Good morning. I’m pleased to speak with the Small Business Capital Formation Advisory Committee. As is customary, I’d like to note that my views are my own as Chair of the Securities and Exchange Commission, and I am not speaking on behalf of my fellow Commissioners or the staff.
Today, I understand the Committee will discuss recent changes to the Small Business Investment Company (SBIC) program under the Small Business Administration (SBA). The Committee will hear from industry stakeholders, as well as Bailey DeVries, who leads the SBIC program as Associate Administrator at the SBA.
When Congress established the SBIC program in 1958, their intent was to “stimulate and supplement the flow of private equity capital and long-term loan funds which small-business concerns need… and which are not available in adequate supply.”[1]
Through the SBIC program, the SBA provides government-guaranteed loans to types of private sector investment funds, called SBICs. The SBICs, in turn, invest in small businesses and startups.
Recent data from the SBA shows that 319 active SBIC funds manage a total of $42.7 billion of capital at risk—including $27.7 billion of outstanding leverage and $14.9 billion of commitments. In 2023, SBICs provided more than $8 billion in financing to U.S. small businesses.[2]
SBICs are typically structured to be exempt from registering under the Investment Company Act, and typically raise money in reliance on Reg D and Section 4. Further, the 2015 FAST Act generally exempted investment advisers to SBICs from having to register with the SEC under the Investment Advisers Act.[3]
SBICs and their advisers, however, are still subject to other important protections under the securities laws—including anti-fraud provisions.
The SBA recently reformed the SBIC program to diversify and expand the network of SBIC licensed private funds, to include so-called “Accrual SBICs” and “Reinvestor SBICs.”[4]
I look forward to hearing from the Committee about the SBIC program, as well as your opening discussion on the broader economic environment. In particular, I’d be interested about how the current interest rate environment has affected access to capital for small businesses.
Thank you.
ENDNOTES
[1] See United States Code, “15 USC Ch. 14B: SMALL BUSINESS INVESTMENT PROGRAM” (Subchapter I—General Provisions) available athttps://uscode.house.gov/view.xhtml?path=/prelim@title15/chapter14B&edition=prelim.
[2] See Small Business Administration, “Small Business Investment Company (SBIC) Program Overview Report” (Version FY ending 9/30/2023) available at https://www.sba.gov/document/report-small-business-investment-company-sbic-program-overview-report.
[3] See Securities and Exchange Commission, “IM Guidance Update” (March 2016), available at https://www.sec.gov/investment/im-guidance-2016-03.pdf
[4] See United States Federal Register, “Small Business Investment Company Investment Diversification and Growth; Technical Amendments and Clarifications” (January 2024), available at https://www.federalregister.gov/documents/2024/01/19/2024-00559/small-business-investment-company-investment-diversification-and-growth-technical-amendments-and
These remarks were delivered on July 30, 2024, by Gary Gensler, chair of the U.S. Securities and Exchange Commission, before the Small Business Capital Formation Advisory Committee in Washington, D.C.