Small Business Investment Companies

Written by Shirley Parker
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Before investors form a Small Business Investment Company (SBIC), they need to study the information and requirements for becoming licensed, published by the Small Business Administration. The basics are available through the SBA's website, or more detail can be obtained via e-mail, telephone or regular mail. The SBA is extremely interested in encouraging investors to form SBICs; however, they also recommend that each group retain their own legal counsel, prior to applying for a license, since it is a complex process.

Briefly, a group should first decide on the state or region of the country where they want to invest. The businesses that the group's members want to invest in should be related to their professional expertise. The prospective investors should study businesses of various sizes, what growth phase they have reached, and what they actually do or produce. And the group must have the necessary capital to be considered as an SBIC. Five million dollars would be a bare minimum and some markets require a capital commitment that is quite a bit higher.

A detailed and well-structured business plan will need to be presented with the license application. Therefore, a great deal of time and effort should go into its preparation. The management team must meet all of the SBA's requirements and must be able to complete a Management Assessment Questionnaire (MAQ).

Seeking Financing from an SBIC

The company that is just launching will often need financing to undertake the final steps. A company ready to grow will also need additional funds to take those next steps. Entrepreneurs can search the SBIC Program's directory by state, at this point in time. The website is evolving and will have greater search capabilities in the future. Business owners can also check out SBIC information through the National Association of Small Business Investment Companies. Another source is the National Association of Investment Companies, whose members believe in an ethnically diverse world of trade.


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