Investing in All of America Act of 2023
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Summary
House Report 118–469 of the 118th Congress, 2d Session, dated April 26, 2024, submitted by Mr. Williams of Texas from the Committee on Small Business to accompany H.R. 5333, the Investing in All of America Act of 2023, together with minority views. The committee reports the bill favorably with an amendment and recommends that it pass. The amendment would change the Small Business Investment Act of 1958 to exclude from the SBIC leverage limit certain investments in smaller enterprises in rural or low-income areas and small businesses in critical technology areas, capped at the lesser of 50 percent of private capital or $125,000,000. The report describes an April 16, 2024 subcommittee hearing and the April 17, 2024 markup, and gives a section-by-section analysis. It closes with minority views signed by Ranking Member Nydia M. Velázquez.
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118TH CONGRESS REPORT
" HOUSE OF REPRESENTATIVES !
2d Session 118–469
INVESTING IN ALL OF AMERICA ACT OF 2023
APRIL 26, 2024.—Committed to the Committee of the Whole House on the State of
the Union and ordered to be printed
Mr. WILLIAMS of Texas, from the Committee on Small Business,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 5333]
The Committee on Small Business, to whom was referred the bill
(H.R. 5333) to amend the Small Business Investment Act of 1958
to exclude from the limit on leverage certain amounts invested in
smaller enterprises located in rural or low-income areas and small
businesses in critical technology areas, and for other purposes, hav-
ing considered the same, reports favorably thereon with an amend-
ment and recommends that the bill as amended do pass.
CONTENTS
Page
I. Purpose and Bill Summary ........................................................................ 3
II. Need for Legislation .................................................................................... 3
III. Hearings ....................................................................................................... 3
IV. Committee Consideration ........................................................................... 4
V. Committee Votes ......................................................................................... 4
VI. Section-by-Section of H.R. 5333 ................................................................. 7
VII. Congressional Budget Office Cost Estimate ............................................. 7
VIII. New Budget Authority, Entitlement Authority, and Tax Expenditures 7
IX. Oversight Findings & Recommendations .................................................. 7
X. Performance Goals and Objectives ............................................................ 8
XI. Statement of Duplication of Federal Programs ........................................ 8
XII. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits ..................................................................................................... 8
XIII. Federal Mandates Statement ..................................................................... 8
XIV. Federal Advisory Committee Statement ................................................... 8
XV. Applicability to Legislative Branch ........................................................... 8
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XVI. Statement of Constitutional Authority ...................................................... 8
49–006
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XVII. Changes in Existing Law, Made by the Bill, As Reported ...................... 8
XVIII. Minority Views ............................................................................................ 23
The amendment is as follows:
Strike all after the enacting clause and insert the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Investing in All of America Act of 2023’’.
SEC. 2. SBIC MAXIMUM LEVERAGE EXCLUSION.
(a) DEFINITIONS.—Section 103(9) of the Small Business Investment Act of 1958
(15 U.S.C. 662(9)) is amended—
(1) in subparagraph (A)(ii), by striking ‘‘and’’ at the end;
(2) in subparagraph (B)(iii)—
(A) in subclause (I), by striking ‘‘established prior to October 1, 1987’’;
(B) in subclause (II)—
(i) by striking ‘‘or’’ and inserting ‘‘,’’; and
(ii) by inserting ‘‘, or a foundation, endowment, or trust of a college
or university’’ after ‘‘pension plan’’; and
(C) in subclause (III), by striking the semicolon at the end and inserting
‘‘; and’’; and
(3) by adding at the end the following new subparagraph:
‘‘(C) does not include any funds obtained directly or indirectly from any
Federal, State or local government or any government agency or instrumen-
tality, except for funds described in subclauses (I) through (III) of subpara-
graph (B)(iii), for the purpose of approval by the Administrator of any re-
quest for leverage.’’.
(b) IN GENERAL.—Section 303(b)(2) of the Small Business Investment Act of 1958
(15 U.S.C. 683(b)(2)) is amended—
(1) in subparagraph (A)(i), by striking ‘‘300’’ and inserting ‘‘200’’;
(2) in subparagraph (C)—
(A) in the heading—
(i) by inserting ‘‘OR RURAL’’ after ‘‘LOW-INCOME’’; and
(ii) by inserting ‘‘OR CRITICAL TECHNOLOGY AREAS’’ after ‘‘GEOGRAPHIC
AREAS’’;
(B) in clause (i)—
(i) by striking ‘‘(i) In calculating’’ and inserting the following:
‘‘(i) IN GENERAL.—Except as provided in clause (iii), in calculating’’;
(ii) by inserting ‘‘or companies’’ after ‘‘of a company’’;
(iii) by striking ‘‘subparagraph (A)’’ and inserting ‘‘subparagraphs (A)
and (B)’’;
(iv) by striking ‘‘equity’’;
(v) by striking ‘‘the company in a smaller enterprise’’ and all that fol-
lows and inserting the following: ‘‘the company or companies in—
‘‘(I) a smaller enterprise located in a low-income geographic area
(as defined in section 689 of this title) or in a rural area; or’’; and
(vi) by adding at the end the following new subclause:
‘‘(II) a small business concern in an area of critical technology (as
defined in section 4801 of title 10, United States Code) vital to
maintaining the national security of the United States.’’;
(C) by amending clause (ii) to read as follows:
‘‘(ii) LIMITATION.—While maintaining the limitation of subparagraph
(A)(i) and consistent with a leverage determination ratio issued pursu-
ant to section 301(c), the aggregate amount excluded for a company or
companies under clause (i) from the calculation of the outstanding le-
verage of such company or companies for the purposes of subpara-
graphs (A) and (B) may not exceed the lesser of 50 percent of the pri-
vate capital of such company or companies or $125,000,000.’’; and
(D) by amending clause (iii) to read as follows:
‘‘(iii) PROSPECTIVE APPLICABILITY.—An investment by a licensee is eli-
gible for exclusion from the calculation of outstanding leverage under
clause (i) only if such investment is made by such licensee after the
date of enactment of the Investing in All of America Act of 2023.’’; and
(3) by adding at the end the following new subparagraphs:
‘‘(E) ANNUAL ADJUSTMENT.—The Administrator shall adjust the dollar
amounts described in subparagraphs (A) and (B)—
‘‘(i) on the date of the enactment of this subparagraph, by a percent-
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age equal to the percentage (if any) by which the Consumer Price Index
(all items; United States city average), as published by the Bureau of
Labor Statistics, increased during the period—
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‘‘(I) beginning on December 18, 2015, and ending on the date of
the enactment of this subparagraph, for subparagraph (B); and
‘‘(II) beginning on June 21, 2018, and ending on the date of the
enactment of this subparagraph, for subparagraph (A); and
‘‘(ii) on the date that is one year after the date of the enactment of
this subparagraph, and annually thereafter, by a percentage equal to
the percentage (if any) by which the Consumer Price Index (all items;
United States city average), as published by the Bureau of Labor Sta-
tistics, increased during the one-year period preceding the date of the
adjustment under this clause.’’.
