remarks33669.com

SBANewMarketsVentureCapitalProgramUpdatedMarch11,2021CongressionalResearchServicehttps://crsreports.
congress.
govR42565SBANewMarketsVentureCapitalProgramCongressionalResearchServiceSummaryAuthorizedbyP.
L.
106-554,theConsolidatedAppropriationsAct,2001(AppendixH:theNewMarketsVentureCapitalProgramActof2000),theNewMarketsVentureCapital(NMVC)program,whichisnolongeractive,isdesignedtopromoteeconomicdevelopmentandthecreationofwealthandjobopportunitiesinlow-incomegeographicareasbyaddressingtheunmetequityinvestmentsneedsofsmallbusinesseslocatedinthoseareas.
ModeledontheSmallBusinessAssociation's(SBA's)SmallBusinessInvestmentCompany(SBIC)program,SBA-selected,privatelyownedandmanagedNMVCcompaniesprovidefundingandoperationalassistancetosmallbusinesses.
Todoso,theyuseprivatecapitaltheNMVCcompanyhasraised(calledregulatorycapital)andupto150%ofthatamount(calledleverage)fromthesaleofSBA-guaranteed10-yeardebentures,orloanobligations,tothirdparties,subjecttotheavailabilityoffunds.
BecausetheSBAguaranteesthedebenture,theSBAisabletoobtainfavorableinterestrates.
NMVCcompaniesareresponsibleformeetingthetermsandconditionssetforthinthedebenture.
Atleast80%oftheinvestmentsmustbeinsmallbusinesseslocatedinalow-incomearea.
SpecializedSmallBusinessInvestmentCompanies(SSBICs)establishedundertheSBICprogramarealsoeligibleforNMVCoperationalassistancegrants,whichareawardedonadollar-to-dollarmatchingbasis.
SixcompaniesparticipatedintheNMVCprogram.
TheNMVCprogramwasappropriated$21.
952millioninFY2001tosupportupto$150millioninSBA-guaranteeddebenturesand$30milliontofundoperationalassistancegrantsforFY2001throughFY2006.
ThefundswereprovidedinalumpsuminFY2001andweretoremainavailableuntilexpended.
In2003,theunobligatedbalancesof$10.
5millionfortheNMVCdebenturesubsidiesand$13.
75millionforoperationalassistancegrantswererescinded.
Theprogramcontinuedtooperate,withthenumberandamountoffinancingdeclininginrecentyearsastheprogram'sinitialinvestmentsexpiredandNMVCcompaniesincreasinglyengagedonlyinadditionalfollow-onfinancingswiththesmallbusinessesintheirportfolios.
TheNMVCprogram'sactiveunpaidprincipalbalancepeakedat$68.
1millioninFY2008,andthenfelleachyearthereafteruntilreaching$0inFY2018.
Overtheyears,legislationhasbeenintroducedtoreauthorizetheprogram.
Forexample,duringthe116thCongress,H.
R.
6342,theSBICCapitalInfusionActof2020,wouldhavereauthorizedtheNMVCprogramfromFY2021throughFY2026,providedcreditsubsidynecessarytofundupto$10billioninSBA-guaranteeddebentures,andappropriated$2billionforNMVCoperationalassistancegrants.
ThisreportexaminestheNMVCprogram'slegislativeoriginsanddescribestheprogram'seligibilityandperformancerequirementsforNMVCcompanies,eligibilityrequirementsforsmallbusinessesseekingfinancing,anddefinitionoflow-incomeareas.
ItalsoreviewsregulationsgoverningtheSBA'sfinancialassistancetoNMVCcompaniesandprovidesprogramstatistics.
Thereportconcludeswithanexaminationof(1)effortstoeliminatetheprogrambasedonconcernsthatitduplicatedotherSBAprogramsandisrelativelyexpensive,(2)therescissionoftheprogram'sunobligatedfundingin2003,and(3)congressionaleffortstoprovidetheprogramadditionalfunds.
SBANewMarketsVentureCapitalProgramCongressionalResearchServiceContentsNewMarketsVentureCapitalProgramOverview1LegislativeOrigins2105thCongress.
2TheCommunityDevelopmentVentureCapitalDemonstrationProgram3106thCongress.
3SBA'sLow-orModerate-IncomeInitiative.
4TheCommunityDevelopmentandVentureCapitalActof20005TheNewMarketsVentureCapitalProgramActof20006NMVCCompanyEligibilityandPerformanceRequirements.
6EligibilityofSmallBusinessesandLow-IncomeGeographicAreas.
9NMVCLeverage10OperationalAssistanceGrants.
11ProgramStatistics.
12CongressionalIssues13LegislativeEffortstoProvideAdditionalNMVCFunding.
14RelatedSBICProgramDevelopments16ConcludingObservations18TablesTable1.
NewMarketsVentureCapitalProgramStatistics,FY2002-FY202012TableA-1.
LegislativeEffortstoProvideAdditionalNMVCFunding.
20AppendixesAppendix.
LegislativeEffortstoProvideAdditionalFundingfortheNMVCProgram.
20ContactsAuthorInformation.
23SBANewMarketsVentureCapitalProgramCongressionalResearchService1NewMarketsVentureCapitalProgramOverviewTheSmallBusinessAdministration(SBA)administersseveralprogramstosupportsmallbusinesses,includingloanguarantyprogramstoenhancesmallbusinessaccesstocapital;venturecapitalprograms,includingthenowinactiveNewMarketsVentureCapital(NMVC)program,tofostersmallbusinessexpansion;programstoincreasesmallbusinessopportunitiesinfederalcontracting;directloansforbusinesses,homeowners,andrenterstoassisttheirrecoveryfromnaturaldisasters;andaccesstoentrepreneurialeducationtoassistwithbusinessformationandexpansion.
1AuthorizedbyP.
L.
106-554,theConsolidatedAppropriationsAct,2001(AppendixH:theNewMarketsVentureCapitalProgramActof2000),theNMVCprogramisdesignedtopromoteeconomicdevelopmentandthecreationofwealthandjobopportunitiesinlow-incomegeographicareasandamongindividualslivinginsuchareasbyencouragingdevelopmentalventurecapitalinvestmentsinsmallerenterprisesprimarilylocatedinsuchareas;andaddresstheunmetequityinvestmentneedsofsmallenterpriseslocatedinlow-incomegeographicareas.
2ModeledontheSBA'sSmallBusinessInvestmentCompany(SBIC)program,SBA-selected,privatelyownedandmanagedNMVCcompaniesprovidefundingandoperationalassistancetosmallbusinesses.
Todoso,theyuseprivatecapitaltheNMVCcompanyhasraised(calledregulatorycapital)andupto150%ofthatamount(calledleverage)fromthesaleofSBA-guaranteed10-yeardebentures,orloanobligations,tothirdparties,subjecttotheavailabilityoffunds.
3BecausetheSBAguaranteesthedebenture,theSBAisabletoobtainfavorableinterestrates.
NMVCcompaniesareresponsibleformeetingthetermsandconditionssetforthinthedebenture.
Atleast80%oftheinvestmentsmustbeinsmallbusinesseslocatedinalow-incomearea,asdefinedinthestatute.
SpecializedSmallBusinessInvestmentCompanies(SSBICs)establishedundertheSBICprogramarealsoeligibleforNMVCoperationalassistancegrants,whichareawardedonadollar-to-dollarmatchingbasis.
SixNMVCcompaniesparticipatedintheprogram.
TheNMVCprogramwasappropriated$21.
952millioninFY2001tosupportupto$150millioninSBA-guaranteeddebenturesandupto$30millionforoperationalassistancegrantsforFY2001throughFY2006.
4ThefundswereprovidedinalumpsuminFY2001andweretoremainavailableuntilexpended.
TheSBAsubsequentlyprovided$72.
0millioninleveragetoNMVCcompaniesinFY2002andFY2003($12.
5millioninFY2002and$59.
5millioninFY2003)and1U.
S.
SmallBusinessAdministration(SBA),FiscalYear2018CongressionalBudgetJustificationandFY2016AnnualPerformanceReport,p.
1,athttps://www.
sba.
gov/sites/default/files/aboutsbaarticle/FINAL_SBA_FY_2018_CBJ_May_22_2017c.
pdf.
215U.
S.
C.
§689(a).
3ForfurtherinformationandanalysisconcerningtheSBA'sSmallBusinessInvestmentCompanyprogram,seeCRSReportR41456,SBASmallBusinessInvestmentCompanyProgram,byRobertJayDilger.
TheSBAisauthorizedtoissuedebentureswithatermofupto15years.
TheSBAhasoptedtolimitthetermforNewMarketsVentureCapital(NMVC)debenturesto10years.
4BecausetheSBA'sNewMarketVentureCapital(NMVC)debenturesarediscountedtoguaranteethepaymentofinterestduringthefirstfiveyearsofthedebenture,thefundingprovidedwasestimatedtobesufficienttoraiseabout$100millioninavailablecapitalforinvestment.
Also,theappropriationwasforFY2001throughFY2006,butwasprovidedasalumpsumpaymentinFY2001.
SBANewMarketsVentureCapitalProgramCongressionalResearchService2$14.
4millionforoperationalassistancegrants($3.
75millioninFY2002and$10.
65millioninFY2003).
5In2003,theunobligatedbalancesof$10.
5millionforNMVCdebenturesubsidiesand$13.
75millionforoperationalassistancegrantswererescinded.
6Theprogramcontinuedtooperate,withthenumberandamountoffinancingdeclininginrecentyearsastheprogram'sinitialinvestmentsexpiredandNMVCcompaniesincreasinglyengagedonlyinadditionalfollow-onfinancingswiththesmallbusinessesintheirportfolios.
TheNMVCprogram'sactiveunpaidprincipalbalance(whichiscomprisedoftheSBAguaranteedportionandtheunguaranteedportionoftheNMVCcompanies'unpaidprincipalbalance)peakedat$68.
1millioninFY2008,andthenfelleachyearthereafteruntilreaching$0inFY2018.
7Overtheyears,legislationhasbeenintroducedtoreauthorizetheNMVC.
Forexample,duringthe116thCongress,H.
R.
6342,theSBICCapitalInfusionActof2020,wouldhavereauthorizedtheNMVCprogramfromFY2021throughFY2026,providedcreditsubsidynecessarytofundupto$10billioninSBA-guaranteeddebentures,andappropriated$2billionforNMVCoperationalassistancegrants.
