Venture capital program eyed for small firms

Members of Congress want to establish a new government-backed venture capital program to replace one that’s being phased out because of sizable losses.

The Small Business Administration stopped issuing licenses for the participating securities part of its Small Business Investment Company program last October. These types of SBICs accounted for more than half of the $2.8 billion invested by these venture funds in small businesses last year.

SBICs are privately managed investment firms that raise money from private investors and receive government-backed long-term loans from the SBA.

They were created to provide capital to startups and early-stage businesses. These types of companies often have trouble getting conventional venture capital, particularly if they aren’t high-tech firms located in Silicon Valley, Boston or other VC hot spots.

SBICs in the participating securities program make equity investments in companies, while SBICs in the debenture program make loans to small businesses that have enough cash flow to cover the interest payments.

Kent Hoover

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