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Advantages of an SBIC
Limited partners (LPs) of SBIC-licensed funds benefit from several advantages that aren’t available to other types of investment funds.
Regulatory benefits
Certain exemptions from registration requirements with the SEC are available to SBICs and their advisers.
Rapid deployment of funds
With a leverage commitment from the U.S. Small Business Administration (SBA) up to two times the private capital raised, fund managers are able to minimize the time spent on fundraising and focus on making investments.
Flexible fund structure
SBICs are allowed to organize themselves as stand-alone entities, drop-down vehicles, or side-car vehicles.
Strong, stable returns
The low cost of SBA capital provides fund managers with pricing flexibility across cycles, while the 10-year term on SBA debentures avoids the problems of duration mismatch.
Community Reinvestment Act credit
Investments in SBICs may be eligible for Community Reinvestment Act credit.
Underlooked opportunity to invest in small business
Despite being the bedrock of the American economy, U.S. small businesses remain underserved and represent a value opportunity for investors.