(c) REPORT.—Not later than June 30 of the first year beginning after the date of
the enactment of this Act, and annually thereafter, the Administrator of the Small
Business Administration shall submit to the Committee on Small Business and En-
trepreneurship of the Senate and the Committee on Small Business of the House
of Representatives a report on the results of the exclusion under subparagraph (C)
of section 303(b)(2) of the Small Business Investment Act of 1958 (15 U.S.C.
683(b)(2)), as amended by subsection (a), including the economic activity generated
and jobs directly and indirectly created by the exclusion.
I. PURPOSE AND BILL SUMMARY
On September 1, 2024, Rep. Meuser and Rep. Scholten intro-
duced H.R. 5333. The purpose of H.R. 5333, the ‘‘Investing in All
of America Act of 2023,’’ is to improve the SBIC program at the
SBA by encouraging private investment in overlooked areas of the
country while maintaining a zero-subsidy status. Specifically, the
bill increases the SBIC licensee commitment levels by a factor of
inflation and provides additional leverage to licensees when com-
mitting to invest in smaller enterprises in rural areas or smaller
enterprises developing technology that is critical to national de-
fense.
II. NEED FOR LEGISLATION
The SBIC program has been successful in funding several compa-
nies that go on to become household names. Many of these types
of companies also go on to produce technology that’s vital to our na-
tional security needs. When it comes to investments made by the
SBIC program, often overlooked are rural areas, and in light of out-
sourcing, the encouragement of American-made military tech-
nology. With entrepreneurs of all sorts facing challenges of access-
ing capital in President Biden’s economy, entrepreneurs in rural
America and those trying to lessen dependence on China should
not be forced to fight with one hand behind their backs.
III. HEARINGS
In the 118th Congress, the Committee held one hearing exam-
ining the issues covered in H.R. 5333. On April 16, 2024, the Sub-
committee on Economic Growth, Tax, and Capital Access held a
hearing titled ‘‘Exploring SBA Programs: Reviewing the SBIC and
SBIR Programs’ Impact on Small Businesses.’’ During the hearing,
witnesses testified to the challenges small businesses are facing to
bridge the funding gap that exists in the marketplace for over-
looked areas, and how the SBIC program differs from other capital
access programs at the SBA. Further, the hearing discussed how
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improvements could be made to the SBIC program to continue suc-
cessfully infusing private investments into innovative small busi-
nesses.
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IV. COMMITTEE CONSIDERATION
The Committee on Small Business met in open session, with a
quorum being present, on April 17, 2024 and ordered H.R. 5333 re-
ported to the House of Representatives. During the markup, one
Amendment in the Nature of a Substitute was offered.
V. COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of Representa-
tives requires the Committee to list the recorded votes on the mo-
tion to report legislation and amendments thereto. The Committee
voted to favorably report H.R. 5333 to the House of Representatives
at 11:45 AM.
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Insert offset folio 6 here HR469.001
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VI. SECTION-BY-SECTION OF H.R. 5333
Section 1—Short title
This section cites the bill as the ‘‘Investing in All of America Act
of 2023.’’
Section 2—SBIC Maximum leverage exclusion
This section provides SBICs with access to additional leverage
when they invest in rural, low-income, and critical technology-fo-
cused small businesses. The additional leverage (known as bonus
leverage) is capped at 50 percent of a fund’s private capital or $125
million. The bonus leverage would be applied prospectively on a
fund’s eligible investments made after the bill’s effective date. Ad-
ditionally, this section adds foundations, endowments, and trusts of
public colleges and universities as eligible private capital that can
be leveraged.
This section also provides for an annual inflation adjustment to
the statutory dollar limits for individual funds or multiple funds
under common control, which have not been adjusted since 2018
and 2015, respectively. Additionally, this section caps the max-
imum leverage of an SBIC’s private capital or the statutory dollar
limits for individual funds. Lastly, this section codifies existing fed-
eral regulations to clarify that certain funds invested by Federal,
state, or local government entities, and that are not already ex-
empted by statute, do not count towards a licensing decision or le-
verage determination for an SBIC fund.
VII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
Pursuant to clause 3(d)(1) of House rule XIII, the Committee
adopts as its own the cost estimate prepared by the Director of the
Congressional Budget Office pursuant to section 402 of the Con-
gressional Budget Act of 1974. The Committee has requested but
not received from the Director of the Congressional Budget Office
a cost estimate for the Committee’s provisions. Once available, the
cost estimate will be published in the Congressional Record.
VIII. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX
EXPENDITURES
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the House
of Representatives and section 308(a)(I) of the Congressional Budg-
et Act of 1974, the Committee provides the following opinion and
estimate with respect to new budget authority, entitlement author-
ity, and tax expenditures. While the Committee has not received an
estimate of new budget authority contained in the cost estimate
prepared by the Director of the Congressional Budget Office pursu-
ant to Sec. 402 of the Congressional Budget Act of 1974, the Com-
mittee does not believe that there will be any additional costs at-
tributable to this legislation. H.R. 5333 does not increase the au-
thorization of the SBIC program, nor does it direct any new spend-
ing or mandates.