8ThisreportexaminestheNMVCprogram'slegislativeoriginsanddescribestheprogram'seligibilityandperformancerequirementsforNMVCcompanies,eligibilityrequirementsforsmallbusinessesseekingfinancing,anddefinitionoflow-incomeareas.
ItalsoreviewsregulationsgoverningtheSBA'sfinancialassistancetoNMVCcompaniesandprovidesprogramstatistics.
Thisreportconcludeswithanexaminationof(1)effortstoeliminatetheprogrambasedonconcernsthatitduplicatedotherSBAprogramsandisrelativelyexpensive,(2)therescissionoftheprogram'sunobligatedfundingin2003,and(3)congressionaleffortstoprovidetheprogramadditionalfunds.
LegislativeOrigins105thCongressOnSeptember15,1998,theSenateCommitteeonSmallBusinessconductedamarkupofseveralbillspendingbeforethecommittee,includingH.
R.
3412,theSmallBusinessInvestmentCompanyTechnicalCorrectionsActof1998,whichtheHousehadpassed.
9SenatorChristopher5SBA,OfficeofCongressionalandLegislativeAffairs,"Correspondencewiththeauthor,"June5,2012.
6P.
L.
108-7,theConsolidatedAppropriationsResolution,2003;andU.
S.
Congress,CommitteeofConference,MakingFurtherContinuingAppropriationsfortheFiscalYear2003,andforOtherPurposes,reporttoaccompanyH.
J.
Res.
2,108thCong.
,1stsess.
,February13,2003,H.
Rept.
108-10(Washington:GPO,2003),p.
787.
7SBA,OfficeofCongressionalandLegislativeAffairs,"WDSfiles:Table1.
1.
b–ActiveUPBbyProgram,"October18,2019.
TheNMVCprogram'sinventoryunpaidprincipalbalance(theunpaidprincipalbalanceofpurchasedloansandloanswithalegaljudgmentagainsttheborrower(i.
e.
,abankruptcyjudgment))was$20.
8millioninFY2019.
8Also,H.
R.
6312,theCOVID-19ReliefforSmallBusinessesActof2020,wouldhavereauthorizedtheNMVCprogramfromFY2020throughFY2025,providedcreditsubsidynecessarytofundupto$10billioninSBA-guaranteeddebentures,andauthorizedtobeappropriated$2billionforNMVCoperationalassistancegrants.
AlistofbillsintroducedinpreviousCongressestoeitherexpandoramendtheNMVCprogramisprovidedintheAppendix.
9H.
R.
3412,theSmallBusinessInvestmentCompanyTechnicalCorrectionsActof1998,wasintroducedbyRep.
(laterSen.
)JimTalent,chairoftheHouseCommitteeonSmallBusiness,onMarch10,1998.
ThebillwouldhaveauthorizedseveraltechnicalcorrectionstotheSBA'sSmallBusinessInvestmentCompany(SBIC)program.
TheHouseCommitteeonSmallBusinessreportedthebillonMarch17,1998,andtheHousepassedit(onmotiontoSBANewMarketsVentureCapitalProgramCongressionalResearchService3Bond,then-chairoftheSenateCommitteeonSmallBusiness,proposedanamendmentinthenatureofasubstitutetoH.
R.
3412incorporatingthefulltextsofS.
2372,theYear2000ReadinessAct,andS.
2407,theSmallBusinessProgramsRestructuringandReformActof1998,aswellasprovisionsfromS.
2448,theSmallBusinessLoanEnhancementAct.
10Thecommitteealsodebatedandapprovedbyunanimousvoicevotessevenamendmentstothesubstituteamendment.
OneofthesevenapprovedamendmentswasaprecursoroftheNMVCprogram.
TheCommunityDevelopmentVentureCapitalDemonstrationProgramTheamendment,offeredbySenatorPaulWellstone,wouldhaveauthorizeda$20million,four-yeartechnicalassistanceprogram—theCommunityDevelopmentVentureCapitalDemonstrationProgram—toprovidegrants,onamatchingdollar-to-dollarbasis,toexperiencedcommunitydevelopmentventurecapital(CDVC)firmsthatinvestinsmallbusinesseslocatedineconomicallydistressedareas,suchasinnercitiesandpoorruralcounties.
Thegrantswouldbeusedtoprovidetechnicalexpertiseandoperatingassistancetonew,emerging,lessexperiencedCDVCorganizations.
11Theprogram'sstatedpurposewas"todevelopandexpandanewbutgrowingfieldoforganizationsthatusethetoolsofventurecapitaltocreategoodjobs,productivewealth,andentrepreneurialcapacitythatbenefitdisadvantagedpeopleandeconomicallydistressedcommunities.
"12Theprogram'sadvocatesarguedthatdespitedifficultiesassociatedwithmakinginvestmentsineconomicallydistressedareas,somesuccessfulCDVCshadproduced"a'doublebottomline'ofnotonlyfinancialreturns,butalsosocialbenefitsintheformofgoodjobsandhealthiercommunities.
"13OnSeptember15,1998,thecommitteereportedH.
R.
3412,asamended,byavoteof18-0.
OnSeptember30,1998,theSenatepassedthebill,withanamendment,byunanimousconsent.
TheHousedidnotactonthebill.
106thCongressOnJanuary19,1999,PresidentBillClintonannouncedduringhisStateoftheUnionAddresssupportforwhatwaslatercalledthe"NewMarketsInvestmentInitiative.
"14Theproposedinitiativewascomprisedofseveralprograms,includingaNewMarketsTaxCreditprogramandaNewMarketsVentureCapitalprogram,toencourageeconomicdevelopmentineconomicallydistressedareas.
15PresidentClintonsubsequentlydrewattentiontotheinitiativebytakingthreesuspendtherulesandpassthebill,asamended),407-0,onMarch24,1998.
10U.
S.
Congress,SenateCommitteeonSmallBusiness,Year2000ReadinessandSmallBusinessProgramsRestructuringandReformActof1998,105thCong.
,2ndsess.
,September25,1998,S.
Rept.
105-347(Washington:GPO,1998).
11U.
S.
Congress,SenateCommitteeonSmallBusiness,Year2000ReadinessandSmallBusinessProgramsRestructuringandReformActof1998,pp.
18,23;andPherabeKolb,"SenateSmallBusinessMarkup:Year2000Assistance,Drug-FreeWorkplace,"CQMarkupandVoteCoverage,Washington,DC,September15,1998,athttp://www.
cq.
com/doc/committees-COMM159517print=true.
12U.
S.
Congress,SenateCommitteeonSmallBusiness,Year2000ReadinessandSmallBusinessProgramsRestructuringandReformActof1998,105thCong.
,2ndsess.
,September25,1998,S.
Rept.
105-347(Washington:GPO,1998),p.
18.
13IU.
S.
Congress,SenateCommitteeonSmallBusiness,Year2000ReadinessandSmallBusinessProgramsRestructuringandReformActof1998,p.
18.
14U.
S.
President(Clinton),"AddressBeforeaJointSessionoftheCongressontheStateoftheUnion,"WeeklyCompilationofPresidentialDocuments,vol.
35(January19,1999),p.
83.
15U.
S.
President(Clinton),"RemarksontheNewMarketsInitiative,"WeeklyCompilationofPresidentialDocuments,SBANewMarketsVentureCapitalProgramCongressionalResearchService4separatetripstounderservedinnercityandruralcommunities,visitingPhoenix,Arizona,andthePineRidgeIndianReservationinSouthDakotaonJuly7,1999,andLosAngeles,California,andAnaheim,California,onJuly8,1999(trip1);Newark,NewJersey,andHartford,Connecticut,onNovember4,1999(trip2);andHermitage,Arkansas,andChicago,Illinois,onNovember5,1999(trip3).
16DuringhisremarksinChicago,PresidentClintonannouncedthathehadreachedanagreementwithHouseSpeakerDennisHastert(whowaspresent)todevelopabipartisanlegislativeinitiativeondevelopingnewmarketinvestmentsasameanstorevitalizeimpoverishedcommunities.
17SBA'sLow-orModerate-IncomeInitiativeInarelateddevelopment,onFebruary9,1999,theSBAproposedseveralincentivestoencouragecompaniesparticipatinginitsSBICprogramto"expandtheirinvestmentactivityintoeconomicallydistressedinnercitiesandruralareas.
"18Afterreceivingpubliccommentsonseveralproposedincentives,theSBAissuedafinalruleonSeptember30,1999,implementingtheSBIClow-ormoderate-income(LMI)initiative.
19TheongoingLMIinitiativeisdesignedtoencourageSBICstoinvestinsmallbusinesseslocatedininnercitiesandruralareas"thathavesevereshortagesofequitycapital"becauseinvestmentsinthoseareas"oftenareofatypethatwillnothavethepotentialforyieldingreturnsthatarehighenoughtojustifytheuseofparticipatingsecurities.
"20SBICsthatinvestinsmallbusinesseswithatleast50%oftheiremployeesortangibleassetslocatedinalow-ormoderate-incomearea(LMIzone)oratleast35%oftheirfull-timeemployeeswiththeirprimaryresidenceinanLMIzoneareeligiblefortheincentives.
21Forexample,unlikeregularSBICdebenturesthattypicallyhavea10-yearmaturity,LMIdebenturesareavailableintwomaturities,5yearsand10years,vol.
35(May11,1999),pp.
860-861.
16U.
S.
President(Clinton),"RemarkstotheCommunityatPineRidgeIndianReservation,SouthDakota,"WeeklyCompilationofPresidentialDocuments,vol.
35(July7,1999),pp.
1298-1302;U.
S.
President(Clinton),"RemarksinaRoundtableDiscussiononSmallBusinessDevelopmentinPhoenix,Arizona,"WeeklyCompilationofPresidentialDocuments,vol.
35(July7,1999),pp.
1303-1308;U.
S.
President(Clinton),"RemarksinaDiscussiononYouthOpportunitiesinLosAngeles,California,"WeeklyCompilationofPresidentialDocuments,vol.
35(July8,1999),pp.
1318-1321;U.
S.
President(Clinton),"RemarkstotheNationalAcademyFoundationConferenceinAnaheim,California,"WeeklyCompilationofPresidentialDocuments,vol.
35(July8,1999),pp.
1322-1327;U.
S.
President(Clinton),"RemarkstotheCommunityinNewark,"WeeklyCompilationofPresidentialDocuments,vol.
