More buyout firms large and small are showing interest in raising funds organized as small business development companies, a flexible source of financing that can provide equity or debt to companies that meet federal small business guidelines.
Perseus, which has raised more than $2 billion across eight funds since 1996, plans to use its SBIC fund to provide mezzanine financing for its own deals, she said. This would be Perseus’s first SBIC fund.
“In the small end of the market, which is where SBICs operate, there’s a real shortage of capital,” she said in a keynote interview with Jon Madorsky, a principal with the Chicago fund of funds
SBICs are generally limited to $75 million in initial capital, but they can borrow twice that amount from the SBA, giving them up to $225 million in capital to lend.
Meantime, LongueVue is completing paperwork that could enable the firm to license its current fundraising effort as an SBIC, a source close to the fund said. LongueVue, which according to its Web site raised an $82 million equity fund in 2001 from a group of high net worth investors, is targeting at least $50 million for its planned SBIC fund (not including leverage) but could raise as much as $75 million.
While LongueVue plans to use the SBIC fund primarily to provide debt financing for its equity deals, it also could use it for direct equity investments in target companies, the source said.
The SBA reported in October that it had issued 21 SBIC licenses in fiscal 2010, ended Sept. 30, more than double the 10 licenses a year that the agency had averaged over the preceding four years. Total SBA financings through the SBIC debenture program grew to $1.59 billion, a record, up 23 percent from the average of the prior four years.