IX. OVERSIGHT FINDINGS & RECOMMENDATIONS
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In accordance with clause 3(c)(1) of rule XIII and clause 2(b)(1)
of rule X of the Rules of the House of Representatives, the over-
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8
sight findings and recommendations of the Committee on Small
Business with respect to the subject matter contained in H.R. 5333
are incorporated into the descriptive portions of this report.
X. PERFORMANCE GOALS AND OBJECTIVES
With respect to the requirements of clause 3(c)(1) of rule XIII of
the Rules of the House of Representatives, the performance goals
and objectives of H.R. 5333 are to annually report to Congress on
the results of the economic activity generated and the jobs directly
or indirectly created as a result of the bill’s implementation.
XI. STATEMENT OF DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the House
of Representatives, no provision of H.R. 5333 is known to be dupli-
cative of another Federal program, including any program that was
included in a report to Congress pursuant to section 21 of Public
Law 111–139 or the most recent Catalog of Federal Domestic As-
sistance.
XII. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND
LIMITED TARIFF BENEFITS
With respect to clause 9 of rule XXI of the Rules of the House
of Representatives, the Committee finds that the bill does not con-
tain any congressional earmarks, limited tax benefits, or limited
tariff benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI of
the Rules of the House of Representatives.
XIII. FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal man-
dates prepared by the Director of the Congressional Budget Office
pursuant to section 423 of the Unfunded Mandates Reform Act.
XIV. FEDERAL ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b) of the
Federal Advisory Committee Act were created by this legislation.
XV. APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to the
terms and conditions of employment or access to public services or
accommodations within the meaning of section 102(b)(3) of the Con-
gressional Accountability Act.
XVI. STATEMENT OF CONSTITUTIONAL AUTHORITY
Pursuant to clause 7 of rule XII of the Rules of the House, the
Committee finds that the authority for this legislation in Art. I, § 8,
cl.1 of the Constitution of the United States.
XVII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of the
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House of Representatives, changes in existing law made by the bill,
as reported, are shown as follows (existing law proposed to be omit-
ted is enclosed in black brackets, new matter is printed in italics,
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and existing law in which no change is proposed is shown in
roman):
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of the
House of Representatives, changes in existing law made by the bill,
as reported, are shown as follows (existing law proposed to be omit-
ted is enclosed in black brackets, new matter is printed in italics,
and existing law in which no change is proposed is shown in
roman):
SMALL BUSINESS INVESTMENT ACT OF 1958
TITLE I—SHORT TITLE, STATEMENT OF POLICY, AND
DEFINITIONS
* * * * * * *
DEFINITIONS
SEC. 103. As used in this Act—
(1) the term ‘‘Administration’’ means the Small Business Ad-
ministration;
(2) the term ‘‘Administrator’’ means the Administrator of the
Small Business Administration;
(3) the terms ‘‘small business investment company’’, ‘‘com-
pany’’, and ‘‘licensee’’ mean a company approved by the Admin-
istration to operate under the provisions of this Act and issued
a license as provided in section 301;
(4) the term ‘‘State’’ includes the several States, the Terri-
tories and possessions of the United States, the Common-
wealth of Puerto Rico, and the District of Columbia;
(5) the term ‘‘small-business concern’’ shall have the same
meaning as in the Small Business Act, except that, for pur-
poses of this Act—
(A) an investment by a venture capital firm, investment
company (including a small business investment company)
employee welfare benefit plan or pension plan, or trust,
foundation, or endowment that is exempt from Federal in-
come taxation—
(i) shall not cause a business concern to be deemed
not independently owned and operated regardless of
the allocation of control during the investment period
under any investment agreement between the busi-
ness concern and the entity making the investment;
(ii) shall be disregarded in determining whether a
business concern satisfies size standards established
pursuant to section 3(a)(2) of the Small Business Act;
and
(iii) shall be disregarded in determining whether a
small business concern is a smaller enterprise. and
(B) in determining whether a business concern satisfies
net income standards established pursuant to section
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3(a)(2) of the Small Business Act, if the business concern
is not required by law to pay Federal income taxes at the
enterprise level, but is required to pass income through to
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10
the shareholders, partners, beneficiaries, or other equi-
table owners of the business concern, the net income of the
business concern shall be determined by allowing a deduc-
tion in an amount equal to the sum of—
(i) if the business concern is not required by law to
pay State (and local, if any) income taxes at the enter-
prise level, the net income (determined without regard
to this subparagraph), multiplied by the marginal
State income tax rate (or by the combined State and
local income tax rates, as applicable) that would have
applied if the business concern were a corporation;
and
(ii) the net income (so determined) less any deduc-
tion for State (and local) income taxes calculated
under clause (i), multiplied by the marginal Federal
income tax rate that would have applied if the busi-
ness concern were a corporation;
(6) the term ‘‘development companies’’ means enterprises in-
corporated under State law with the authority to promote and
assist the growth and development of small-business concerns
in the areas covered by their operations;
(7) the term ‘‘license’’ means a license issued by the Adminis-
tration as provided in section 301;
(8) the term ‘‘articles’’ means articles of incorporation for an
incorporated body and means the functional equivalent or
other similar documents specified by the Administrator for
other business entities;
(9) the term ‘‘private capital’’—
(A) means the sum of—
(i) the paid-in capital and paid-in surplus of a cor-
porate licensee, the contributed capital of the partners
of a partnership licensee, or the equity investment of
the members of a limited liability company licensee;
and
(ii) unfunded binding commitments, from investors
that meet criteria established by the Administrator, to
contribute capital to the licensee: Provided, That such
unfunded commitments may be counted as private
capital for purposes of approval by the Administrator
of any request for leverage, but leverage shall not be
funded based on such commitments; øand¿
(B) does not include any—
(i) funds borrowed by a licensee from any source;
(ii) funds obtained through the issuance of leverage;
or
(iii) funds obtained directly or indirectly from any
Federal, State, or local government, or any govern-
ment agency or instrumentality, except for—
(I) funds obtained from the business revenues
(excluding any governmental appropriation) of any
federally chartered or government-sponsored cor-
poration øestablished prior to October 1, 1987¿;
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(II) funds invested by an employee welfare ben-
efit plan øor¿, pension plan, or a foundation, en-
dowment, or trust of a college or university; and
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11
(III) any qualified nonprivate funds (if the in-
vestors of the qualified nonprivate funds do not
control, directly or indirectly, the management,
board of directors, general partners, or members
of the licensee)ø;¿; and
(C) does not include any funds obtained directly or indi-
rectly from any Federal, State or local government or any
government agency or instrumentality, except for funds de-
scribed in subclauses (I) through (III) of subparagraph
(B)(iii), for the purpose of approval by the Administrator of
any request for leverage.
