Small Business Investment Companies Small Business Investment Companies, or SBICs, are licensed by the Small Business Administration and are privately organized and privately managed investment firms. They are participants in a partnership between government and the private sector economy. With their own capital and with funds borrowed at favorable rates through the federal government, SBICs provide venture capital to small independent businesses, both new and already established. Virtually all SBICs are profit-motivated businesses. They provide equity capital, long-term loans, debt-equity investments and management assistance to qualifying small businesses. Their incentive is the chance to share in the success of the small business as it grows and prospers. There are two types of SBICs: regular SBICs and specialized SBICs, also known as 301(d) SBICs. Specialized SBICs invest in small businesses owned by entrepreneurs who are socially or economically disadvantaged, mainly members of minority groups. The program makes funding available to all types of manufacturing and service industries. Many investment companies seek out small businesses with new products or services because of the strong growth potential of such firms. Some SBICs specialize in the field in which their management has special knowledge or competency. Most, however, consider a wide variety of investment opportunities.
Certified Development Companies The 504 Certified Development Company (CDC) Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community or region. CDCs work with the SBA and private-sector lenders to provide financing to small businesses. There are about 290 CDCs nationwide. Each CDC covers a specific area.
Preferred/Certified Lenders Certified lenders are those who have been heavily involved in regular SBA loan-guaranty processing and have met certain other criteria. They receive a partial delegation of authority and are given a three-day turnaround by the SBA on their applications; they may also use regular SBA loan processing. Certified lenders account for nearly a third of all SBA business loan guaranties.
Approved Microloan Participants The MicroLoan Program was developed to increase the availability of very small loans to prospective small business borrowers. Under this program, the SBA makes funds available to nonprofit intermediaries, who in turn make loans to eligible borrowers in amounts that range from under $100 to a maximum of $25,000. The average loan size is $10,000. Completed applications can usually be processed by the intermediary in less than one week.