Federal Stimulus Opens Access to VC for Smaller Businesses

Under the federal stimulus package, small businesses may now have access to more venture capital via a program from the Small Business Administration.  The SBA can now increase the amount of investment capital available to companies licensed under its Small Business Investment Company program.  These companies are privately owned VC firms which are regulated by the SBA.  They use a combination of money from both private sources and through SBA guarantees to make equity and mezzanine capital investments in smaller businesses.  These firms are now eligible for greater SBA-guaranteed financing and are required to invest 25 percent of their investments in small businesses.  The money these firms can invest in a single business is now set at ten percent.  Maximum SBA financing in investment companies will increase as much as three times the private capital raised – maxing out at $150 million for a single company, or $225 million for multiple companies under common control.  Previously maximum investments were capped at $137.1 million.
 
For more details, see the story in Business First