(10) the term ‘‘leverage’’ includes—
(A) debentures purchased or guaranteed by the Adminis-
tration;
(B) participating securities purchased or guaranteed by
the Administration; and
(C) preferred securities outstanding as of October 1,
1995;
(11) the term ‘‘third party debt’’ means any indebtedness for
borrowed money, other than indebtedness owed to the Admin-
istration;
(12) the term ‘‘smaller enterprise’’ means any small business
concern that, together with its affiliates—
(A) has—
(i) a net financial worth of not more than
$6,000,000, as of the date on which assistance is pro-
vided under this Act to that business concern; and
(ii) an average net income for the 2-year period pre-
ceding the date on which assistance is provided under
this Act to that business concern, of not more than
$2,000,000, after Federal income taxes (excluding any
carryover losses) except that, for purposes of this
clause, if the business concern is not required by law
to pay Federal income taxes at the enterprise level,
but is required to pass income through to the share-
holders, partners, beneficiaries, or other equitable
owners of the business concern, the net income of the
business concern shall be determined by allowing a de-
duction in an amount equal to the sum of—
(I) if the business concern is not required by law
to pay State (and local, if any) income taxes at the
enterprise level, the net income (determined with-
out regard to this clause), multiplied by the mar-
ginal State income tax rate (or by the combined
State and local income tax rates, as applicable)
that would have applied if the business concern
were a corporation; and
(II) the net income (so determined) less any de-
duction for State (and local) income taxes cal-
culated under subclause (I), multiplied by the
marginal Federal income tax rate that would have
applied if the business concern were a corporation;
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or
(B) satisfies the standard industrial classification size
standards established by the Administration for the indus-
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12
try in which the small business concern is primarily en-
gaged;
(13) the term ‘‘qualified nonprivate funds’’ means any—
(A) funds directly or indirectly invested in any applicant
or licensee on or before August 16, 1982, by any Federal
agency, other than the Administration, under a provision
of law explicitly mandating the inclusion of those funds in
the definition of the term ‘‘private capital’’;
(B) funds directly or indirectly invested in any applicant
or licensee by any Federal agency under a provision of law
enacted after September 4, 1992, explicitly mandating the
inclusion of those funds in the definition of the term ‘‘pri-
vate capital’’; and
(C) funds invested in any applicant or licensee by one or
more State or local government entities (including any
guarantee extended by those entities) in an aggregate
amount that does not exceed 33 percent of the private cap-
ital of the applicant or licensee;
(14) the terms ‘‘employee welfare benefit plan’’ and ‘‘pension
plan’’ have the same meanings as in section 3 of the Employee
Retirement Income Security Act of 1974, and are intended to
include—
(A) public and private pension or retirement plans sub-
ject to such Act; and
(B) similar plans not covered by such Act that have been
established and that are maintained by the Federal Gov-
ernment or any State or political subdivision, or any agen-
cy or instrumentality thereof, for the benefit of employees;
(15) the term ‘‘member’’ means, with respect to a licensee
that is a limited liability company, a holder of an ownership
interest or a person otherwise admitted to membership in the
limited liability company;
(16) the term ‘‘limited liability company’’ means a business
entity that is organized and operating in accordance with a
State limited liability company statute approved by the Admin-
istration;
(17) the term ‘‘long term’’, when used in connection with eq-
uity capital or loan funds invested in any small business con-
cern or smaller enterprise, means any period of time not less
than 1 year;
(18) the term ‘‘Energy Saving debenture’’ means a deferred
interest debenture that—
(A) is issued at a discount;
(B) has a 5-year maturity or a 10-year maturity;
(C) requires no interest payment or annual charge for
the first 5 years;
(D) is restricted to Energy Saving qualified investments;
and
(E) is issued at no cost (as defined in section 502 of the
Credit Reform Act of 1990) with respect to purchasing and
guaranteeing the debenture;
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(19) the term ‘‘Energy Saving qualified investment’’ means
investment in a small business concern that is primarily en-
gaged in researching, manufacturing, developing, or providing
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13
products, goods, or services that reduce the use or consumption
of non-renewable energy resources; and
(20) the term ‘‘underlicensed State’’ means a State in which
the number of licensees per capita is less than the median
number of licensees per capita for all States, as calculated by
the Administrator.
* * * * * * *
TITLE III—INVESTMENT DIVISION PROGRAMS
PART A—SMALL BUSINESS INVESTMENT COMPANIES
* * * * * * *
BORROWING POWER
SEC. 303. (a) Each small business investment company shall
have authority to borrow money and to issue its securities, promis-
sory notes, or other obligations under such general conditions and
subject to such limitations and regulations as the Administration
may prescribe.
(b) To encourage the formation and growth of small business in-
vestment companies the Administration is authorized when author-
ized in appropriation Acts, to purchase, or to guarantee the timely
payment of all principal and interest as scheduled on, debentures
or participating securities issued by such companies. Such pur-
chases or guarantees may be made by the Administration on such
terms and conditions as it deems appropriate, pursuant to regula-
tions issued by the Administration. The full faith and credit of the
United States is pledged to the payment of all amounts which may
be required to be paid under any guarantee under this subsection.
