WASHINGTON, D.C. – The Small Business Administration (SBA) has announced a direct final rule, set to take effect on March 4, 2024, that aims to enhance the Small Business Investment Company (SBIC) Program. This rule follows the SBIC Investment Diversification and Growth (IDG) final rule implemented on August 17, 2023, which significantly reduced barriers for new fund managers and funds focusing on underserved communities, capital-intensive investments, and technologies critical to national security and economic development.
The SBIC IDG Final Rule introduced a new class of SBICs, known as “Accrual” SBICs. These are designed to provide more patient capital financing for small businesses, lowering financial barriers for new fund managers to participate in the program.
This latest direct final rule aims to align with Executive Order 13985, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government. It seeks to reduce financial and administrative obstacles to participating in the SBIC program and modernize the program’s license offerings. This modernization will reflect a more diversified set of private funds investing in underserved small businesses.
The rule is slated to become effective without further action unless significant comment is received by February 20, 2024. In case of significant adverse comment, the SBA will publish a timely withdrawal in the Federal Register.
Bailey G. DeVries, Associate Administrator of the Office of Investment and Innovation at SBA, emphasized the importance of this rule in expanding access to capital for small businesses, especially in underserved areas. Nathan Putnam, also from the Office of Investment and Innovation, can be contacted for further regulatory comments or information.
The SBIC program’s mission is to enhance small business access to capital by supplementing the flow of private equity capital and long-term loan funds. The SBA achieves this by licensing and monitoring privately owned and managed investment funds. These funds raise capital from private investors and issue SBA-guaranteed Debentures for investments in qualifying small businesses.
With this new rule, the SBA continues its commitment to fostering growth and modernization among small businesses, particularly in communities that have traditionally faced barriers to accessing critical funding.
For further information, interested parties can contact Bailey G. DeVries at oii.frontoffice@sba.gov or 202–941–6064 and Nathan Putnam at the same email or 202–699–1746. These phone numbers are also accessible to individuals who are deaf or hard of hearing, or who have speech disabilities, through the Federal Communications Commission’s TTY-Based Telecommunications Relay Service at 711.
