Small Business Loans & Grants!

The Small Business Investment Companies (SBIC)

SBICs provide equity capital, long-term loans, debt-equity investments and management assistance to qualifying small businesses. They make these venture-capital investments with their own funds plus funds obtained by borrowing at favorable rates with an SBA guaranty. The incentive for the SBICs is the opportunity to share in the success of the funded small business as it grows and prospers.

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Congress created the Small Business Investment Company Program in 1958 to provide venture capital to of start-up and expanding small businesses. Licensed and regulated by the U.S. Small Business Administration, SBICs are privately owned and managed, profit-motivated investment firms.

Many investment companies seek out small businesses with new products or services because of the strong growth potential of such firms. Some SBICs specialize in a particular field in which their management has special knowledge or competency. Most, however, consider a wide variety of investment opportunities.

The SBIC Program makes funding available to all types of manufacturing, distribution and service industries. To be eligible, the company must meet the SBA’s definition of "small." In general, the SBA defines small businesses as companies with a net worth of $18 million or less and with average net (after-tax) income for the preceding two years of not more than $6 million. For some industries, the above standards are too low, and alternative size standards are used. In determining whether or not a business qualifies, the SBA considers the firm’s parent, subsidiaries and affiliates.

Approaching an SBIC

The SBA publishes a regularly updated directory of all current SBIC licensees. It lists the amount of each SBIC’s private capital, the amount of government leverage the licensee has received, and information on each SBIC’s type of ownership and investment policy.

To obtain SBIC financing, take the following steps:

Determine your company’s financing needs well in advance of the time you will actually require the money.
Identify and investigate existing SBICs that may be interested in financing your company.
Determine whether or not the SBIC can offer the management services you need.
Prepare a presentation to give to the SBICs you think can best meet your financing needs.

Your initial presentation will play a major role in successfully obtaining financing. It’s up to you to demonstrate that an investment in your business will be a sound one. The best way to achieve this is to present a detailed and comprehensive business plan or prospectus. You should include, at a minimum, the information that follows.

Identification

Full legal name of the business
Type of entity (e.g., corporation, limited partnership, etc.), including date and state of incorporation, if applicable
City, county and state of the principal location and of any branch offices or facilities

Product or Service

Description of the business, including the principal products sold or services provided
History of the development of the products and/or services during the past five years or since your business was started
Information relating the importance of each product or service to the volume of the business and to its profits

Marketing

Detailed information about your customer base, including potential customers, and the percentage of gross revenue accounted for by your five largest customers
Marketing survey and/or economic feasibility study
Distribution system by which products or services are delivered to customers

Competition

Competitive conditions for your industry, including your company’s position relative to its largest and smallest competitors
Full explanation of your pricing policies

Management

Brief résumés of managers and principal owners, including their ages, education and business experience
Banking, business and personal references for each manager and principal owner

Financial Statements

Balance sheets and profit-and-loss statements for the last three fiscal years or from start-up
Monthly or quarterly projections of revenues, expenses and net earnings for the coming year, and annual forecasts for the next four years
Amount of funding you are requesting and the time requirement for the funds
Reasons for your request for funds and a description of the proposed uses
Benefits you expect your business to gain from the financing for example, increases in revenues, cost reduction, productivity improvements

Production Facilities and Property

Description of real and physical property and adaptability to new or existing business ventures
Description of technical aspects of production facilities

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