35(November4,1999),pp.
2246-2249;U.
S.
President(Clinton),"RemarkstotheNorthEndCommunityinHartford,Connecticut,"WeeklyCompilationofPresidentialDocuments,vol.
35(November4,1999),pp.
2257-2259;TheWhiteHouse,OfficeofthePressSecretary,"RemarksbythePresidenttothepeopleofBradleyCounty:HermitageTomatoCooperative,Hermitage,Arkansas,"November5,1999,athttps://clintonwhitehouse3.
archives.
gov/WH/New/html/19991105.
html;andU.
S.
President(Clinton),"RemarkstotheEnglewoodCommunityinChicago,Illinois,"WeeklyCompilationofPresidentialDocuments,vol.
35(November4,1999),pp.
2271-2275.
17U.
S.
President(Clinton),"RemarkstotheEnglewoodCommunityinChicago,Illinois,"WeeklyCompilationofPresidentialDocuments,vol.
35(November4,1999),p.
2273.
18SBA,"SmallBusinessInvestmentCompanies,"64FederalRegister6256,February9,1999.
19SBA,"SmallBusinessInvestmentCompanies,"64FederalRegister52641-52646,September30,1999.
20SBA,"SmallBusinessInvestmentCompanies,"64FederalRegister52645,September30,1999.
21SBA,"SmallBusinessInvestmentCompanies,"64FederalRegister52641-52646,September30,1999.
Low-ormoderate-incomeareas(LMIzones)areareaslocatedinahistoricallyunderutilizedbusinesszone(HUBZone);anurbanempowermentzoneorurbanenterprisecommunitydesignatedbytheSecretaryoftheU.
S.
DepartmentofHousingandUrbanDevelopment;aruralempowermentzoneorruralenterprisecommunityasdesignatedbytheSecretaryoftheU.
S.
DepartmentofAgriculture;anareaoflowincomeormoderateincomeasrecognizedbytheFederalFinancialInstitutionsExaminationCouncil;oracountywithpersistentpovertyasclassifiedbytheU.
S.
DepartmentofAgriculture'sEconomicResearchService.
See13C.
F.
R.
§107.
50.
SBANewMarketsVentureCapitalProgramCongressionalResearchService5plusthestubperiod.
Thestubperiodisthetimebetweenthedebenture'sissuancedateandthenextMarch1orSeptember1.
ThestubperiodallowsallLMIdebenturestohavecommonMarch1orSeptember1maturitydatestosimplifyadministrationoftheprogram.
Inaddition,LMIdebenturesareissuedatadiscountsothattheproceedsanSBICreceivesforthesaleofadebenturearereducedby(1)thedebenture'sinterestcostsforthefirstfiveyears,plusthestubperiod;(2)theSBA'sannualfeeforthedebenture'sfirstfiveyears,plusthestubperiod;and(3)theSBA's2%leveragefee.
Asaresult,theseinterestcostsandfeesareeffectivelydeferred,freeingSBICsfromtherequirementtomakeinterestpaymentsonLMIdebenturesortopaytheSBA'sannualfeesonLMIdebenturesforthefirstfiveyearsofadebenture,plusthestubperiod.
22SinceFY2015,LMIshavereceivedfrom17.
6%to24.
1%oftotalSBICfinancingseachfiscalyear.
23InFY2020,SBICsmade492investmentsinsmallbusinesseslocatedinanLMIzone,totaling$862million—17.
6%ofthetotalamountinvested.
TheCommunityDevelopmentandVentureCapitalActof2000OnSeptember16,1999,SenatorJohnKerryintroducedS.
1594,theCommunityDevelopmentandVentureCapitalActof2000.
24ThebillincludedseveralprovisionsinPresidentClinton'sNewMarketsInvestmentInitiative.
Thebillhadthreemainparts:aNewMarketsVentureCapitalProgram,verysimilartothepresentprogram,toencourageinvestmentineconomicallydistressedcommunities;aCommunityDevelopmentVentureCapitalAssistanceProgramtoexpandthenumberofcommunitydevelopmentventurecapitalfirmsandprofessionalsdevotedtoinvestingineconomicallydistressedcommunities;andBusinessLINC,amentoringprogramtolinkestablished,successfulbusinesseswithsmallbusinessownersineconomicallystagnantordeterioratingcommunitiestofacilitatethedevelopmentofsmallbusinessesinthoseareas.
25AfterconductingtwohearingsandsponsoringaroundtablediscussionontheCommunityDevelopmentandVentureCapitalActof2000,theSenateCommitteeonSmallBusinessreportedthebill,asamended,byavoteof16-1,onJuly26,2000.
Inthereportaccompanyingthebill,SenatorChristopherBond,chairoftheSenateCommitteeonSmallBusiness,arguedthattheSBICprogramhad"proventobeanextremelysuccessfulpublic-privatesectorpartnershipwiththegovernment"andmentionedtheSBA'sLMIinitiativeasanewmeanstoencourageSBICstomakeinvestmentsinLMIzones.
26However,hearguedthat"assuccessfulastheSBICprogramis,itdoesnotsufficientlyreachareasofourcountrythatneedeconomicdevelopmentthemost.
"27HeaddedthatalthoughSBICsinvested$771millioninLMIzonesin1999,"thevastmajorityofthoseinvestmentswereverylargeandnotatallcomparabletothetypeofinvestments[NMVC]22SBA,"ForSBICs:BackgroundInformationonLoworModerateIncome(LMI)Debentures,"athttps://www.
sba.
gov/content/low-or-moderate-income-lmi-debentures.
23SBA,OfficeofCongressionalandLegislativeAffairs,"Correspondencewiththeauthor,"March11,2016,December1,2016,August24,2018,December20,2018,andFebruary18,2021.
24Thebill'sfiveoriginalcosponsorswereSens.
JeffBingaman,MaxCleland,CarlLevin,PaulSarbanes,andPaulWellstone.
25U.
S.
Congress,SenateCommitteeonSmallBusiness,CommunityDevelopmentandVentureCapitalActof1999,reporttoaccompanyS.
1594,106thCong.
,2ndsess.
,August25,2000,S.
Rept.
106-383(Washington:GPO,2000),p.
4.
26U.
S.
Congress,SenateCommitteeonSmallBusiness,CommunityDevelopmentandVentureCapitalActof1999,p.
3.
27U.
S.
Congress,SenateCommitteeonSmallBusiness,CommunityDevelopmentandVentureCapitalActof1999,p.
3.
SBANewMarketsVentureCapitalProgramCongressionalResearchService6fundswouldmake.
"28SenatorBondarguedthatthecommitteewasapprovingthebillbecauseitwasnecessarytoexpandthenumberofsmallerinvestmentsbeingmadetosmallbusinessesinthepoorestareas,low-incomegeographicareas,andtofillanothergapinaccesstocapitalthatsmallbusinessesface.
InvestmentsforNMVCfundstypicallywillrangefrom$50,000to$300,000versusthe$300,000to$5millionrangefoundintheAgency'sSBICprogram.
"29TheSenatedidnottakefurtheractiononthebill.
TheNewMarketsVentureCapitalProgramActof2000OnDecember14,2000,Representative(laterSenator)JimTalent,chairoftheHouseCommitteeonSmallBusiness,introducedH.
R.
5663,theNewMarketsVentureCapitalProgramActof2000.
30Thebillhadtwoparts:thecurrentNewMarketsVentureCapitalProgramandBusinessLINC.
Thenextday,thebillwasincorporatedbyreferenceintheconferencereportaccompanyingH.
R.
4577,theConsolidatedAppropriationsAct,2001,whichbecamelaw(P.
L.
106-554)onDecember21,2000.
31OnJanuary22,2001,theSBApublishedaninterimfinalruleintheFederalRegisterindicatingitsintentiontoestablishtheNMVCprogram.
TheSBA'sfinalrule,whichformallyestablishedtheNMVCprogram,waspublishedintheFederalRegisteronMay23,2001.
32NMVCCompanyEligibilityandPerformanceRequirementsP.
L.
106-554specifiedthatventurecapitalcompaniesinterestedinparticipatingintheprogrammustsubmitadetailedapplicationtotheSBAthatincludes,amongotheritems,abusinessplandescribinghowthecompanyintendstomakesuccessfuldevelopmentalventurecapitalinvestmentsinidentifiedlow-incomegeographicareas,andinformationregardingthecommunitydevelopmentfinanceorrelevantventurecapitalqualificationsandgeneralreputationofthecompany'smanagement.
3328U.
S.
Congress,SenateCommitteeonSmallBusiness,CommunityDevelopmentandVentureCapitalActof1999,p.
3.
29U.
S.
Congress,SenateCommitteeonSmallBusiness,CommunityDevelopmentandVentureCapitalActof1999,p.
3.
30ThebillwascosponsoredbyRep.
NydiaVelázquez.
31U.
S.
Congress,CommitteeofConference,MakingOmnibusConsolidatedandEmergencySupplementalAppropriationsforFiscalYear2001,reporttoaccompanyH.
R.
4577,106thCong.
,2ndsess.
,December15,2000,H.
Rept.
106-1033(Washington:GPO,2000),pp.
1041-1054.
32SBA,"13CFRPart108:NewMarketsVentureCapitalProgram,InterimFinalRule"66FederalRegister7218-7246,January22,2001;andSBA,"NewMarketsVentureCapitalProgram:FinalRule,"66FederalRegister28601-28632,May23,2001.
33Inadditiontothesetwoitems,aNMVCapplicantmustalsosubmitadescriptionofhowthecompanyintendstoworkwithcommunityorganizationsandseektoaddresstheunmetcapitalneedsofthecommunitiesserved;aproposaldescribinghowthecompanyintendstousethegrantfundsprovidedunderthisparttogiveoperationalassistancetosmallerenterprisesfinancedbythecompany,includinginformationregardingwhetherthecompanyintendstouselicensedprofessionals,whennecessary,onthecompany'sstafforfromanoutsideentity;withrespecttobindingcommitmentstobemadetothecompanyunderthispart,anestimateoftheratioofcashtoin-kindcontributions;aSBANewMarketsVentureCapitalProgramCongressionalResearchService7Inaddition,anNMVCcompanymustbeanewlyformedfor-profitentityoranewlyformedfor-profitsubsidiaryofanexistingentity;beorganizedunderstatelawsolelyforthepurposeofperformingthefunctionsandconductingtheactivitiescontemplatedundertheact;beorganizedeitherasacorporation,alimitedpartnership,oralimitedliabilitycompany;show,totheSBA'ssatisfaction,thatitscurrentorproposedmanagementteamisqualifiedandhastheknowledge,experience,andcapabilityincommunitydevelopmentfinanceorrelevantventurecapitalfinancenecessaryforinvestinginthetypesofbusinessescontemplatedbytheact;andhaveaprimaryobjectiveofeconomicdevelopmentoflow-incomeareas.
