Overseeing and Executing the Small Business Investment Company (SBIC) Program

SBIA Comment Letter to:

Mr. Joseph Shepard
Associate Administrator
Office of Investment and Innovation
U.S. Small Business Administration

Dear Associate Administrator Shepard:

As the appointee leading the Office of Investment and Innovation (OII), your responsibilities include overseeing and executing the Small Business Investment Company (SBIC) program. SBIA again requests you take corrective action to address what appears to the small business investing community to be another breakdown of the SBIC program, particularly the delays with the delivery of licenses.

Today, over four months into the new fiscal year, only one SBIC license has been issued and received by an applicant. This license was issued last week despite being approved by the Agency Committee on November 16, 2018. This single new license is a non-levered SBIC. With more than a third of the fiscal year completed, not a single levered SBIC license has been issued and delivered. This inability to license any levered SBIC funds is confounding because there are several SBIC applicants that also completed SBA’s entire licensing process and were approved by the Agency Committee on November 16, 2018. These would-be-SBICs are in limbo and are currently not able to operate and invest in small businesses until SBA issues the licenses.

It is important to also put on the record that the single license issued and the several would-be-licenses-in-limbo are all repeat SBICs with well-established, successful track records in the program. These applicants are extremely well-known to the SBA. Not a single license has been issued to a new SBIC platform in FY 2019. Our industry wants to see more small business investment with more women, more minorities, and more veterans running SBICs. Our industry wants to see more SBIC funds licensed in more geographies – under licensed states and underinvested areas. Our industry wants to see more SBIC funds investing in a broader array of investments in a broader mix of small businesses. How can SBA expect any investing professional, but particularly new entrants to the program who are women, minorities, veterans, or investors from new areas, to take the entrepreneurial risk of forming an SBIC fund when even established and successful SBIC funds are facing unpredictable delays and are struggling to be licensed? Even longtime institutional investors in SBICs, who know the program well, are worried about deploying capital into SBICs that are entering the licensing process because many aspects of the program are now unpredictable and slower than ever.

The government shutdown is not a meaningful cause of these licensing delays. The licenses-in-limbo were approved by the Agency Committee on November 16, 2018. The government did not shut down until December 23, 2018. These licenses should have been issued well before the shutdown. The government reopened on January 25th, almost two weeks ago and still there are approved applicants without an SBIC license.

The private sector is having difficulty making sense of the delays. Applicants and their investors can only sit and wait. The civil servants in the Office of Investment and Innovation are not the cause of these licensing delays. By all accounts the civil servants appear to be doing their work professionally and with a sense of purpose. The Agency Committee, composed of both political appointees and civil servants, appears to have done their job and approved applicants for SBIC licenses months ago.

Other parts of the Trump Administration have done an excellent job in promoting small businesses, reducing taxes on small businesses, reducing regulations on small business, and prioritizing capital access to small businesses. The SBIC program is completely in line with the President’s goals of supporting small business, promoting investment in domestic companies, and promoting hiring American workers and limiting offshoring of jobs. The SBIA wants to partner with and support this Administration to aid growing small businesses, but the SBIC program must be allowed to function.

On behalf of the small business investing community, the SBIA asks that OII ends these delays and release to the applicants all approved licenses. OII should also prevent these delays from happening in the future. Further, we ask that the SBIC program’s other operational issues, not just licensing, be righted so the program can become reliable again. Small businesses, their employees, the private sector investors into SBICs, and SBA’s SBIC partners expect a functional Office of Investment and Innovation. SBIA stands ready to assist you in this undertaking in any way that we can.


About the Small Business Investor Alliance (SBIA)

The Small Business Investor Alliance (SBIA) is the premier organization of lower middle market private equity funds and investors. SBIA works on behalf of its members as a tireless advocate for policies that promote competitive markets and robust domestic investment for growing small businesses. SBIA has been playing a pivotal role in promoting the growth and vitality of the private equity industry for over 50 years. For more information, visit www.SBIA.org or call (202) 628-5055.


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