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Financial Feasts

Financing message forum where you can get and give insights found nowhere else. Belly up to the table and request funding. Or tell your money tales. Any money talk is fair game except ads.

The Latest Hot Topics:

Show Me the Money!
Belly up to the Financial Feasts table and talk turkey about money... what to look for, where & how? All money talk is fair game. Go

 

SBIC: Small Business Investment Company

1. What's a Small Business Investment Company (SBIC)?

2. Who is This Good For?

3. When is This The Best Choice For Me?

4. Tips For Getting The Money.

5. Ingredients You'll Need on Hand.

6. Watch Out For...

7. Web Links.

1.What is a SBIC?

Small Business Investment Companies, affiliated with the Small Business Administration, channel private investors' money, sometimes combined with some government money or government guarantees, to small, fast-growing companies. They enjoy unique status under federal securities law, as they encourage more private money to go to smaller companies. Currently, there are 271 SBICs nationwide with $3.5 billion in private funds and $1 billion in government money to lend.

2. Who is This Good For?

While there are some general-purpose SBIC's, some focus on a particular industry, geographic area, type of borrower, women, or minorities. Some industries sponsor SBIC's to encourage innovation.

3. When is This The Best Choice For Me?

When you can qualify. SBICs differ in the nature of companies they will invest in, size of investment, stage of company, and so on. Otherwise they bring some of the same concerns as venture capital companies

When you don't mind dealing with bureaucrats; with an investment from a SBIC you may need to fill out more forms, meet more requirements, and put up with a government representative from time-to-time. Often SBIC funds open the door to more traditional financing, such as a line of credit.

color business bar

4. Tips For Getting The Money

Start close to home; most SBICs prefer to work with local businesses. Aim for an SBIC within 300 miles of your company.

Use your status as a minority or woman-owned business to locate programs for you through the Minority Enterprise Small Business Investment Company.

SBICs offer both debt and equity financing, and some specialize in smaller loans. Decide what financing blend is right for you, and screen out the SBIC's that don't match your needs.

5. Ingredients You'll Need on Hand

  • A Business Plan.
  • Basic financial package
  • Proof that you meet any requirements of the specific SBIC.
  • If you are a minority or woman-owned company, you'll have to document that a minority or woman owns and controls at least 51 percent of the firm.
  • Possibly, proof that your product is original work not in violation of existing patents or copyrights.

6. Watch Out For...

All those cooks. Your relationship with the government agency or industry lender may appear to be a quasi-partnership. Your product or process will have to benefit them directly for their investment in you to pay off (in their minds), which may crimp your development style.

Limited future options. The SBIC may have limited amounts of money they can invest and not be able to help you in future rounds of financing to grow your business larger. On the other hand, the investor may want right of first refusal to fund future rounds of financing, limiting your ability to take the company public or even to get additional private investors.

7. Web Links

The SBA's site
Small business resources and guidance for applying for SBA-backed loans.

Small Business Advancement Center
National research, training, and information center operated by the SBA

American Economic Development Council
Go here for a list of affiliated and regional business development organizations.

 

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