SBIC Advisory Committee Act of 2022
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- Crpt 117Srpt105
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- Crpt 117Srpt105
Summary
Senate Report 117–105 of the 117th Congress, 2d Session, on the SBIC Advisory Committee Act of 2022, submitted by Mr. CARDIN from the Committee on Small Business and Entrepreneurship to accompany S. 2521 and ordered printed May 3, 2022. The committee reports the bill favorably with an amendment in the nature of a substitute and recommends it pass. The bill directs the SBA Administrator to establish a 16-member SBIC Advisory Committee to report within 18 months on increasing SBIC investment in underserved communities and underfinanced States. The report cites 1,080 SBIC investments in FY 2021, records a voice vote on February 15, 2022 with Senators Paul, Ernst and Marshall recorded as voting no, and includes a section-by-section analysis. It closes with minority views of Senator Paul arguing the committee is unnecessary.
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Full text
Calendar No. 280
117TH CONGRESS REPORT
" SENATE !
2d Session 117–105
SBIC ADVISORY COMMITTEE ACT OF 2022
MAY 3, 2022.—Ordered to be printed
Mr. CARDIN, from the Committee on Small Business and
Entrepreneurship, submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany S. 2521]
The Committee on Small Business and Entrepreneurship, to
which was referred the bill (S. 2521) to require the Administrator
of the Small Business Administration to establish an SBIC Work-
ing Group, and for other purposes, reports favorably thereon, with
an amendment in the nature of a substitute and an amendment to
the title, and recommends that the bill, as amended, do pass.
I. INTRODUCTION
A bill to require the Administrator of the Small Business Admin-
istration to establish an SBIC Advisory Committee, (S. 2521) was
introduced by Senator Ben Cardin and Senator Jim Risch on July
28, 2021.
This bill directs the U.S. Small Business Administration (SBA)
Administrator to establish an SBIC Advisory Committee to develop
recommendations for increasing the diversity of the investments
made by the SBIC program to include a greater number of busi-
nesses owned by members of underserved communities and busi-
nesses located in underfinanced States.
During the markup of the bill, the Cardin substitute amendment
and the Cardin long title amendment to the bill were approved by
a voice vote as part of a manager’s package. The Cardin substitute
amendment changes the name of the SBIC working group to the
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‘‘SBIC Advisory Committee’’ and revises the membership and selec-
tion process. Of the 16 appointees, one will be from SBA, 7 will be
chosen by the SBA Administrator, and 8 will be chosen by the Ad-
ministrator from lists submitted by the Chairs and Ranking Mem-
bers of the Small Business and Entrepreneurship Committee of the
Senate and the Small Business Committee of the House of Rep-
resentatives. The Advisory committee would then have 18 months
to draft a report on recommendations to improve access to the
SBIC program for underserved communities and underfinanced
States. The bill, as amended, was also approved by a voice vote as
part of a manager’s package.
II. HISTORY (PURPOSE & NEED FOR LEGISLATION)
An SBIC is a privately owned and managed investment fund
that is licensed and regulated by the SBA, which invest in small
businesses through debt and equity. Concerns have been raised
about SBICs’ lack of diversity among investments in businesses
and locations. In FY 2021, the SBIC made 1,080 investments in
small businesses. Of those investments:
• 75 (7%) of those businesses were owned by women, vet-
erans, or minorities
• 200 (19%) of the businesses were located in low and mod-
erate income (LMI) areas
• 253 (23%) of those businesses were Special Competitive
Opportunity Gap Businesses.1
Similarly, in 2021, the top five states, California, Texas, New
York, Illinois, and Pennsylvania, made up approximately 40% of
total dollars invested by the SBIC program, while Wyoming, North
Dakota, and New Mexico received practically zero SBIC invest-
ment.2
III. HEARINGS & ROUNDTABLES
In the 117th Congress the Committee on Small Business and En-
trepreneurship held a hearing on June 9, 2021 entitled, ‘‘Review of
the Small Business Investment Company Program.’’ In her testi-
mony, Ivelisse Rodriguez Simon, Managing Partner of Avante Cap-
ital Partners, spoke about the lack of diversity of the SBIC pro-
gram and argued that increasing the number of women and minor-
ity fund managers would increase the diversity of the businesses
that receive SBIC investments. Among Ms. Rodriquez Simon’s rec-
ommendations was the creation of a diversity task force at SBA
that would track and implement initiatives that drive diversity of
managers and investments.
IV. DESCRIPTION OF BILL
This bill establishes an SBIC advisory committee (committee) to
provide recommendations to SBA on how to increase demographic
and geographic diversity in the management and investments of
SBIC funds. The committee consists of 16 members, with the Asso-
ciate Administrator of the Office of Innovation and Investment as
1 Special Competitive Opportunity Gap Businesses are defined by SBA as those businesses in
LMI areas or are owned by minorities, women, and veterans. For FY2021, 22 businesses are
both owned by women, veterans, or minorities and are located in LMI areas under this category.
