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Letter to the Honorable Judd Gregg 1 (October 2005)

handle is hein.congrec/cbo9006 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Douglas Holtz-Eakin, Director US. Congress Washington, DC 20515 October 17, 2005 Honorable Judd Gregg Chairman Committee on the Budget United States Senate Washington, DC 20510 Dear Mr. Chairman: As you requested, CBO has reviewed draft legislation for the SBIC Program Restructuring Act of 2005, provided to CBO on July 29, 2005. The draft legislation would modify the Small Business Investment Company (SBIC) program administered by the Small Business Administration (SBA) by creating a new program called the participating debentures program. You requested a cost estimate for the draft legislation, including an analysis of the budgetary treatment of the proposed participating debentures program under the Federal Credit Reform Act of 1990 (FCRA). CBO expects that the proposed participating debentures program would be considered a credit activity under FCRA. The legislation would direct SBA to assess fees sufficient to fully offset the estimated subsidy cost of the program (as defined in FCRA). CBO estimates that, absent any fees, the new program would have a subsidy cost of between 20 percent and 25 percent on each dollar loaned by SBA. Assuming that the fees are set at the proper level, CBO estimates that the budget would record no net cost to the federal government for this program. The SBIC Programs Through two SBIC programs authorized under current law-participating securities and debentures-SBA provides funding to privately owned and operated venture capital firms called small business investment companies (SBICs). SBICs are licensed by SBA and utilize a combination of financing from SBA and the private sector to provide capital to qualified small businesses. Under the participating securities program, SBICs use the funding to make venture capital investments in qualified small businesses and share any profits earned from www.cbo.gov

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