34OnJanuary22,2001,theSBAsolicitedapplicationsfromventurecapitalcompaniesandSSBICstoparticipateintheNMVCprogram.
TheSBAhadplannedtoofferanotherroundofapplicationsfortheprogramduringthefirstquarterof2003.
However,thesecondroundofapplicationswascanceledbecause,asmentionedpreviously,P.
L.
108-7,theConsolidatedAppropriationsResolution,2003,whichbecamelawonFebruary20,2003,rescindedtheprogram'sunobligatedfunding.
35TheSBAreceived23applicantsfromcompaniesinterestedinparticipatingintheNMVCprogram,andconditionallyapproved7ofthem.
36Finalapprovalissubjecttotheapplicantmeetingseveralconditions.
Forexample,applicantsarerequiredtoraise,within18monthsofbeingconditionallyapproved,atleast$5millioninprivatecapitalorinbindingcapitalcommitmentsfromoneormoreinvestors(otherthanfederalagenciesordepartments)thatmeetcriteriaestablishedbytheadministrator(theprivatefundsarecalledregulatorycapital).
ApplicantsalsomusthaveinplacebindingcommitmentsfromsourcesotherthantheSBAthatarepayableoravailableoveramultiyearperiodnottoexceed10yearsthatamounttonotlessthan30%ofthetotalamountofregulatorycapitalandcommitmentsraised(30%of$5million=descriptionofthecriteriatobeusedtoevaluatewhetherandtowhatextentthecompanymeetstheobjectivesoftheprogramestablishedunderthispart;informationregardingthemanagementandfinancialstrengthofanyparentfirm,affiliatedfirm,oranyotherfirmessentialtothesuccessofthecompany'sbusinessplan;andsuchotherinformationastheadministratormayrequire.
SeeU.
S.
Congress,CommitteeofConference,MakingOmnibusConsolidatedandEmergencySupplementalAppropriationsforFiscalYear2001,reporttoaccompanyH.
R.
4577,106thCong.
,2ndsess.
,December15,2000,H.
Rept.
106-1033(Washington:GPO,2000),p.
1044.
3413C.
F.
R.
§108.
100;13C.
F.
R.
§108.
110;and13C.
F.
R.
§108.
120.
35P.
L.
108-7,theConsolidatedAppropriationsResolution,2003;andU.
S.
Congress,CommitteeofConference,MakingFurtherContinuingAppropriationsfortheFiscalYear2003,andforOtherPurposes,reporttoaccompanyH.
J.
Res.
2,108thCong.
,1stsess.
,February13,2003,H.
Rept.
108-10(Washington:GPO,2003),p.
787.
36TheinitialapplicationdeadlinewasApril19,2001,andwaslaterextendedtwice—first,toMay21,2001;andsecond,toMay29,2001.
SeeSBA,"NewMarketsVentureCapitalProgram;ExtensionofApplicationDeadline,"66FederalRegister18993,April12,2001;andSBA,"NewMarketsVentureCapitalProgram;ExtensionofApplicationDeadline,"66FederalRegister27721,May18,2001.
SBANewMarketsVentureCapitalProgramCongressionalResearchService8$1.
5million).
37Thisadditionalfundingisnecessarytoguaranteetheapplicant'sabilitytomeettherequireddollar-to-dollarmatchingcontributionforoperationalassistancegrants.
38Sixofthesevencompaniesgrantedconditionalapprovalsubsequentlymetalloftheprogramrequirements(oneinApril2002,threeinMarch2003,oneinApril2003,andoneinAugust2003)andwereacceptedintotheprogramaftersigningaformalparticipationagreementwiththeSBA.
39ThesixNMVCcompaniesinitiallyraised$48millioninprivatecapitalandweresubsequentlyprovided$72millioninleverage.
40ThecompaniesareAdenaVentures,L.
P.
,Athens,Ohio,approvedonApril24,2002,withtargetedlow-incomeareasinOhio,WestVirginia,andMaryland;NewMarketsVenturePartners,CollegePark,Maryland,approvedonMarch5,2003,withtargetedlow-incomeareasinMaryland,Virginia,andtheDistrictofColumbia;CEICommunityVenturesFund,LLC,Portland,Maine,approvedonMarch21,2003,withtargetedlow-incomeareasinMaine,NewHampshire,andVermont;MurexInvestmentsI,L.
P.
,Philadelphia,Pennsylvania,approvedonMarch31,2003,withtargetedlow-incomeareasinPennsylvania,NewJersey,andDelaware;PennVenturePartners,LP,Harrisburg,Pennsylvania,approvedonApril23,2003,withtargetedlow-incomeareasinPennsylvania;SouthernAppalachianFund,L.
P.
,London,Kentucky,approvedonAugust8,2003,withtargetedlow-incomeareasinKentucky,Tennessee,Georgia,Alabama,andMississippi.
41NMVCcompaniesaresubjecttovariousreportingrequirements.
Forexample,foreachfiscalyear,NMVCcompaniesmustfileanannualfinancialstatementwiththeSBAthathasbeenauditedbyanindependentpublicaccountantacceptabletotheSBA.
42Thestatementmustincludeanassessmentofthesocial,economic,orcommunitydevelopmentimpactofeachfinancing;thenumberoffull-timeequivalentjobscreatedasaresultofthefinancing;theimpactontherevenuesandprofitsofthebusinessbeingfinanced;andtheimpactonthetaxespaidbythebusinessbeingfinancedandbyitsemployees.
Thestatementmustalsoincludealistingofthe37TheSBAmayacceptbindingcommitmentsforoperationalassistancematchingresourcesequaltoatleast20%oftherequiredminimumifthecompanyhasaviableplantoraisethebalance.
Innocase,however,willtheSBAdisbursegrantfundsforoperationalassistanceinexcessoftheamountactuallyraised,includingin-kindcontributions.
See13C.
F.
R.
§108.
380.
38P.
L.
106-554authorizedtheSBAtoprovideconditionallyapprovedapplicantsaperiodoftime,nottoexceedtwoyears,tosatisfyallprogramrequirementsnecessarytoparticipateintheprogram.
TheSBAprovidedapplicants18months.
SeeSBA,OfficeofNewMarketsVentureCapital,"NewMarketsVentureCapital(MNVC)Program,FAQs:HowmuchtimedoesaconditionallyapprovedNMVCChavetoraiseitscapitalandgrantmatchingresources"(nolongeravailableonline).
39SBA,OfficeofNewMarketsVentureCapital,"NewMarketsVentureCapital(MNVC)Program,"June2010,p.
13(nolongeravailableonline).
40SBA,OfficeofCongressionalandLegislativeAffairs,"Correspondencewiththeauthor,"June5,2012.
41SBA,"NMVCCompanies,"(nolongeravailableonline);andCommunityDevelopmentVentureCapitalAlliance,"TheNewMarketsVentureCapitalProgram,"July2006,athttps://community-wealth.
org/sites/clone.
community-wealth.
org/files/downloads/paper-cdvca.
pdf.
4213C.
F.
R.
§108.
630.
SBANewMarketsVentureCapitalProgramCongressionalResearchService9numberandpercentageofthebusiness'semployeesthatresideinalow-incomearea.
43Inaddition,NMVCcompaniesarerequiredtosubmittotheSBAaportfoliofinancingreportforeachfinancingmadewithin30daysoftheclosingdate.
44EligibilityofSmallBusinessesandLow-IncomeGeographicAreasNMVCcompaniesarerequiredtoprovidefinancialassistanceandoperationalassistanceonlytosmallbusinessesasdefinedundertheSBA'sSBICprogram.
ThebusinessmusteithermeettheSBA'ssizestandardfortheindustryinwhichitisprimarilyengagedorhaveamaximumnetworthofnomorethan$19.
5millionandaverageafter-taxnetincomefortheprecedingtwoyearsofnotmorethan$6.
5million.
45Allofthecompany'ssubsidiaries,parentcompanies,andaffiliatesareconsideredinthesizestandarddetermination.
46Inaddition,atthecloseofeachNMVCcompany'sfiscalyear,atleast80%ofthecompany'stotalfinancings(intotaldollars)and80%ofthetotalnumberofconcernsinthatcompany'sportfoliomustbesmallbusinessesthat,atthetimeofthefinancing,hadtheirprincipalofficeslocatedinalow-incomearea(low-incomeenterprises).
47NMVCcompaniesthatfailtoreachtheserequiredpercentagesattheendofanyfiscalyearmustbeincompliancebytheendofthefollowingfiscalyear.
TheyarenoteligibleforadditionalleveragefromtheSBAuntiltheyreachtherequiredpercentages.
48Theactdefinesalow-incomeareaasanycensustract,orequivalentcountydivisionasdefinedbytheBureauoftheCensus,thatmeetsanyofthefollowingcriteria:apovertyrateof20%ormore;iflocatedinametropolitanarea,atleast50%ofitshouseholdshaveanincomethatisbelow60%oftheareamediangrossincome;ifnotlocatedinametropolitanarea,hasamedianhouseholdincomethatdoesnotexceed80%ofthestatewidemedianhouseholdincome;islocatedwithinahistoricallyunderutilizedbusinesszone(HUBZone);islocatedinanurbanempowermentzoneorurbanenterprisecommunityasdesignatedbytheDepartmentofHousingandUrbanDevelopment;or4313C.
F.
R.
§108.
630.
4413C.
F.
R.
§108.
640.
45SBA,"SmallBusinessSizeStandards:InflationAdjustmenttoMonetaryBasedSizeStandards,"79FederalRegister33647-33669,June12,2014.
ThepreviousSBICalternativesizestandard,whichwasestablishedin1994andinplacewhentheNewMarketsVentureCapitalProgrambegan,wastangiblenetworthnotinexcessof$18millionandaveragenetincomeafterfederalincometaxes(excludinganycarry-overlosses)fortheprecedingtwocompletedfiscalyearsnotinexcessof$6million.
