Small Business Investment Companies
One of the first steps toward a professionally managed private equity and venture capital industry was the passage of the Small Business Investment Act of 1958. The 1958 Act officially allowed the SBA to license private "Small Business Investment Companies" (SBICs) to help with financing and managing small entrepreneurial businesses in the United States. Passage of the Act addressed concerns raised in a Federal Reserve Board report to Congress that concluded that a major gap existed in the capital markets for long-term funding for growth-oriented small businesses. Additionally, it was thought that fostering entrepreneurial companies would spur technological advances to compete with the Soviet Union. Facilitating the flow of capital through the economy up to the pioneering small concerns in order to stimulate the U.S. economy was and still is today the main goal of the SBIC program. The passage of the Small Business Investment Act of 1958 by the federal government was an important incentive for would-be venture capital organizations. The act provided venture capital firms structured either as SBICs or Minority Enterprise Small Business Investment Companies (MESBICs) access to federal funds which could be leveraged at a ratio of up to 4:1 against privately raised investment funds. In 2005, in response to extensive losses incurred in connection with tech boom investments, the SBA decided to wind down its "Participating Securities" SBIC program, which had provided equity-like SBA backing for equity-oriented SBIC funds. The SBA's "Debenture" SBIC program, the original SBIC vehicle founded in 1958, is still very much alive and healthy and continues to license and contribute capital to SBIC funds. The SBIC program had its highest ever year in Fiscal Year 2010.
Read more about this topic: Small Business Administration
Famous quotes containing the words small, business, investment and/or companies:
“Govern a small family as you would cook a small fish, very gently.”
—(20th century)
“To business that we love we rise betime,
And go tot with delight.”
—William Shakespeare (15641616)
“The only thing that was dispensed free to the old New Bedford whalemen was a Bible. A well-known owner of one of that citys whaling fleets once described the Bible as the best cheap investment a shipowner could make.”
—For the State of Massachusetts, U.S. public relief program (1935-1943)
“The recent attempt to secure a charter from the State of North Dakota for a lottery company, the pending effort to obtain from the State of Louisiana a renewal of the charter of the Louisiana State Lottery, and the establishment of one or more lottery companies at Mexican towns near our border, have served the good purpose of calling public attention to an evil of vast proportions.”
—Benjamin Harrison (18331901)