and help great companies pivot, expand and scale to leverage opportunities in the marketplace and deliver more jobs in our economy.
So I’m excited to spend some time with you today on my vision, the Biden-Harris agenda and our continued partnership.
From Day 1, the Biden-Harris administration has promoted an economic agenda that is rebuilding our economy from the bottom up and the middle out.
President Biden worked with Congress to rescue families, small businesses, and the American economy from a once-in-a-generation pandemic – this was a part of the $450 billion in COVID relief from the SBA in the President’s first year in office that helped fuel the strongest job recovery on record.
President Biden passed the historic Bipartisan Infrastructure Law which is directing $1.2 trillion dollars towards transformational projects across multiple sectors of our economy.
From clean energy and power grid updates to roads and bridges, railways, and other infrastructure projects, the nation’s small businesses are stepping up and into contracts to help build a better America.
The Biden-Harris Administration’s Investing in America agenda is working. The economy has created over 12.6 million jobs – including 800 thousand in manufacturing - since the beginning of the Biden Administration. There has been a small business boom with 10.5mm new business applications filed over the last 2 years – that is 84% higher than any 2 years on record. And the private sector has invested more than $300 billion in new manufacturing here in America, including multi-billion dollar semiconductor factories and electric battery manufacturers.
Like you, the Biden-Harris Administration wants America’s job creators to have the tools and resources to leverage these opportunities – and that starts with capital.
Increasing equity and access to capital is a core pillar of our agenda to support small businesses – because we can’t continue to build a reimagined economy if a lack of capital keeps small businesses on the sidelines - especially in underserved and undercapitalized communities which we know are also the most entrepreneurial with women and people of color leading small business startup rates for the past 10 years.
That’s why we’ve taken a pivotal step by modernizing the SBIC program – and this could not have come at a better time.
With the recent failures of SVB and Signature Bank, stresses in the global banking system, liquidity issues, and tightening of credit to businesses - SBA must modernize to unlock capital for the small businesses that we need to innovate and compete.
More capital gaps would mean fewer opportunities.
SBICs must be there to bridge those capital gaps. The Biden administration’s SBIC modernizations through rulemaking and the President’s proposed budget will help them do just that, and we need your support and your voices.
SBA was founded 70 years ago to ensure innovation and competition through entrepreneurship. And 65 years ago, the SBIC program was created with the advocacy of the Federal Reserve to leverage federal and private capital to fill gaps – and crowd investment into early stage and growth companies. With SBICs, the SBA has delivered on its mission. SBIC investments have propelled some of the most innovative and successful businesses in the world - giving rise to critical technology - from semiconductors to PCs to EVs and more - that are vital to America’s economic strength.
Just in the past year, 308 SBICs invested roughly $8 billion in over 1,200 companies, which created and sustained over 129,000 U.S. jobs. SBICs across the country manage over $38 billion in SBA federal and private capital – providing debt and equity to small businesses in a wide range of industries – including critical industries our nation relies on.
And we have increased financings to women-, minority-, and veteran-owned small business by 29%, and in low to moderate income areas by 32%. Nearly 2/3 of our 2022 licensed funds were managed by general partnerships inclusive of veteran, women, or minority principals, as well as first-time SBIC licenses.
Yet, despite the program’s impact and progress, we still face underinvestment in communities across America – and the SBIC program is about filling capital gaps.
Just under 2% of program dollars go to women-owned small businesses, just under 3% to minority, and just over a half of a percent to veterans. And only 1/3 of dollars go to rural and LMI areas.
We need more SBIC licensed investors to support more businesses across a diverse array of communities and industries. And I believe our SBICs can lead private equity, growth and venture investment in the right direction to solve these inefficiencies in our economy.
My vision across the agency is to be customer-centric, technology forward and equitable in all of our programs. And in our capital programs – that means simplifying our products and processes for our capital partners and small businesses, leveraging technology and expanding the distribution networks for greater reach. We are doing it with major reforms on our core 7a lending program and now in our SBICs.