SeeSBA,"SmallBusinessSizeStandards:IncreaseSizeStandardofSmallBusinessConcernsEligibleforAssistancebySmallBusinessInvestmentCompanies,"59FederalRegister16953-16956,April8,1994.
4613C.
F.
R.
§121.
301(c)(1)and13C.
F.
R.
§121.
301(c)(2).
NMVCcompaniesarenotpermittedtoinvestinpassivebusinesses,realestatebusinesses,projectfinancings,farmlandpurchases,thefinancingofNMVCcompaniesorSBICs,orprojectsthatwillbeusedsubstantiallyforaforeignoperationorwhenmorethan49%oftheemployeesortangibleassetsofthesmallbusinessarelocatedoutsideoftheUnitedStates.
See13C.
F.
R.
§108.
720.
4713C.
F.
R.
§108.
710.
4813C.
F.
R.
§108.
710.
SBANewMarketsVentureCapitalProgramCongressionalResearchService10islocatedinaruralempowermentzoneorruralenterprisecommunityasdesignatedbytheDepartmentofAgriculture.
NMVCLeverageNMVCcompaniesinvestfundstheyhaveraisedthemselves,theirregulatorycapital,insmallbusinesses.
Inaddition,theycanreceiveupto150%ofthatamountfromtheSBA,subjecttotheavailabilityoffunds.
NMVCcompaniesfollowessentiallythesameprocessforobtainingSBAfundingasprescribedundertheSBICprogram.
TheSBA'sfunding,orleverage,comesfromthesaletothirdpartiesof10-yearsecurities(ordebentures),whicharebackedbythefullfaithandcreditoftheUnitedStates.
49BecausetheSBAguaranteesthetimelypaymentoftheprincipalandinterestdueonthesecurities,theSBAisabletoobtainfavorableinterestrates.
NMVCcompaniesareresponsibleformeetingthetermsandconditionssetforthinthedebenture.
NMVCdebenturesaredeferred-interestdebenturesissuedatadiscount(lessthanfacevalue)equaltothefirstfiveyears'interesttoeliminatetheneedforNMVCcompaniestomakeinterestpaymentsduringthatperiod.
Asaresult,NMVCcompaniesmakenopaymentsonthedebentureforfiveyearsfromthedateofissuance,plusthestubperiod,whichensuresthatallNMVCdebentureshavecommonprepaymentandmaturitydatesofeitherMarch1orSeptember1.
50NMVCcompaniesmakesemiannualinterestpaymentsonthefaceamountofthedebentureduringyears6to10,andtheyareresponsibleforpayingthedebenture'sprincipalamountwhenthedebenturereachesitsmaturitydate.
NMVCcompaniesreceiveleveragefromtheSBAinatwo-stepprocess.
First,theysubmitarequesttotheSBAforaconditionalcommitmenttoreserveaspecificamountofleverageforfutureuse.
51ThisrequestauthorizestheSBAtoselltherequesteddebentureamounttoathirdpartyataninterestrateapprovedbytheSBAortopooltherequesteddebentureamountwithotherrequests,providingeachrequestwiththesamematuritydate,interestrates,andconditions.
TheNMVCcompaniesthenapplytotheSBAtodrawagainsttheSBA'sleveragecommitment.
TheserequestsmaycomeatanytimeduringthetermoftheSBA'sleveragecommitment.
52Althoughauthorizedtodoso,theSBAdidnotpoolNMVCdebentures.
ThroughanagreementwiththeSBA,theFederalHomeLoanBankofChicago(FHLB)purchasedandheldalloutstandingNMVCdebenturessinceissuance.
TheFHLBdeterminedtheinterestrateoneachNMVCdebentureusingaspreadoverFHLB'scostoffundsasofthedateofeachissuance.
53TheSBAdidnotallowNMVCcompaniestoprepaytheirdrawsforaperiodof12months(plusthestubperiod)afterissuance.
Prepaymentswerepermittedafterthatwaitingperiod,butonlyon49P.
L.
106-554authorizestheSBAtoselldebentureswithamaturityofupto15years.
TheSBAhasoptedtoselldebentureswithamaturityofupto10years.
50TheSBAdoesnotchargeafeefortheissuanceofdebenturesbyaNMVCcompany.
See13C.
F.
R.
§108.
1130.
Incontrast,theSBAisauthorizedtochargeSBICsa3%originationfeeforeachdebentureandparticipatingsecurityissued(1%atcommitmentand2%atdraw);anannualfee(nottoexceed1.
38%fordebenturesand1.
46%forparticipatingsecurities)ontheleveragedrawn,whichisfixedatthetimeoftheleveragecommitment;andotheradministrativeandunderwritingfees,whichareadjustedannually.
See13C.
F.
R.
§107.
1130;and13C.
F.
R.
§107.
1210.
5113C.
F.
R.
§108.
1230;and13C.
F.
R.
§108.
1240.
5213C.
F.
R.
§108.
1230.
53ThelastNMVCdebenturewasissuedonJune27,2008,ataninterestrateof5.
494%.
SBANewMarketsVentureCapitalProgramCongressionalResearchService11March1orSeptember1ofeachyear.
ThecostofprepaymentisthepresentvalueoftheNMVCdebentureonthesemiannualdatechosenforprepayment.
54Afterreceivingfunds,NMVCcompaniesmadeequityinvestmentsinsmallbusinessesoftheirchoice.
Equityinvestmentsweretypicallyintheformofcommonorpreferredstockandsometimesintheformofsubordinateddebtwithequityfeatures(aslongasthedebtisnotamortizedandprovidesforinterestpaymentscontingentuponandlimitedtotheextentofearnings)orlimitedpartnershipinterests,options,warrants,andsimilarequityinvestmentinstruments.
55OperationalAssistanceGrantsTheSBAisauthorizedtoawardgrantstoNMVCcompaniesandSSBICstoprovidefreeoperationalassistancetosmallbusinessesfinanced,orexpectedtobefinanced,undertheprogram.
56Thegrantsmustbeusedtoprovidemanagement,marketing,andothertechnicalassistancetohelpasmallbusinesswithitsbusinessdevelopment.
57Thegrantshaveadollar-to-dollarmatchingrequirementandcannotbeusedforgeneralandadministrativeexpenses,includingoverhead.
58Matchingresourcesmaybeintheformof(1)cash;(2)in-kindcontributions;(3)bindingcommitmentsforcashorin-kindcontributionsthatarepayableoravailableoveramultiyearperiodacceptabletotheSBAbutnottoexceed10years;or(4)anannuity,purchasedwithfundsotherthanregulatorycapital,fromaninsurancecompanyacceptabletotheSBAthatmaybepayableoveramultiyearperiodacceptabletotheSBAbutnottoexceed10years.
59NMVCcompaniesandSSBICsareeligibleforanoperationalassistancegrantawardequaltotheamountofmatchingresourcesthecompanyhasraised,subjecttotheavailabilityoffunds.
60NMVCcompaniesmustuseatleast80%ofboththegrantfundsandtheirmatchingresourcestoprovidefreeoperationalassistancetosmallbusinesseslocatedinalow-incomearea.
SSBICsmustuseboththegrantfundsawardedbytheSBAandtheirmatchingresourcestoprovidefreeoperationalassistancetosmallbusinesses"inconnectionwithalow-incomeinvestmentmadebytheSSBICwithregulatorycapitalraisedafterSeptember21,2000.
"615413C.
F.
R.
§108.
1610.
55Subordinateddebt(alsoknownassubordinateddebentureorjuniordebt)ranksafterotherdebtsshouldacompanyfallintoliquidationorbankruptcy.
Becausesubordinateddebtisrepayableafterotherdebtshavebeenpaid,itisconsideredtocarryahigherlevelofrisktothelender.
56TheSBAdisbursedoperationalassistancegrantsovera4.
5yearperiod.
SeeSBA,OfficeofNewMarketsVentureCapital,"NewMarketsVentureCapital(MNVC)Program,"June2010,p.
7(nolongeravailableonline).
5713C.
F.
R.
§108.
10.
Someexamplesofoperationalassistanceincludewritingorassistinginthepreparationofabusinessplan;legalassistancerelatingtobusinessformationorreorganization(butnotlitigation);recruitmentofexecutives,creationofInternetcapability,engineering,orothertechnicalservicestocreateorenhanceproductionordistributionofproductsorservices;creationofmarketingmaterials;creationofcustomizedaccountingorinformationsystems;andactiveparticipationinnegotiationwithfinancialinstitutions(debt).
SeeAdenaVentures,L.
P.
,"OperationalAssistance,"Athens,Ohio,athttp://www.
adenaventures.
com/serviceprograms/opsassist.
aspx.
5813C.
F.
R.
§108.
2010;and13C.
F.
R.
§108.
2030.
5913C.
F.
R.
§108.
2040.
6013C.
F.
R.
§108.
2030.
6113C.
F.
R.
§108.
2010.
SBANewMarketsVentureCapitalProgramCongressionalResearchService12ProgramStatisticsAsshowninTable1,NMVCcompaniesreceivedoperationalassistancegrantsinFY2002andFY2003andstartedmakingequityinvestmentsinsmallbusinessesinFY2002.
Table1.
NewMarketsVentureCapitalProgramStatistics,FY2002-FY2020FiscalYearOperationalAssistanceGrantAwards($inmillions)AmountofNMVCFinancings($inmillions)NumberofNMVCFinancingsNumberofSmallBusinessesFinanced2002$3.
75$0.
50112003$10.
65$2.
69662004$0.
00$9.
6722192005$0.
00$8.
6029222006$0.
00$16.
2856352007$0.
00$14.
0259322008$0.
00$13.
3555362009$0.
00$4.
2437242010$0.
00$3.
4230162011$0.
00$2.
5130182012$0.
00$0.
541262013$0.
00$1.
8917102014$0.
00$2.
08542015$0.
00$1.
65542016$0.
00$0.
00002017$0.
00$0.
00002018$0.
00$0.
00002019$0.
00$0.
00002020$0.
00$0.
0000Total$14.
40$81.
4536471aSource:U.
S.
SmallBusinessAdministration(SBA),CongressionalBudgetJustification,variousyears;SBA,PerformanceandAccountabilityReport,variousyears;SBA,OfficeofCongressionalandLegislativeAffairs,"Correspondencewiththeauthor,"onNovember21,2013,December8,2014,January29,2016,December16,2016,August24,2018,December18,2018,andOctober18,2019.
a.