Debentures purchased or guaranteed by the Administration under
this subsection shall be subordinate to any other debenture bonds,
promissory notes, or other debts and obligations of such companies,
unless the Administration in its exercise of reasonable investment
prudence and in considering the financial soundness of such com-
pany determines otherwise. Such debentures may be issued for a
term of not to exceed fifteen years and shall bear interest at a rate
not less than a rate determined by the Secretary of the Treasury
taking into consideration the current average market yield on out-
standing marketable obligations of the United States with remain-
ing periods to maturity comparable to the average maturities on
such debentures, adjusted to the nearest one-eighth of 1 per cen-
tum, plus, for debentures obligated after September 30, 2001, an
additional charge, in an amount established annually by the Ad-
ministration, as necessary to reduce to zero the cost (as defined in
section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C.
661a)) to the Administration of purchasing and guaranteeing de-
bentures under this Act, which amount may not exceed 1.38 per-
cent per year, and which shall be paid to and retained by the Ad-
ministration. The debentures or participating securities shall also
contain such other terms as the Administration may fix, and shall
be subject to the following restrictions and limitations:
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(1) The total amount of debentures and participating securi-
ties that may be guaranteed by the Administration and out-
standing from a company licensed under section 301(c) of this
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14
Act shall not exceed 300 per centum of the private capital of
such company: Provided, That nothing in this paragraph shall
require any such company that on March 31, 1993, has out-
standing debentures in excess of 300 per centum of its private
capital to prepay such excess: And provided further, That any
such company may apply for an additional debenture guar-
antee or participating security guarantee with the proceeds to
be used solely to pay the amount due on such maturing deben-
ture, but the maturity of the new debenture or security shall
be not later than September 30, 2002.
(2) MAXIMUM LEVERAGE.—
(A) IN GENERAL.—The maximum amount of outstanding
leverage made available to any one company licensed
under section 301(c) of this Act may not exceed the lesser
of—
(i) ø300¿ 200 percent of such company’s private cap-
ital; or
(ii) $175,000,000.
(B) MULTIPLE LICENSES UNDER COMMON CONTROL.—The
maximum amount of outstanding leverage made available
to two or more companies licensed under section 301(c) of
this Act that are commonly controlled (as determined by
the Administrator) and not under capital impairment may
not exceed $350,000,000.
(C) INVESTMENTS IN LOW-INCOME OR RURAL GEOGRAPHIC
AREAS OR CRITICAL TECHNOLOGY AREAS.—
(i) IN GENERAL.—øIn calculating¿ Except as provided
in clause (iii), in calculating the outstanding leverage
of a company or companies for the purposes of øsub-
paragraph (A)¿ subparagraphs (A) and (B), the Ad-
ministrator shall not include the amount of the cost
basis of any øequity¿ investment made by øthe com-
pany in a smaller enterprise located in a low-income
geographic area (as defined in section 351), to the ex-
tent that the total of such amounts does not exceed 50
percent of the company’s private capital.¿ the company
or companies in—
(I) a smaller enterprise located in a low-income
geographic area (as defined in section 689 of this
title) or in a rural area; or
(II) a small business concern in an area of crit-
ical technology (as defined in section 4801 of title
10, United States Code) vital to maintaining the
national security of the United States.
ø(ii) The maximum amount of outstanding leverage
made available to—
ø(I) any 1 company described in clause (iii) may
not exceed the lesser of 300 percent of private cap-
ital of the company, or $175,000,000; and
ø(II) 2 or more companies described in clause
(iii) that are under common control (as determined
by the Administrator) may not exceed
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$250,000,000.
ø(iii) A company described in this clause is a com-
pany licensed under section 301(c) in the first fiscal
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15
year after the date of enactment of this clause or any
fiscal year thereafter that certifies in writing that not
less than 50 percent of the dollar amount of invest-
ments of that company shall be made in companies
that are located in a low-income geographic area (as
that term is defined in section 351).¿
(ii) LIMITATION.—While maintaining the limitation
of subparagraph (A)(i) and consistent with a leverage
determination ratio issued pursuant to section 301(c),
the aggregate amount excluded for a company or com-
panies under clause (i) from the calculation of the out-
standing leverage of such company or companies for
the purposes of subparagraphs (A) and (B) may not ex-
ceed the lesser of 50 percent of the private capital of
such company or companies or $125,000,000.
(iii) PROSPECTIVE APPLICABILITY.—An investment by
a licensee is eligible for exclusion from the calculation
of outstanding leverage under clause (i) only if such in-
vestment is made by such licensee after the date of en-
actment of the Investing in All of America Act of 2023.
(D) INVESTMENTS IN ENERGY SAVING SMALL BUSI-
NESSES.—
(i) IN GENERAL.—Subject to clause (ii), in calculating
the outstanding leverage of a company for purposes of
subparagraph (A), the Administrator shall exclude the
amount of the cost basis of any Energy Saving quali-
fied investment in a smaller enterprise made in the
first fiscal year after the date of enactment of this sub-
paragraph or any fiscal year thereafter by a company
licensed in the applicable fiscal year.
(ii) LIMITATIONS.—
(I) AMOUNT OF EXCLUSION.—The amount ex-
cluded under clause (i) for a company shall not ex-
ceed 33 percent of the private capital of that com-
pany.
(II) MAXIMUM INVESTMENT.—A company shall
not make an Energy Saving qualified investment
in any one entity in an amount equal to more
than 20 percent of the private capital of that com-
pany.
(III) OTHER TERMS.—The exclusion of amounts
under clause (i) shall be subject to such terms as
the Administrator may impose to ensure that
there is no cost (as that term is defined in section
502 of the Federal Credit Reform Act of 1990 (2
U.S.C. 661a)) with respect to purchasing or guar-
anteeing any debenture involved.
