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DCCUMENT RESUME
05635 - [B1296260]
Small Busines Administratiop'ts Small Businesm Investment
Company Proqram. May 8, 1978. '40 pp.
Testimony before the House Committee on Small Business: Access
to Equity Capital and Business Opportunities Subcommittee; by
Hanry Eschweqe, Director, Community and Economic Development
Div.
Contact: Community and Economic Development Div.
Orqanization Corcerned: Small Business Administration.
Conqressional Relevance: House Committee on Small Ausiness:
Access to Equity Capital and Busines aiportunities
Su bcommittee.
Authority: Small Business Investment Act of 1958.
The Small Business Administration's (SBA's) Small
Business Investment Company (SBIC) Program was intended to
stimulate and supplement the flow of private-equity capital and
lonq-term loans to swall business. 3BICs are privately operated
investment companies that are authorized to make eguity
investments in small businesses. In sp-te of the Federal
Governpent's lar'ge financial commitment to the program and the
benefits to some small firms, only a aelact group of small
businesses are beina serviced. These-aro u.ually larger firms
with the greatest growth potential. Equity-oriented SBICs are
prof 4 t-motivated and consider investments according to risk and
qroth potential, whereas loan-oriented SDICs are more ccncerned
with tL-d ability to repay loans. Some factcrs restricting the
usefulnpss of the program are: here has been a decrease in the
number of investment companies participating and financings
made; few businesses get equity-type financing; a private
industry provides equity financing to the same type of
businesses; banks have made equity investments othqruie*
prohibited by law; and SBICs serve the same clientele as those
of SBA's 7(A proqram which offers better loaa conditions.
Before further funding is provide! fcr the program, it should be
reviewed and justified br the SBA. H7W)](ViewImageLocal?handle=hein.gao/gaobadxys0001&div=1&collection=&method=preview&ext=.png&size=3)