ThetotalnumberofsmallbusinessesfinancedislessthanthesumofsmallbusinessesfinancedeachyearbecauseNMVCcompaniesmaymakemultiplefinancingsintoanyoneoftheir"portfoliocompanies"overthelifeofthefund.
Sincetheprogram'sinception,NMVCcompaniesinvestedmorethan$81.
4millionin71differentsmallbusinesses.
Theprogramreacheditspeak,intermsoftheamountoffinancings,inFY2007,investingnearly$16.
3millionin35differentsmallbusinessesthatyear.
Sincethen,theamountoffinancingseachyeargenerallydeclined—fallingtononewfinancingsinFY2016astheprogram'sinitialinvestmentsexpiredandNMVCcompaniesengagedonlyinadditionalfollow-onfinancingswiththesmallbusinessesintheirportfolios.
SBANewMarketsVentureCapitalProgramCongressionalResearchService13Asmentioned,theNMVCprogram'sactiveunpaidprincipalbalance(includingboththeSBAguaranteedportionandtheunguaranteedportionoftheNMVCcompanies'unpaidprincipalbalance)peakedat$68.
1millioninFY2008,andthenfelleachyearthereafteruntilreaching$0inFY2018.
62CongressionalIssuesTheNMVCprogramhasnotreceivedanyadditionalfundingsince2001.
OppositiontotheprogramwithinCongressbegantogainmomentumwhenPresidentGeorgeW.
BushrecommendedinhisFY2002budgetrequestthattheNMVCprogrambeeliminated,arguingthattheprogramisrelativelyexpensiveandduplicativeofotherfederalprograms:63TheAdministrationsupportstheobjectivesoftheNewMarketsVentureCapital(NMVC)programbutbelievesthoseobjectivescanbeachievedmoreefficientlyandatalowercostthroughotherexistingprograms.
Severalvehiclesandincentivestodirectinvestmentintoeconomicallydistressedcommunitiesalreadyexist.
CommunitiestargetedbyNMVChaveaccesstoawiderangeofprivatefor-profitandeconomicdevelopmentprograms,includingthefederallysupportedcommunitydevelopmentfinancialinstitutionsadministeredthroughtheDepartmentofTreasury.
Inaddition,SBA'sSBICprogram,whichhas412licensedventurecapitalcompanieswithtotalcapitalresourcesamountingto$17.
7billion,isimplementingincentivestoencourageinvestmentineconomicallydistressedareas.
TheNMVCprogramisalsoexpensiverelativetotheimpactthatitisexpectedtohave.
ThetotalcostoftheprograminFY2001is$52million,notincludingadministrativecostofrunningtheprogram.
Sincetheprogramisexpectedtogenerate$150-$200millionofinvestmentactivity,itwillyieldonly$3.
00-$4.
00ofinvestmentforeverytaxpayerdollarspent.
Incomparison,undertheSmallBusinessInvestmentCompany(SBIC)program,thereisnocostassociatedwiththedebentureportionoftheprogram.
64OthersarguedthattheNMVCprogram'stargetedclienteleofsmallbusinesseslocatedineconomicallydistressedareasisinherentlytooriskyforgovernmentinvolvement.
Intheirview,NMVCcompaniesare"designedandcharteredtooperate(asprofit-makingfirms)inamarketnichethatmainstreamventurecapitalfirmswillnottouch.
"65Theprogram'sadvocatescontendedthattheNMVCprogramisnecessarypreciselybecausemainstreamventurecapitalfirmsgenerallyavoidedinvestmentsinsmallbusinesseslocatedineconomicallydistressedareas.
Intheirview,theNMVCprogramisanessentialpartofalargerfederaleffort,whichincludestaxincentives,tofillamarketnicheinprivate-sectorventurecapitalinvestmentsand,intheprocess,helptorevitalizeareasexperiencinglong-termeconomicdifficulties.
TheyalsoobjectedtotheBushAdministration'sargumentthattheprogramisduplicativeofotherfederalprograms.
Intheirview,theNMVCprogramistargetedataclientelethatisnotbeingadequatelyservedbyotherfederalprograms.
6662SBA,OfficeofCongressionalandLegislativeAffairs,"WDSfiles:Table1.
1.
b–ActiveUPBbyProgram,"October18,2019.
63SBA,"FY2002BudgetRequestandPerformancePlan,"p.
15.
64U.
S.
Congress,SenateCommitteeonSmallBusinessandEntrepreneurship,SBA'sFundingPrioritiesforFiscalYear2002,107thCong.
,1stsess.
,May1,2002,S.
Hrg.
107-237(Washington:GPO,2002),p.
45.
65TimothyBates,"GovernmentasVentureCapitalCatalyst:PitfallsandPromisingApproaches,"EconomicDevelopmentQuarterly,vol.
16,no.
49(2002):58,athttps://journals.
sagepub.
com/doi/pdf/10.
1177/089124240201600106.
66U.
S.
Congress,SenateCommitteeonSmallBusiness,ThePresident'sFiscalYear2000BudgetRequestfortheSBANewMarketsVentureCapitalProgramCongressionalResearchService14TheBushAdministrationcontinuedtorecommendtheprogram'seliminationineachofitssubsequentbudgetrequests.
Asmentioned,duringcongressionalconsiderationoftheFY2003budgettheunobligatedbalancesof$10.
5millionforNMVCdebenturesubsidiesand$13.
75millionforoperationalassistancegrantswererescinded.
67Sincethen,legislationhasbeenintroducedtoamendtheNMVCprogram,includingbillstoreducetheamountofcapitalNMVCcompaniesmustraisetobecomeeligibleforoperationalassistancegrants,eliminatethematchingrequirementforoperationalassistancegrants,createanOfficeofNewMarketsVentureCapitalwithintheSBA,requiretheSBAtoprovideconditionallyapprovedNMVCcompaniesafulltwoyearstomeetallprogramrequirements,provideincreasedfinancingtosmallmanufacturers,andamendtheprogram'sdefinitionforlow-incomeareatocorrespondwiththedefinitionusedbytheNewMarketTaxCreditsprogram(Section45D(e)oftheInternalRevenueCodeof1986)(26U.
S.
C.
45D(e)).
ManyofthesebillsalsoincludedprovisionstoprovidetheNMVCprogramadditionalfunding.
68LegislativeEffortstoProvideAdditionalNMVCFundingAsshowninTableA-1intheAppendix,duringthe108thCongress,twobillswereintroduced,oneintheHouseandoneintheSenate,toprovidetheNMVCprogram"suchsubsidybudgetauthorityasmaybenecessarytoguarantee$75millionofdebentures"and$15millionforoperationalassistancegrantsoverFY2004andFY2005.
69Neitherbillwasenacted.
70SmallBusinessAdministration,106thCong.
,1stsess.
,March16,1999,S.
Hrg.
106-118(Washington:GPO,1999),pp.
125,126;U.
S.
Congress,SenateCommitteeonSmallBusinessandEntrepreneurship,SBA'sFundingPrioritiesforFiscalYear2002,107thCong.
,1stsess.
,May1,2001,S.
Hrg.
107-237(Washington:GPO,2002),pp.
14,15,20,26,91-93;U.
S.
Congress,HouseCommitteeonSmallBusiness,SmallBusinessInvestmentExpansionActof2007,reporttoaccompanyH.
R.
3567,110thCong.
,1stsess.
,September25,2007,H.
Rept.
110-110(Washington:GPO,2007),pp.
5,6;andU.
S.
Congress,SenateCommitteeonSmallBusinessandEntrepreneurship,SmallBusinessVentureCapitalActof2007',110thCong.
,1stsess.
,October16,2007,S.
Rept.
110-199(Washington:GPO,2007),pp.
5,6,9-11.
67P.
L.
108-7,theConsolidatedAppropriationsResolution,2003;andU.
S.
Congress,CommitteeofConference,MakingFurtherContinuingAppropriationsfortheFiscalYear2003,andforOtherPurposes,reporttoaccompanyH.
J.
Res.
2,108thCong.
,1stsess.
,February13,2003,H.
Rept.
108-10(Washington:GPO,2003),p.
787.
68Duringthe111thCongress,P.
L.
111-240,theSmallBusinessJobsActof2010,Section1115,NewMarketsVentureCapitalCompanyInvestmentLimitations,includedthefollowinglanguage:"ExcepttotheextentapprovedbytheAdministrator,acoveredNewMarketsVentureCapitalcompanymaynotacquireorissuecommitmentsforsecuritiesunderthistitleforanysingleenterpriseinanaggregateamountequaltomorethan10percentofthesumof—''(A)theregulatorycapitalofthecoveredNewMarketsVentureCapitalcompany;and''(B)thetotalamountofleverageprojectedintheparticipationagreementofthecoveredNewMarketsVentureCapital.
''69H.
R.
2802,theSmallBusinessReauthorizationandManufacturingRevitalizationActof2003,wasintroducedbyRep.
DonaldManzulloonJuly21,2003.
ItwouldhaveprovidedtheNMVCprogramtheadditionalfundingoverFY2004andFY2005.
S.
1886,theMADEinAmericaAct,wasintroducedbySen.
TomDaschleonbehalfofSen.
JohnKerryonNovember18,2003.
ItwouldhaveprovidedtheNMVCprogramtheadditionalfundingoverFY2005andFY2006.
70H.
R.
2802wasreportedbytheHouseCommitteeonSmallBusinessonOctober21,2003,andplacedontheUnionSBANewMarketsVentureCapitalProgramCongressionalResearchService15Duringthe109thCongress,anamendmentwasofferedduringtheHouseduringfloordebateonH.
R.
2862,theScience,State,Justice,Commerce,andRelatedAgenciesAppropriationsAct,2006,toprovide"$30millionindebentureguaranteesand$5millionforoperationalassistancegrantstofundthecreationofafreshroundofNewMarketVentureCapitalcompanies…paidforbyusingfundsfromtheSmallBusinessAdministration'ssalaryandexpenseaccount.
"71Theamendmentfailedbyvoicevote.
72AbillintroducedintheHousewouldhaveauthorizedanexpansionoftheNMVCprogramtoincludetheselectionofanNMVCcompanywhoseprimaryobjectivewouldbetheeconomicdevelopmentofsmallbusinesseslocatedinHurricaneKatrina-affectedareas.
Thebillwouldhaveauthorized"suchsubsidybudgetauthorityasmaybenecessarytoguarantee…$50millionofdebenturesissuedbytheGulfRegionNewMarketsVentureCapitalCompany…and$10millionforgrantstotheGulfRegionNewMarketsVentureCapitalCompany.
