Small Business Investment Companies
Tips & Advice to help you make your decision on Small Business Investment Companies
The start of a new small business is a big undertaking. There are many steps to take and many factors to consider when seeking investments into your business. However, there are organizations, such as Small Business Investment Companies, that can help successfully launch your next venture.
Small Business Investment Companies (SBIC) offer private funding to existing and start up businesses, both small and medium. When the SBIC helps fund small businesses, it ultimately helps the US economy as a whole, due to the new jobs that are created. This is why their backing comes from the United States government Small Business Administration, which licenses and regulates small businesses.
There are some things you should understand before you seek out help from SBIC. For starters, you must find out if you qualify for financing. Also, it's a good idea to make an estimate of how much funding you need, which depends a great deal on whether you are starting or expanding a business. Research and preparation are key in effectively making use of SBIC's assistance.
Through the vast database on Business.com, you can find sources that will provide you with the information that suits your particular situation. Qualified individuals are trained to make sure your business is taken care of. Take a look to the links on the left to see what is available for investments into your business.
Small Business Investment Companies (SBICs)
SBA-licensed private firms offer loans when others can'tBy Holly Ocasio Rizzo, Writer and editor Holly Ocasio Rizzo Small businesses requiring growth capital in the tough-to-find $250,000-to-$5 million range can turn to the Small Business Administration's Small Business Investment Company (SBIC) program. The SBA licenses SBICs – privately organized and managed venture-capital firms – to make loans exclusively to small companies. The financing isavailable to:
- Small businesses only, defined by the SBA as those with a net worth of $18 million or less and with after-tax earnings of $6 million or less for the past two years.
- Nearly every type of business.
- Businesses owned by social or economically disadvantaged entrepreneurs, through Specialized Small Business Investment Companies (SSBICs) investing only in these types of businesses.
Choose debt or equity
SBICs and SSBICs use their own capital plus funds raised through the SBA to make equity capital and long-term loans. Debenture SBICs focus on more mature companies, providing debt or debt-with-equity loans. Participating-securities SBICs are able to invest in younger companies with pure equity investments.
Try:
Get the detailed rules from the SBA.
Craft your pitch
SBICs will expect to see a detailed business plan laying out your strategy and your financials.
Try:
The National Association of Small Business Investment Companies' guide for entrepreneurs walks you through the application process.
Contact an SBIC or SSBIC
They're located throughout the country, but they differ in dollar limits of financing, investment policies, and preferences for certain types of and locations of businesses.
Try:
SBICs and SSBICs can be found through the SBA and the National Association of Small Business Investment Companies.
- Although SBICs and SSBICs have their own investment criteria, they make exceptions in some cases.
- There is no rule about how long it should take an SBIC or SSBIC to decide on an application, so it's wise to determine your company's needs and to research SBICs long before you'll need the money.
- Financing is tailored to meet the needs of the business and the SBIC.
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