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Innovation and Public-. Private Partnerships. Bradley Knox. Chief Counsel. Committee on Small Business. U.S. House of Representatives ...
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Publié par
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Innovation and Public-
Private Partnerships
Bradley Knox
Chief Counsel
Committee on Small Business
U.S. House of Representatives
Basic Loan Programs
7(a) General Business Loan Guaranty
program
Commercial lenders make & administer the
loans.
SBA guarantees up to 85% of loans of
$150,000 and less, and up to 75% of loans
above $150,000.
Goal is to provide start up funding for any
small firm (not focused on high tech
companies)
Basic Loan Programs
504 Certified Development Company (CDC)
Provides long-term, fixed-rate financing for
major fixed assets, such as land and buildings.
A CDC is a nonprofit corporation set up to
contribute to the economic development of its
community.
There are about 270 CDCs nationwide.
Again, focus is very broad, designed to
encourage growth of small firms &
employment…
Small Business Investment Companies
(SBIC)
A private-sector led partnership with the U.S. government,
created to help small businesses meet long-term, patient
capital needs not available through banks or other private
capital sources. Fills the gap in the “Valley of Death.”
SBICs have provided nearly $33 billion in long-term
debt and equity growth capital to more than 90,000
small companies in start-up and growth situations
since 1958.
At the end of FY ’03, the SBA had close to $5.5 billion
invested in 435 funds, plus another $3.7 billion in available
commitments. Together with private capital topping $12
billion, the program totals over $21 billion in private equity
capital dedicated to America’s entrepreneurs.
The Budget proposes total program level, subsidy rates, and,
if necessary, any appropriation amount. The subsidy rate is
an estimate, stated as a percentage, of any appropriations
amount to be reserved against possible program losses.
Congress sets the final program levels and, if necessary, the
appropriation to support the same.
A prospective SBIC must raise between $5 million and $10
million in private capital before it can be licensed. After
licensing, the private capital is always at risk first.
Money (leverage) can only be drawn from the Trust after
application to and approval by the Small Business
Administration (SBA). A full credit and regulatory compliance
review is performed each time leverage is sought. Money
drawn by SBICs is repaid in accordance with the terms of the
securities.
SBIC: How The Program Works
SBIC: How The Program Works
SBA guarantees payment by the Trust of all principal and
interest due on the certificates sold to the public capital market.
Money for leverage is raised by the sale of SBA-guaranteed
securities bearing interest at a rate equal to that of 10-year
Treasury Bonds plus a variable spread to that rate based on
market conditions.
Participating Securities SBICs pay approximately 10% of their
profits to SBA.
Investments in small U.S. businesses may be in the form of
loans, loans with equity features (e.g., options to obtain stock
in the future or royalty rights), or purchases of equity (stock).
SBIC Success Stories
Apple Computer (Cupertino, CA)
Brunswick Technologies, Inc. (Brunswick, ME)
Callaway Golf Company (Carlsbad, CA)
Demegen, Inc. (Pittsburgh, PA)
Federal Express (Memphis, TN)
Gymboree Corporation (Burlingame, CA)
Infotec Commercial Systems (Santa Ana, CA)
Outback Steakhouse (Tampa, FL)
Staples Inc. (Westborough, MA)
Telesis Corporation (Washington, DC)
Women’s Business Centers
Women-owned firms face disproportionate
obstacles in obtaining funding for firm
formation and growth
WBCs promote the growth of women-owned
businesses through:
Business training
Technical assistance
Access to credit and capital
Help with federal contract opportunities
International trade opportunities
Small Business Development Centers
(SBDC)
Provides management & technical assistance
Cooperative effort:
Private sector
Educational community
Federal, state and local governments
More than 1100 service locations
The SBA provides 50% or less of the
operating funds for each state SBDC
Conclusions
The SBA programs provide a valuable
interface between small companies and
the private capital markets.
The goal is not to replace the judgment
of the market, but rather to use public
resources to leverage private funds.
SBICs change incentives for venture
capitalists, just as SBIR changes
incentives for entrepreneurs