"73AnotherHousebillwouldhaveprovidedtheNMVCprogram"suchsubsidybudgetauthorityasmaybenecessarytoguarantee$100millionofdebenturesand$25millionforoperationalassistancegrantsforFY2006throughFY2008.
"74Neitherbillwasenacted.
75Duringthe110thCongress,fourbillswereintroduced,twointheHouseandtwointheSenate,toprovidetheNMVCprogramadditionalfunding.
OneoftheHousebillswouldhaveprovidedtheNMVCprogramsuchsubsidybudgetauthorityasmaybenecessarytoguarantee$100millionofdebenturesand$25millionforoperationalassistancegrantsforFY2007throughFY2009.
76TheotherHousebillwouldhaveprovidedtheNMVCprogramsuchsubsidybudgetauthorityasmaybenecessarytoguarantee$30millionofdebenturesand$5millionforoperationalassistancegrantsforFY2008throughFY2010.
77ThetwoSenatebillswouldhaveprovidedtheNMVCprogram$20millionforoperationalassistancegrants.
78Noneofthesebillswasenacted.
CalendaronMarch8,2004.
TheHousetooknofurtheractiononthebill.
S.
1886wasreferredtotheSenateCommitteeonSmallBusinessandEntrepreneurship.
Nofurtheractiontookplaceonthebill.
71Rep.
GwenMoore,"ConsiderationofH.
R.
2862,theScience,State,Justice,Commerce,andRelatedAgenciesAppropriationsAct,2006,"Housedebate,CongressionalRecord,vol.
151,part79(June15,2005),p.
H4511.
72Rep.
GwenMoore,"ConsiderationofH.
R.
2862,theScience,State,Justice,Commerce,andRelatedAgenciesAppropriationsAct,2006,"Housedebate,CongressionalRecord,vol.
151,part79(June15,2005),p.
H4512.
73H.
R.
4234,theSmallBusinessGulfCoastRevitalizationActof2005,Section104.
GulfRegionNewMarketsVentureCapitalCompany.
ThebillwasintroducedbyRep.
NydiaVelázquezonNovember5,2005.
74H.
R.
4303,theSecuringEquityfortheEconomicDevelopmentofLowIncomeAreasActof2005,wasintroducedbyRep.
GwenMooreonNovember10,2005.
75H.
R.
4303wasreferredtotheHouseCommitteeonSmallBusiness.
TheHousetooknofurtheractiononthebill.
H.
R.
4234wasreferredtotheHouseCommitteeonSmallBusiness.
TheHousetooknofurtheractiononthebill.
76H.
R.
1719,theSecuringEquityfortheEconomicDevelopmentofLowIncomeAreasActof2007,wasintroducedbyRep.
GwenMooreonMarch27,2007.
ThebillwasreferredtotheHouseCommitteeonSmallBusiness.
TheHousetooknofurtheractiononthebill.
77H.
R.
3567,theSmallBusinessInvestmentExpansionActof2007,wasintroducedbyRep.
JasonAltmireonSeptember18,2007.
ThebillwasreferredtotheHouseCommitteeonSmallBusinessandreportedonSeptember25,2007.
TheHousepasseditonSeptember27,2007,byavoteof325-72.
ThebillwasreceivedintheSenateonSeptember28,2007,andreferredtotheSenateCommitteeonSmallBusinessandEntrepreneurship.
TheSenatetooknofurtheractiononthebill.
78S.
1663,theSecuringEquityfortheEconomicDevelopmentofLowIncomeAreasActof2007,wasintroducedbySen.
JohnKerryonJune19,2007,andreferredtotheSenateCommitteeonSmallBusinessandEntrepreneurship.
TheadditionalfundingforoperationalassistancegrantswouldhavebeenavailablefromFY2007throughFY2010.
ThebillwasincorporatedintoS.
1662,theSmallBusinessVentureCapitalActof2007,whichaddressedtheSBA'sSBICprogram.
Thatbill,asamended,wasreportedbytheSenateCommitteeonSmallBusinessandEntrepreneurshiponOctober16,2007.
TheSenatetooknofurtheractiononthebill.
S.
2920,theSBAReauthorizationandImprovementActof2008,wasintroducedbySen.
JohnKerryonApril24,2008.
TheadditionalfundingforoperationalassistancegrantswouldhavebeenavailablefromFY2008throughFY2010.
ThebillwasplacedontheSenateLegislativeSBANewMarketsVentureCapitalProgramCongressionalResearchService16Duringthe111thCongress,twobillswereintroducedintheHousetoprovidetheNMVCprogramadditionalfunding.
OneofthebillswouldhaveprovidedtheNMVCprogramsuchsubsidybudgetauthorityasmaybenecessarytoguarantee$100millionofdebenturesand$25millionforoperationalassistancegrantsforFY2009throughFY2011.
79TheotherbillwouldhaveprovidedtheNMVCprogramsuchsubsidybudgetauthorityasmaybenecessarytoguarantee$100millionofdebenturesand$20millionforoperationalassistancegrantsforFY2010throughFY2011.
80Duringthe112thCongress,onebillwasintroducedtoprovideadditionalfundingfortheNMVCprogram.
RepresentativeNydiaVelázquezintroducedH.
R.
2872,theJobCreationandUrbanRevitalizationActof2011,onSeptember8,2011.
ThebillwouldhaveprovidedtheNMVCprogramsuchsubsidybudgetauthorityasmaybenecessarytoguarantee$75millionofdebenturesand$15millionforoperationalassistancegrantsforFY2012throughFY2013.
ThebillwasreferredtotheHouseCommitteeonSmallBusinessonSeptember8,2011.
Nofurtheractionwastakenonthebill.
NoNMVCbillswereintroducedduringthe113ththrough115thCongresses.
TwoNMVCbillswereintroducedduringthe116thCongress:H.
R.
6312,theCOVID-19ReliefforSmallBusinessesActof2020,andH.
R.
6342,theSBICCapitalInfusionActof2020.
H.
R.
6312wouldhavereauthorizedtheNMVCprogramfromFY2020throughFY2025,providedcreditsubsidynecessarytofundupto$10billioninSBA-guaranteeddebentures,andappropriated$2billionforNMVCoperationalassistancegrants.
H.
R.
6342wouldhavereauthorizedtheNMVCprogramfromFY2021throughFY2026,providedcreditsubsidynecessarytofundupto$10billioninSBA-guaranteeddebentures,andappropriated$2billionforNMVCoperationalassistancegrants.
BothbillswerereferredtotheHouseCommitteeonSmallBusiness.
RelatedSBICProgramDevelopmentsP.
L.
111-5,theAmericanRecoveryandReinvestmentActof2009(ARRA),includedprovisionsdesignedtoencourageSBICinvestmentsinlow-incomeareas.
TheactallowedanSBIClicensedonorafterOctober1,2009,toelecttohaveamaximumleverageamountof$175millioninsteadof$150million(laterincreasedto$175million)ifthatSBIChasinvestedatleast50%ofitsfinancingsinlow-incomegeographicareas,asdefinedundertheNMVCprogram,andcertifiedthatatleast50%ofitsfutureinvestmentswillbeinlow-incomegeographicareas.
81ARRAalsoCalendarunderGeneralOrdersunderReadtheFirstTimeonSeptember24,2008,anditwasplacedontheSenateLegislativeCalendarunderGeneralOrdersunderReadtheSecondTimeonSeptember28,2008.
TheSenatetooknofurtheractiononthebill.
79H.
R.
1491,theSecuringEquityfortheEconomicDevelopmentofLowIncomeAreasActof2009,wasintroducedbyRep.
GwenMooreonMarch12,2009,andreferredtotheHouseCommitteeonSmallBusiness.
TheHousetooknofurtheractiononthebill.
80H.
R.
3722,theEnhancedNewMarketsandExpandedInvestmentinRenewableEnergyforSmallManufacturersActof2009,wasintroducedbyRep.
AnnKirkpatrickonOctober6,2009,andreferredtotheHouseCommitteeonSmallBusiness.
Thebill'sprovisionswereincorporatedintoH.
R.
3854,theSmallBusinessFinancingandInvestmentActof2009,whichwasintroducedbyRep.
KurtSchraderonOctober20,2009.
ThatbillwasreportedbytheHouseCommitteeonSmallBusinessonOctober26,2009,andpassedbytheHouse,byavoteof389-32,onOctober29,2009.
ThebillwasreceivedintheSenateandreferredtotheSenateCommitteeonSmallBusinessandEntrepreneurshiponNovember2,2009.
TheSenatetooknofurtheractiononthebill.
8113C.
F.
R.
§107.
1150.
P.
L.
115-187,theSmallBusinessInvestmentOpportunityActof2017,increasedtheamountofoutstandingleverageallowedforindividualSBICsto$175millionfrom$150million.
SBANewMarketsVentureCapitalProgramCongressionalResearchService17increasedthemaximumamountofleverageavailablefortwoormorelicensesundercommoncontrolto$250millionfrom$225millioniftheserequirementsaremet.
82Inaddition,onApril7,2011,theSBAannounceda$1billionimpactinvestmentSBICinitiative(providingupto$150millioninleverageinFY2012andupto$200millioninleverageperfiscalyearthereafteruntilthelimitisreached).
Underthisinitiative,SBA-licensedimpactinvestmentdebentureSBICsarerequiredtoinvestatleast50%oftheirfinancings,"whichtargetareasofcriticalnationalpriorityincludingunderservedmarketsandcommunitiesfacingbarrierstoaccesstocreditandcapital.
"83Toreceiveanimpactinvestment,asmallbusinessmustmeetatleastoneofthefollowingcriteria:belocatedinor,atthetimeoftheinitialinvestment,haveatleast35%ofitsfull-timeemployeesresidinginanLMIzoneasdefinedin13C.
F.
R.
Section107.
5084orbelocatedinaneconomicallydistressedareaasdefinedbySection3011ofthePublicWorksandEconomicDevelopmentActof1965,asamended(anareawithpercapitaincomeof80%orlessofthenationalaverageoranunemploymentratethatis,forthemostrecent24-monthperiodforwhichdataareavailable,atleast1%greaterthanthenationalaverageunemploymentrate);orbeinanindustrialsectorthattheSBAhasidentifiedasanationalpriority(currentlycleanenergy,education,andadvancedmanufacturing).