(E) ANNUAL ADJUSTMENT.—The Administrator shall ad-
just the dollar amounts described in subparagraphs (A)
and (B)—
(i) on the date of the enactment of this subparagraph,
by a percentage equal to the percentage (if any) by
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which the Consumer Price Index (all items; United
States city average), as published by the Bureau of
Labor Statistics, increased during the period—
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16
(I) beginning on December 18, 2015, and ending
on the date of the enactment of this subparagraph,
for subparagraph (B); and
(II) beginning on June 21, 2018, and ending on
the date of the enactment of this subparagraph, for
subparagraph (A); and
(ii) on the date that is one year after the date of the
enactment of this subparagraph, and annually there-
after, by a percentage equal to the percentage (if any)
by which the Consumer Price Index (all items; United
States city average), as published by the Bureau of
Labor Statistics, increased during the one-year period
preceding the date of the adjustment under this clause.
(3) Subject to the foregoing dollar and percentage limits, a
company licensed under section 301(c) of this Act may issue
and have outstanding both guaranteed debentures and partici-
pating securities: Provided, That the total amount of partici-
pating securities outstanding shall not exceed 200 per centum
of private capital.
For purposes of this subsection, the term ‘‘venture capital’’ includes
such common stock, preferred stock, or other financing with subor-
dination or nonamortization characteristics as the Administration
determines to be substantially similar to equity financing.
(c) THIRD PARTY DEBT.—The Administrator—
(1) shall not permit a licensee having outstanding leverage
to incur third party debt that would create or contribute to an
unreasonable risk of default or loss to the Federal Government;
(2) shall permit such licensees to incur third party debt only
on such terms and subject to such conditions as may be estab-
lished by the Administrator, by regulation or otherwise.
(d) INVESTMENTS IN SMALLER ENTERPRISES.—The Administrator
shall require each licensee, as a condition of approval of an applica-
tion for leverage, to certify in writing that not less than 25 percent
of the aggregate dollar amount of financings of that licensee shall
be provided to smaller enterprises.
(e) CAPITAL IMPAIRMENT.—Before approving any application for
leverage submitted by a licensee under this Act, the Adminis-
trator—
(1) shall determine that the private capital of the licensee
meets the requirements of section 302(a); and
(2) shall determine, taking into account the nature of the as-
sets of the licensee, the amount and terms of any third party
debt owed by such licensee, and any other factors determined
to be relevant by the Administrator, that the private capital of
the licensee has not been impaired to such an extent that the
issuance of additional leverage would create or otherwise con-
tribute to an unreasonable risk of default or loss to the Federal
Government.
(f) REDEMPTION OR REPURCHASE OF PREFERRED STOCK.—Not-
withstanding any other provision of law—
(1) the Administrator may allow the issuer of any preferred
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stock sold to the Administration before November 1, 1989 to
redeem or repurchase such stock, upon the payment to the Ad-
ministration of an amount less than the par value of such
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17
stock, for a repurchase price determined by the Administrator
after consideration of all relevant factors, including—
(A) the market value of the stock;
(B) the value of benefits provided and anticipated to ac-
crue to the issuer;
(C) the amount of dividends paid, accrued, and antici-
pated; and
(D) the estimate of the Administrator of any anticipated
redemption; and
(2) any moneys received by the Administration from the re-
purchase of preferred stock shall be available solely to provide
debenture leverage to licensees having 50 percent or more in
aggregate dollar amount of their financings invested in smaller
enterprises.
(g) In order to encourage small business investment companies
to provide equity capital to small businesses, the Administration is
authorized to guarantee the payment of the redemption price and
prioritized payments on participating securities issued by such
companies which are licensed pursuant to section 301(c) of this Act,
and a trust or a pool acting on behalf of the Administration is au-
thorized to purchase such securities. Such guarantees and pur-
chases shall be made on such terms and conditions as the Adminis-
tration shall establish by regulation. For purposes of this section,
(A) the term ‘‘participating securities’’ includes preferred stock, a
preferred limited partnership interest or a similar instrument, in-
cluding debentures under the terms of which interest is payable
only to the extent of earnings and (B) the term ‘‘prioritized pay-
ments’’ includes dividends on stock, interest on qualifying deben-
tures, or priority returns on preferred limited partnership interests
which are paid only to the extent of earnings. Participating securi-
ties guaranteed under this subsection shall be subject to the fol-
lowing restrictions and limitations, in addition to such other re-
strictions and limitations as the Administration may determine:
(1) Participating securities shall be redeemed not later than
15 years after their date of issuance for an amount equal to
100 per centum of the original issue price plus the amount of
any accrued prioritized payment: Provided, That if, at the time
the securities are redeemed, whether as scheduled or in ad-
vance, the issuing company (A) has not paid all accrued
prioritized payments in full as provided in paragraph (2) below
and (B) has not sold or otherwise disposed of all investments
subject to profit distributions pursuant to paragraph (11), the
company’s obligation to pay accrued and unpaid prioritized
payments shall continue and payment shall be made from the
realized gain, if any, on the disposition of such investments,
but if on disposition there is no realized gain, the obligation to
pay accrued and unpaid prioritized payments shall be extin-
guished: Provided further, That in the interim, the company
shall not make any in-kind distributions of such investments
unless it pays to the Administration such sums, up to the
amount of the unrealized appreciation on such investments, as
may be necessary to pay in full the accrued prioritized pay-
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ments.
(2) Prioritized payments on participating securities shall be
preferred and cumulative and payable out of the retained earn-
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18
ings available for distribution, as defined by the Administra-
tion, of the issuing company at a rate determined by the Sec-
retary of the Treasury taking into consideration the current av-
erage market yield on outstanding marketable obligations of
the United States with remaining periods to maturity com-
parable to the average maturities on such securities, adjusted
to the nearest one-eighth of 1 percent, plus, for participating
securities obligated after September 30, 2001, an additional
charge, in an amount established annually by the Administra-
tion, as necessary to reduce to zero the cost (as defined in sec-
tion 502 of the Federal Credit Reform Act of 1990 (2 U.S.C.
661a)) to the Administration of purchasing and guaranteeing
participating securities under this Act, which amount may not
exceed 1.46 percent per year, and which shall be paid to and
retained by the Administration.