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2 The top 5 states received $2.837 billion while the bottom 3 received less than $300,000 com-
bined.
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the chairperson (or another designee as determined by the SBA Ad-
ministrator). The Administrator has authority to appoint 4 mem-
bers to the committee, and must also appoint 2 members each from
lists of 3 provided by the Chairs and Ranking Members of the Sen-
ate and House Small Business Committees. Within 18 months, the
committee must submit a report to Congress and the SBA Adminis-
trator with recommendations on how the SBA could expand SBIC
program access to underserved and underfinanced communities. All
appointed members of the SBIC Advisory Committee shall have no
conflict of interest in the SBIC program.
V. COMMITTEE VOTE
In compliance with rule XXVI (7)(b) of the Standing Rules of the
Senate, the following vote was recorded on February 15, 2022.
A motion to adopt S. 2521, a bill to direct the Administrator of
the Small Business Administration (SBA) to establish an SBIC Ad-
visory Committee, as amended by the Cardin substitute amend-
ment, was agreed to by a majority voice vote of a quorum present
as part of a manager’s package. Senators Paul, Ernst, and Mar-
shall asked to be recorded as voting no.
VI. COST ESTIMATE
The Committee has not yet received the Congressional Budget
Office’s estimate of the cost of S. 2521 as ordered reported. When
the Congressional Budget Office completes its cost estimate, it will
be posted on the Internet at www.cbo.gov.
VII. EVALUATION OF REGULATORY IMPACT
In compliance with rule XXVI (11)(b) of the Standing Rules of the
Senate, it is the opinion of the Committee that no significant addi-
tional regulatory impact will be incurred in carrying out the provi-
sions of this legislation.
VIII. SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section designates the act as the ‘‘SBIC Advisory Committee
Act of 2022’’.
Sec. 2. SBIC Advisory Committee
This section defines terms used to establish and carry out the
SBIC Advisory Committee. The section also outlines the composi-
tion of the committee, including how selections are made, the proc-
ess for Members of Congress to recommend panelists, the designa-
tion of a Chairperson, and the duties of the Committee. Finally,
this section directs the Committee to issue a report on rec-
ommendations to diversify the program within 18 months to the
SBA Administrator, the Committee on Small Business and Entre-
preneurship of the Senate, and the Committee on Small Business
of the House of Representatives. The SBIC Advisory Committee
will terminate upon completion of the report and is subject to the
Federal Advisory Committee Act.
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VIV. MINORITY VIEWS
Minority Views of Senator Paul
The SBA has authority to request input and stakeholder feed-
back on this topic. The SBA also has several interagency task
forces and working groups established across the agency that have
added to internal bureaucracy, creating bottlenecks for programs
and services. Establishing the SBIC Advisory Committee would
take time and resources away from SBA personnel providing serv-
ices supporting small businesses and curbing risk to taxpayers.
The private investment market is already meeting the needs of
diverse startups and entrepreneurs. For instance, as Ms. Ivelisse
Rodriguez Simon, Managing Partner of Avante Capital Partners
explained during the June 9, 2021 hearing entitled, ‘‘Review of the
Small Business Investment Company Program there are a large
number of existing diverse investment managers in the private
market. The private market is currently empowering diverse indi-
viduals in the venture and private equity fields without the exist-
ence of the SBIC Advisory Committee. Further, Ms. Sarah Chen,
co-founder and managing partner of Beyond the Billion, stated that
globally, 80 percent of fund managers are women and minorities.3
Ms. Chen confirms this trend in diverse fund managers and invest-
ment in women and minority-owned businesses in the private in-
vestment market.
Additionally, the private market is distributing historic levels of
capital to diverse businesses. In 2021, private venture capital in-
vestment reached record levels with the National Venture Capital
Association and Pitchbook recording nearly $330 billion in invest-
ment in U.S. businesses of which $6.4 billion went to female-only
founded startups.4 Similarly, in 2021 the American Investment
Council reported private equity invested over $1 trillion in Amer-
ica’s communities with 74% of capital investments supporting 5,205
small businesses.5 The private market is creating diversity in rep-
resentation and capital distribution without the use of government-
backed leverage, rendering the SBIC Advisory Committee an un-
necessary waste of taxpayer dollars.
RAND PAUL,
Ranking Member.
Æ
3 https://www.bizjournals.com/bizwomen/news/latest-news/2022/01/female-founded-companies-
get-little-of-therecord.html?page=all#:∼:text=Overall%2C%202021%20
was%20an%20exceptionally,data%20by%20research%20firm%20PitchBook.
4 https://www.bizjournals.com/bizwomen/news/latest-news/2022/01/female-founded-companies-
get-little-of-therecord.html?page=all#:∼:text=Overall%2C%202021%
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20was%20an%20exceptionally,data%20by%20research%20firm%20PitchBook.
5 https://www.investmentcouncil.org/wp-content/uploads/2021-q4-aic-trends-report1.pdf
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