What is government backed equity financing?
SBA’s Small Business Investment Company (SBIC) Program provides long-term loans and/or venture capital to small firms. SBICs are privately-owned investment companies which are licensed and regulated by SBA. Because money for venture or risk investments is difficult for small firms to obtain, SBA provides financial assistance to SBICs to stimulate and supplement the flow of private equity and long-term loan funds to small companies. Venture capitalists participate in the SBIC program to supplement their own private capital with funds borrowed at favorable rates through SBA’s guarantee of SBIC debentures, which are sold to private investors. SBICs offer alternative low capitalization solutions. An SBIC’s success is linked to the growth and profitability of the companies which it finances; as a result, some SBIC’s primarily assist businesses with significant growth potential, such as new firms in innovative industries. SBICs finance small firms by providing straight loans and/or equity-ty