(3) In the event of liquidation of the company, participating
securities shall be senior in priority for all purposes to all other
equity interests in the issuing company, whenever created.
(4) Any company issuing a participating security under this
Act shall commit to invest or shall invest an amount equal to
the outstanding face value of such security solely in equity cap-
ital. As used in this subsection, ‘‘equity capital’’ means common
or preferred stock or a similar instrument, including subordi-
nated debt with equity features which is not amortized and
which provides for interest payments from appropriate sources,
as determined by the Administration.
(5) The only debt (other than leverage obtained in accordance
with this title) which any company issuing a participating se-
curity under this subsection may have outstanding shall be
temporary debt in amounts limited to not more than 50 per
centum of private capital.
(6) The Administration may permit the proceeds of a partici-
pating security to be used to pay the principal amount due on
outstanding debentures guaranteed by the Administration, if
(A) the company has outstanding equity capital invested in an
amount equal to the amount of the debentures being refi-
nanced and (B) the Administration receives profit participation
on such terms and conditions as it may determine, but not to
exceed the per centums specified in paragraph (11).
(7) For purposes of computing profit participation under
paragraph (11), except as otherwise determined by the Admin-
istration, the management expenses of any company which
issues participating securities shall not be greater than 2.5 per
centum per annum of the combined capital of the company,
plus $125,000 if the company’s combined capital is less than
$20,000,000. For purposes of this paragraph, (A) the term
‘‘combined capital’’ means the aggregate amount of private cap-
ital and outstanding leverage and (B) the term ‘‘management
expenses’’ includes salaries, office expenses, travel, business
development, office and equipment rental, bookkeeping and the
development, investigation and monitoring of investments, but
does not include the cost of services provided by specialized
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outside consultants, outside lawyers and outside auditors, who
perform services not generally expected of a venture capital
company nor does such term include the cost of services pro-
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19
vided by any affiliate of the company which are not part of the
normal process of making and monitoring venture capital in-
vestments.
(8) Notwithstanding paragraph (9), if a company is operating
as a limited partnership or as a subchapter S corporation or
an equivalent pass-through entity for tax purposes and if there
are no accumulated and unpaid prioritized payments, the com-
pany may make annual distributions to the partners, share-
holders, or members in amounts not greater than each part-
ner’s, shareholder’s, or member’s maximum tax liability. For
purposes of this paragraph, the term ‘‘maximum tax liability’’
means the amount of income allocated to each partner, share-
holder, or member (including an allocation to the Administra-
tion as if it were a taxpayer) for Federal income tax purposes
in the income tax return filed or to be filed by the company
with respect to the fiscal year of the company immediately pre-
ceding such distribution, multiplied by the highest combined
marginal Federal and State income tax rates for corporations
or individuals, whichever is higher, on each type of income in-
cluded in such return. For purposes of this paragraph, the
term ‘‘State income tax’’ means the income tax of the State
where the company’s principal place of business is located. A
company may also elect to make a distribution under this
paragraph at any time during any calendar quarter based on
an estimate of the maximum tax liability. If a company makes
1 or more interim distributions for a calendar year, and the ag-
gregate amount of those distributions exceeds the maximum
amount that the company could have distributed based on a
single annual computation, any subsequent distribution by the
company under this paragraph shall be reduced by an amount
equal to the excess amount distributed.
(9) After making any distributions as provided in paragraph
(8), a company with participating securities outstanding may
distribute the balance of income to its investors, specifically in-
cluding the Administration, in the per centums specified in
paragraph (11), if there are no accumulated and unpaid
prioritized payments and if all amounts due the Administra-
tion pursuant to paragraph (11) have been paid in full, subject
to the following conditions:
(A) As of the date of the proposed distribution, if the
amount of leverage outstanding is more than 200 per cen-
tum of the amount of private capital, any amounts distrib-
uted shall be made to private investors and to the Admin-
istration in the ratio of leverage to private capital.
(B) As of the date of the proposed distribution, if the
amount of leverage outstanding is more than 100 per cen-
tum but not more than 200 per centum of the amount of
private capital, 50 per centum of any amounts distributed
shall be made to the Administration and 50 per centum
shall be made to the private investors.
(C) If the amount of leverage outstanding is 100 per cen-
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tum, or less, of the amount of private capital, the ratio
shall be that for distribution of profits as provided in para-
graph (11).
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20
(D) Any amounts received by the Administration under
subparagraph (A) or (B) shall be applied first as profit par-
ticipation as provided in paragraph (11) and any remain-
der shall be applied as a prepayment of the principal
amount of the participating securities or debentures.
(10) After making any distributions pursuant to paragraph
(8), a company with participating securities outstanding may
return capital to its investors, specifically including the Admin-
istration, if there are no accumulated and unpaid prioritized
payments and if all amounts due the Administration pursuant
to paragraph (11) have been paid in full. Any distributions
under this paragraph shall be made to private investors and
to the Administration in the ratio of private capital to leverage
as of the date of the proposed distribution: Provided, That if
the amount of leverage outstanding is less than 50 per centum
of the amount of private capital or $10,000,000, whichever is
less, no distribution shall be required to be made to the Admin-
istration unless the Administration determines, on a case by
case basis, to require distributions to the Administration to re-
duce the amount of outstanding leverage to an amount less
than $10,000,000.
(11)(A) A company which issues participating securities shall
agree to allocate to the Administration a share of its profits de-
termined by the relationship of its private capital to the
amount of participating securities guaranteed by the Adminis-
tration in accordance with the following:
(i) If the total amount of participating securities is 100
per centum of private capital or less, the company shall al-
locate to the Administration a per centum share computed
as follows: the amount of participating securities divided
by private capital times 9 per centum.
(ii) If the total amount of participating securities is more
than 100 per centum but not greater than 200 per centum
of private capital, the company shall allocate to the Ad-
ministration a per centum share computed as follows:
(I) 9 per centum, plus
(II) 3 per centum of the amount of participating se-
curities minus private capital divided by private cap-
ital.
