Commerce Street Capital, LLC (“CSC”) and the Small Business Investor Alliance (“SBIA”) gained two wins for Main Street with the unanimous passage by the U.S. House of Representatives of the Small Business Investment Opportunity Act (H.R. 2333) and the Investing in Main Street Act (H.R. 2364). Both of these bills will strengthen the Small Business Investment Company (“SBIC”) program and increase the amount of capital available for investment into small businesses. With a strong commitment to small businesses and banks, CSC has raised more than $757 million for SBIC funds in seven years.
“Commerce Street has and will continue to serve an instrumental role in working with the SBIA on the bills,” said Bobby Hashaway, Executive Vice President and Chief Operating Officer at CSC. “Many of our banking clients have a strong interest in supporting small business funding by making greater investment commitments to SBICs, but have been constrained by an outdated statutory cap within the Small Business Investment Act of 1958. SBICs are attractive to banks because they offer opportunities for competitive returns, Community Reinvestment Act (CRA) consideration and lending and other banking services.”
SBICs are highly regulated private investment funds that invest exclusively in domestic small businesses, facilitating private investment while operating at a zero-subsidy rate. In 2016, Texas-based businesses that received SBIC financing supported 10,772 employees, and that number is growing. Additionally, SBICs have invested more than $2.9 billion in Texas over the last 10 years.
"We hear this all the time, one of the greatest challenges to small business is capital access. Creating businesses and jobs is a matter for private capital markets, and the SBIC program is a great catalyst for small business investment. The program facilitates private investment while protecting taxpayers – and it’s why this program enjoys overwhelming support in Congress. This program makes it possible for entrepreneurs from all communities to access capital that otherwise would be inaccessible," said Alliance President Brett Palmer.
The Small Business Investment Opportunity Act increases the SBIC individual fund leverage limit from $150 to $175 million. Raising the limit will allow SBIC fund managers to maximize the amount of capital they can deploy into domestic small business.
The Investing in Main Street Act lifts an outdated statutory cap that prevents certain banks and savings associations from investing more into small business via SBICs, while still maintaining proper oversight of bank investments into SBICs. Both bills represent modernizations that will facilitate capital access for small business.
Administered by the Small Business Administration, the SBIC program provides mezzanine debt and equity to lower middle market companies and has a history of job creation since its inception in 1958. CSC offers investments in SBIC funds to institutional investors, including banks, family offices, and high net worth individuals through limited partnerships with select fund management teams.
About Commerce Street Capital
Commerce Street Capital is an investment banking firm serving financial institutions and middle-market companies. They value client collaboration and build long term relationships based on mutual respect, goals and integrity. Their practices include: mergers/acquisitions, debt/equity placements, valuations/fairness opinions, bank capital services, SBIC funds, corporate/real estate finance and regulatory/due diligence services. (Member FINRA/SIPC)
About the Small Business Investor Alliance (SBIA)
The Small Business Investor Alliance (SBIA) is the premier organization of lower middle market private equity funds and investors. SBIA works on behalf of its members as a tireless advocate for policies that promote competitive markets and robust domestic investment for growing small businesses. SBIA has been playing a pivotal role in promoting the growth and vitality of the private equity industry for over 50 years. For more information, visit www.SBIA.org or call (202) 628-5055.