SBIC Program Gets Congressional Help

The Small Business Administration – and its much-maligned Small Business Investment Company (SBIC) program – seems to have staved off another year of federal budget negotiations. A two-year SBA reauthorization measure was tacked on to the Omnibus Appropriations bill for Fiscal 2005, which the U.S. Senate approved on Nov. 21.

This is an accomplishment for senators Olympia Snowe (R-Maine) and John Kerry (D-Mass.), who sponsored the bill. The SBIC program has faced an uncertain future. It’s been speculated that President Bush and the U.S. Congress might be unwilling to provide an appropriation to cover the program, which is currently projected to lose nearly $2 billion over the next few years.

Historically, the SBIC has not needed Congressional help. The SBIC, which provides matching funds to small venture capital funds, invests double what a venture firm raises from private LPs in exchange for its money back with a small amount of interest and a percentage of the fund’s returns.

However, the SBIC has taken heavy losses over the past 10 years to the tune of more than $300 million. At the end of fiscal year 2003, the SBA program expects to be at a negative cash position of more than $520 million.

But a source familiar with the SBA/SBIC said that he doesn’t believe the accuracy of recent published reports, which claimed that Bush hopes to kill off the SBIC program in its entirety.