(B) Notwithstanding any other provision of this paragraph—
(i) in no event shall the total per centum required by
this paragraph exceed 12 per centum, unless required pur-
suant to the provisions of (ii) below,
(ii) if, on the date the participating securities are mar-
keted, the interest rate on Treasury bonds with a maturity
of 10 years is a rate other than 8 per centum, the Adminis-
tration shall adjust the rate specified in paragraph (A)
above, either higher or lower, by the same per centum by
which the Treasury bond rate is higher or lower than 8 per
centum, and
(iii) this paragraph shall not be construed to create any
ownership interest of the Administration in the company.
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(12) A company may elect to make an in-kind distribution of
securities only if such securities are publicly traded and mar-
ketable. The company shall deposit the Administration’s share
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21
of such securities for disposition with a trustee designated by
the Administration or, at its option and with the agreement of
the company, the Administration may direct the company to
retain the Administration’s share. If the company retains the
Administration’s share, it shall sell the Administration’s share
and promptly remit the proceeds to the Administration. As
used in this paragraph, the term ‘‘trustee’’ means a person who
is knowledgeable about and proficient in the marketing of thin-
ly traded securities.
(h) The computation of amounts due the Administration under
participating securities shall be subject to the following terms and
conditions:
(1) The formula in subsection (g)(11) shall be computed an-
nually and the Administration shall receive distributions of its
profit participation at the same time as other investors in the
company.
(2) The formula shall not be modified due to an increase in
the private capital unless the increase is provided for in a pro-
posed business plan submitted to and approved by the Admin-
istration.
(3) After distributions have been made, the Administration’s
share of such distributions shall not be recomputed or reduced.
(4) If the company prepays or repays the participating secu-
rities, the Administration shall receive the requisite participa-
tion upon the distribution of profits due to any investments
held by the company on the date of the repayment or prepay-
ment.
(5) If a company is licensed on or before March 31, 1993, it
may elect to exclude from profit participation all investments
held on that date and in such case the Administration shall de-
termine the amount of the future expenses attributable to such
prior investment: Provided, That if the company issues partici-
pating securities to refinance debentures as authorized in sub-
section (g)(6), it may not elect to exclude profits on existing in-
vestments under this paragraph.
(i) LEVERAGE FEE.—With respect to leverage granted by the Ad-
ministration to a licensee, the Administration shall collect from the
licensee a nonrefundable fee in an amount equal to 3 percent of the
face amount of leverage granted to the licensee in the following
manner: 1 percent upon the date on which the Administration en-
ters into any commitment for such leverage with the licensee, and
the balance of 2 percent (or 3 percent if no commitment has been
entered into by the Administration) on the date on which the lever-
age is drawn by the licensee.
(j) CALCULATION OF SUBSIDY RATE.—All fees, interest, and profits
received and retained by the Administration under this section
shall be included in the calculations made by the Director of the
Office of Management and Budget to offset the cost (as that term
is defined in section 502 of the Federal Credit Reform Act of 1990)
to the Administration of purchasing and guaranteeing debentures
and participating securities under this Act.
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(k) ENERGY SAVING DEBENTURES.—In addition to any other au-
thority under this Act, a small business investment company li-
censed in the first fiscal year after the date of enactment of this
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22
subsection or any fiscal year thereafter may issue Energy Saving
debentures.
* * * * * * *
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XVIII. MINORITY VIEWS
In September 2023, the Small Business Administration (‘‘SBA’’)
and the Department of Defense (‘‘DOD’’) launched a joint initiative,
known as the Small Business Investment Company Critical Tech-
nologies Initiative (‘‘SBICCT’’). The SBICCT Initiative couples the
SBA’s Small Business Investment Company Program (‘‘SBIC Pro-
gram’’) with the DOD’s robust scientific and technical expertise and
national security mission with the goal of attracting and scaling
private investment into businesses in technology areas critical to
national and economic security.
The high priority financing areas in critical technology are typi-
cally venture and scale up/growth equity investment. Due to the
early revenue profile, the often capital-intensive nature, and pre-
profitability status of these businesses, the majority of financing in
these businesses comes in the form of equity rather than debt. The
duration of the funds investing in businesses engaged in critical
technology is significantly longer than those funds running mez-
zanine debt and other credit strategies. As a result, such invest-
ments are not always a ‘‘match’’ for SBICs with limited partners
with typically shorter time horizons. For example, currently, of the
approximately $24 billion in private capital committed to SBIC li-
censed funds only about 30 percent come from traditional institu-
tional investors with longer time horizons that can allocate more
capital to long duration investments in critical technology busi-
nesses.
In order to resolve this mismatch and ensure institutional inves-
tors with longer time horizons are able to invest in critical tech-
nologies through the SBIC program, and effectively carryout the
SBICCT Initiative, it is necessary to update antiquated statutory
constraints that limit participation in the SBIC program.
At the same time, there continues to be a significant lack of cap-
ital investment in small businesses in rural and underserved com-
munities. Importantly, the Small Business Investment Act has his-
torically permitted ‘‘bonus’’ leverage to be allocated post licensing
for investments in low-income communities. However, due to
changes in market conditions and investment strategies, after the
SBIC’s fund’s formation, utilization of the ‘‘bonus’’ leverage is not
typically utilized. Therefore, to drive additional SBIC investment
capital to small businesses in rural and underserved communities,
it is important to provide utilization of ‘‘bonus’’ leverage upfront at
the time of licensing, rather than a licensee requesting additional
leverage midway through the investment period.
The bill would amend the Small Business Investment Act of 1958
to exclude from the limit on leverage certain amounts invested in
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(23)
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24
smaller enterprises located in rural or low-income areas and small
businesses in critical technology areas.
NYDIA M. VELÁZQUEZ,
Ranking Member.
Æ
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- 566,331 bytes
- SHA-256
- 7cc2d555a3c9187a8bb66895e4ad53a9891989a0413cec10a80b180b0f2f0236
- Our copy
- CRPT-118hrpt469.pdf
- Original
- No public link identified.