Small Business Investment Company Program

In 1958 the U.S. Small Business Administration (SBA) started the Small Business Investment Company program (SBIC). They wanted to create an alternative funding, besides banks, for small business startups. The SBIC bridges the gap between entrepreneurs' need for money and traditional financing source. In other words it is the gap between the availability of venture capital and the needs of small businesses that are either starting or growing.

SBICs are privately owned and managed investment firms that make money available to small businesses through loans or investments and are licensed and regulated through the SBA. As a way to be competitive with private investors, the SBICs are allowed to borrow from the federal government. The SBA does not use tax dollars to fund SBIC's needs for money. SBICs will use their own funds plus the SBA's and/or by selling preferred stock to the SBA.

As a for-profit firm, the SBIC's incentive is to share in the success of a small business. SBICs provide debt-equity investment and management assistance, along with equity capital and long-term loans. Funding is available to all types of manufacturing and service industries. Some SBICs make funding available for companies specialized in specific industries, while other SBICs seek out smaller entrepreneurial business with new products or services because the potential for growth. Overall, the SBICs consider many different investment opportunities.