Our proposed Growth and Diversification Rule which is very near to finalization, and the President’s proposed budget aim to strengthen, expand, and diversify the SBIC program’s reach and impact to fill capital gaps and meet more small businesses – and first-time fund managers and all of our capital partners - where they are – and everywhere they are.
The new rule introduces Accrual SBICs, a new class of SBIC license designed for longer duration growth investments with deferred payments of interest for up to 10 years. The Accrual SBIC option will incentivize managers investing in earlier-stage businesses, capital intensive industries including technologies critical to our nation’s competitiveness. The rule will also create the Reinvestor SBIC seeding first-time funds and emerging managers who can utilize the Accrual SBIC structure.
It will lower the financial, administrative, and procedural barriers for new fund managers and longer duration, equity-oriented fund strategies.
The bottom-line is that we want to ensure underserved and undercapitalized areas will see investments from a more diversified set of private funds – and that means more jobs and more equitable development.
This program is a public private partnership – and throughout the rulemaking process, SBIA’s members – and all of our shareholders - have provided us with robust feedback in several areas.
Your comments raised valid points to consider – including not changing the standard debenture waterfall – which might have had unintended consequences.
And we heard your concerns that growth and diversification of the SBIC program could potentially reduce access to SBA leverage – that established funds might see a smaller slice of the pie. We must expand our distribution networks to fill gaps – and so President Biden’s proposed Fiscal 24 budget grows the pie for all with a request to increase the program’s authority to $6 billion plus 15% additional discretionary cap – an authority I have on my 7a lending program - which could take the SBIC authority up to $6.9 billion to meet rising demand. That is a 72% increase from the $4 billion allocated in FY2022.
That’s why Congress must approve this request in the President’s budget. We need you all to help Congress understand how critical expanding this program authority is to small businesses.
With a zero-subsidy impact, which means no cost to taxpayers, the SBIC program helps ensure we continue to power a post-pandemic recovery by providing equitable capital access to small businesses across industries and across the country. The President’s budget will help our economy - today, tomorrow, and well into the future.
The Biden-Harris administration across the whole of the federal government sees that value.
We know we need our small businesses to power the more than 23,000 projects that have been launched so far under the Bipartisan Infrastructure Law.
Last fall, the SBA entered into an historic agreement with the Department of Transportation to ensure bonding and capital through our SBICs - were available to small businesses competing for infrastructure projects.
And in December, we announced a new partnership between the SBA and the Department of Defense’s Office of Strategic Capital to leverage the SBIC program to help fund companies in the defense sector.
We know that some of the biggest gaps in private investment appear where development timelines are longest and upfront capital requirements are high. That presents significant challenges for small businesses trying to break through in R&D heavy industries, like national security.
The new Accrual SBIC is designed to align with the cash flow patterns and long duration often required to incubate and scale frontier technology investments.
Our partnership with the DOD taps into the SBIC program’s core capabilities and deep experience helping entrepreneurs seize opportunities.
Since I served at the SBA in the Obama Biden Administration, I grew to respect the potential for the SBIC program and it gives me great pleasure and pride to see that value lifted and seen across the federal government. The time for the SBIC renaissance is now as this program can drive technological innovation and competition, Made in America manufacturing, critical domestic supply chains, a clean energy economy, and resilient infrastructure that all will strengthen and empower the American economy.
When we invest in America – especially through great public private partnerships like the SBIC program, there is nothing that we cannot accomplish.
This is President Biden’s vision of a reimagined economy that supports American ingenuity and American workers, Main Street and small businesses, innovation, and prosperity for all.
I value your continued support and advocacy to help us finish the job and write this exciting next chapter of the SBA’s impactful SBIC program.
And I know my highly talented Associate Administrator of SBA’s Office of Innovation and Investment, Bailey Devries, is with you to ensure you are all a part of writing this next chapter.
Thank you for your partnership and thank you on behalf of America’s 33 million small businesses and innovative startups – who are the real giants in our economy that you all power every day.
I now look forward to any questions or dialogue you’d like to have with me.