The Small Business Investment Company (SBIC) Program was created by Congress in 1958 to bridge the gap between entrepreneurs’ need for capital and traditional financing sources. SBICs, which are licensed by SBA, are professional, privately owned and managed venture funds that participate in a vital partnership between government and the private sector economy. Although SBA doesn't invest money directly in small businesses, the SBIC Program provides comparatively inexpensive capital to SBICs to provide equity capital, long-term loans, and debt-security investments. Essentially, the SBIC Program is a “fund of funds.”

In addition to investing capital, SBICs provide hands-on involvement in their portfolio companies, including:

• Board participation
• Corporate governance
• Strategic planning and marketing
• Recruitment
• Financial support
• Capital raising
• Company exit support

There are over 400 licensed SBICs in operation today. SBICs pursue investments in a broad range of industries, geographies and stage of investment. Some SBICs invest in a particular field or industry in which their management has expertise, while others invest more generally. Most SBICs concentrate on a particular stage of investment (i.e., start-up, expansion or turnaround) and identify a geographic area in which to focus. The form of SBA funding that a particular SBIC uses can vary and will have an impact on the type of investments they can make.

To find SBICs in your area, go to local SBICs.

Eligibility

Only companies defined by SBA as “small” are eligible for SBIC financing. Generally, the SBIC Program defines a company as “small” when its net worth is $18 million or less and its average after-tax net income for the prior two years does not exceed $6 million. All of the company’s subsidiaries, parent companies and affiliates are considered in determining the size standard, and for certain industries alternative size standards may apply. For more information, go to Size Standards.

SBICs may not invest in the following: other SBICs; finance and investment companies or finance-type leasing companies; unimproved real estate; companies with less than 51 percent of their assets and employees in the United States; passive or casual businesses (those not engaged in a regular and continuous business operation); or companies that will use the proceeds to acquire farmland. SBICs may not provide funds for a small concern whose primary business activity is deemed contrary to the public interest.

How to Apply

Small businesses apply directly to an SBIC for venture capital. Once you have identified the SBICs that are best suited to provide the type of financing you need, present your business plan to them. The average SBIC receives hundreds of business plans per year, so entrepreneurs can benefit greatly from a personal referral or introduction to the particular SBIC fund manager being targeted. Talk to accountants, attorneys, executives in your industry and other business colleagues to arrange an introduction. If you are unable to find a qualified referral, submit your business plan directly.

For More Information

• SBIC Program
• SBIC Program and its role in the venture capital industry 
• Entrepreneurs seeking financing