Initially,animpactinvestmentSBICcouldreceiveupto$80millioninSBAleverage.
OnJune6,2013,theSBAannouncedthatitwasincreasingthemaximumleverageavailabletoimpactinvestmentSBICsto$150million.
85OnSeptember25,2014,theSBAannouncedseveralchangestotheimpactinvestmentprogramdesignedto"broadenaccesstothefund.
"86TheagencyannouncedthatitwascontinuingtheprogrambeyondFY2016.
Additionally,effectiveOctober1,2014,amongotherchanges,theSBAeliminatedtheprogram's$200millioncollective,per-fiscal-yearleveragecap;addedadvancedmanufacturingtothelistofeligiblesectors;providedeligibilitytobusinessesthatreceiveSmallBusinessInnovationResearchorSmallBusinessTechnologyTransfergrants;andpermitted,throughDecember1,2014,existingdebentureSBICstoapplytooptintotheprogramiftheymeettheprogram'srequirements.
87SubjecttotheSBA'sapproval,impactinvestmentSBICsmaydeviseacustomizeddefinitionofan"impactinvestment"duringthelicensingprocess.
82P.
L.
114-113,theConsolidatedAppropriationsAct,2016,increasedtheamountofoutstandingleverageallowedfortwoormoreSBIClicensesundercommoncontrol(themultiplelicenses/familyoffundslimit)to$350millionfrom$225million.
Theactdidnotaddressthemultiplelicenses/familyoffundslimitforfinancingsinlow-incomegeographicareas.
Presumably,SBICswouldapplythe$350millionmultiplelicenses/familyoffundslimitforallofitsfinancings,includingthoseinlow-incomegeographicareas.
83SBA,"ImpactInvestmentInitiative,"athttps://www.
sba.
gov/document/policy-guidance—start-america-impact-investment-sbic-initiative-policy-update.
ForfurtheranalysisandinformationconcerningtheSBA'simpactinvestmentinitiativeseeCRSReportR41456,SBASmallBusinessInvestmentCompanyProgram,byRobertJayDilger.
84ForthedefinitionofanLMIzone,seefootnote21.
85SBA,"SBAAnnounces$50MillionIncreaseMatchinitsSBICEarlyStageFundand$70MillionBumpinitsImpactInvestmentFund,"June6,2013,athttps://www.
sba.
gov/content/sba-announces-50-million-increase-match-its-sbic-early-stage-fund-and-70-million-bump-its.
86SBA,"SBAExpandsImpactInvestmentFund,"September25,2014,athttps://www.
sba.
gov/content/sba-expands-impact-investment-fund.
87SBA,"SBAExpandsImpactInvestmentFund.
"SBANewMarketsVentureCapitalProgramCongressionalResearchService18OnFebruary3,2016,theSBApublishedaproposedruleintheFederalRegistertoprovideregulationsforimpactinvestmentSBICsregardinglicensing,leverageeligibility,fees,andreportingandcompliancerequirements.
TheproposedregulationswereanindicationoftheSBA'sintentatthattimetocontinuetheimpactinvestmentSBICinitiativeindefinitely.
88NineimpactinvestmentSBICswerelicensed(twoin2011,onein2012,twoin2014,twoin2015,andtwoin2016).
89AsofSeptember30,2020,theymanagedmorethan$942millioninassetsandhadinvestmentsin119smallbusinesses.
InFY2020,impactinvestmentSBICsinvested$156.
4millionin32smallbusinesses.
90AfterreviewingtheimpactinvestmentSBICinitiative'sperformance,onSeptember28,2017,theSBA'sOfficeofInvestmentandInnovation(OII)publishedaletteraddressedtoSBICparticipants,applicants,andallotherinterestedpartiesindicatingthatasofNovember1,2017,itwouldnolongeracceptnewmanagementassessmentquestionnairesfromapplicantsinterestedinparticipatingintheimpactinvestmentSBICinitiative.
TheletterindicatedthattheSBAwasalsoterminatingthe2011/2012ImpactInvestmentFundPolicyletterthattheSBAhadusedtoformtheinitiative'simpactinvestmentfund.
91TheOII'sletterindicatedthattheSBAwastakingtheseactionsforseveralreasons,includingthat"fewqualifiedfundsappliedtobelicensedasImpactSBICs,"that"manyoftheseSBICswouldhaveappliedtotheSBICprogramregardlessoftheexistenceoftheImpactPolicy,"and"theresultsproducedwerenotcommensuratewiththetimeandresourcesexpendedbySBAtomaintainit.
"92Inaddition,onJune11,2018,theSBApublishedanoticeintheFederalRegisterwithdrawingtheproposedrulepublishedonFebruary3,2016,thatwouldhavecreatedregulationsfortheimpactinvestmentSBICinitiativebecausethe"SBAhasdeterminedthatthecostisnotcommensuratewiththebenefits.
"93ConcludingObservationsTheSBA'sLMIandimpactinvestmentinitiativesaredesignedtoencourageSBICinvestmentsinLMIareas.
Asmentioned,inrecentyears,theamountofSBICinvestmentsinLMIzoneshasvariedsomewhat,rangingfrom17.
6%to24.
1%oftotalSBICfinancingseachfiscalyear.
TheNMVCprogramisnolongeractive(itdoesnothaveanyactiveunpaidprincipalbalance)andtheamountandnumberofitsfinancingswerelowerthananticipatedbyitsoriginalsponsorsandbelowlevelsdesiredbyitsadvocates.
SomeMembersofCongressarguethatSBICinvestmentsinLMIareaswouldincreaseiftheNMVCwerereauthorized.
Othersviewtheprogramashavinghadamarginalimpactonthoseinvestments.
InFY2020,SBICsprovided492financingstotaling$826milliontosmallbusinesseslocatedinaLMIincomearea,anaverageinvestmentof$1.
752million.
94NMVCadvocatesargue,asSenator88SBA,"SmallBusinessInvestmentCompany-ImpactSBICs,"81FederalRegister5666-5676,February3,2016.
89SBA,"ImpactInvestmentFundGrowsThreefold,"January27,2015,athttps://www.
sba.
gov/content/impact-investment-fund-grows-threefold;andSBA,"SBICDirectory,"athttps://www.
sba.
gov/funding-programs/investment-capital#paragraph-11.
90SBA,OfficeofCongressionalandLegislativeAffairs,"Correspondencewiththeauthor,"February18,2021.
91SBA,OfficeofInvestmentandInnovation,"Terminationof2011/2012SBICInitiatives:ImpactInvestmentFundPolicyandEarlyStageSBICProgram,"September28,2017,athttps://www.
sba.
gov/sites/default/files/SBA_Update_on_Impact_Policy_and_Early_Stage_SBIC_Program.
pdf.
92SBA,OfficeofInvestmentandInnovation,"Terminationof2011/2012SBICInitiatives:ImpactInvestmentFundPolicyandEarlyStageSBICProgram.
"93SBA,"SmallBusinessInvestmentCompany-ImpactSBICs,"83FederalRegister26874-26875,June11,2018.
94SBA,OfficeofCongressionalandLegislativeAffairs,"Correspondencewiththeauthor,"February18,2021.
SBANewMarketsVentureCapitalProgramCongressionalResearchService19BonddidwhentheNMVCprogramwasproposed,thattheNMVCprogramtargetssmallbusinessesseekingmuchsmallerinvestments.
95ThedebateovertheNMVCprogram'sfuture,particularlywhethertheprogramshouldbeprovidedadditionalfunding,is,inmanyways,reflectiveofbroaderdisagreementsabouttheroleofgovernment,andtheSBA,inprivateenterprise.
SomebelievethefederalgovernmentandtheSBAshouldtakeanactiveroleinassistingsmallbusinessestoaccesscapital—throughtheprovisionofloanguarantees,equityfinancing,andmanagementtraining—tofurthertheeconomicrecovery.
Intheirview,theSBA'sprogramsfillamarketnichebyprovidingloanstosmallbusinessesunabletogetcreditelsewhere,equityfinancingstosmallbusinessesoftenoverlookedbyprivateinvestors,andtrainingfornewandaspiringentrepreneursunabletofindaffordabletrainingelsewhere.
TheyassertthatincreasingfundingfortheNMVCprogramwillcreatejobsbymakingcapitalavailabletoentrepreneursunabletofinditintheprivatemarketplace.
Othersworryaboutthelong-termadverseeconomiceffectsofthefederaldeficit.
Insteadofsupportingincreasedfundingforfederalspendingprograms,theyadvocatebusinesstaxreduction,reformoffinancialcreditmarketregulation,andfederalfiscalrestraintasthebestmeanstoassistsmallbusinesses,generateeconomicgrowth,andcreatejobs.
Theyareparticularlyinterestedinachievinggreatergovernmentefficiencybyeliminatingfederalspendingprograms,suchastheNMVCprogram,thattheyperceiveareduplicativeofothers.
95U.
S.
Congress,SenateCommitteeonSmallBusiness,CommunityDevelopmentandVentureCapitalActof1999,reporttoaccompanyS.
1594,106thCong.
,2ndsess.
,August25,2000,S.
Rept.
106-383(Washington:GPO,2000),p.
3.
SBANewMarketsVentureCapitalProgramCongressionalResearchService20Appendix.
LegislativeEffortstoProvideAdditionalFundingfortheNMVCProgramTableA-1.
LegislativeEffortstoProvideAdditionalNMVCFundingCongressLegislationandSponsorFundingNecessarytoSupportNMVCDebentureGuaranteeofFundingforOperationalAssistanceGrantsLegislativeAction108thH.
R.
2802,theSmallBusinessReauthorizationandManufacturingRevitalizationActof2003(RepresentativeDonaldManzullo)$75million$15millionIntroducedonJuly21,2003,andreferredtotheHouseCommitteeonSmallBusiness;reportedbytheHouseCommitteeonSmallBusinessonOctober21,2003,andplacedontheUnionCalendaronMarch8,2004.
Nofurtheraction.
S.
1886,theMADEinAmericaAct(bySenatorTomDaschleonbehalfofSenatorJohnKerry)$75million$15millionIntroducedonNovember18,2003,andreferredtotheSenateCommitteeonSmallBusinessandEntrepreneurship.
Nofurtheraction.
109thH.
Amdt.
268,toH.
R.
2862,theScience,State,Justice,Commerce,andRelatedAgenciesAppropriationsAct,2006,toprovidetheNMVCprogram$30millionindebentureguaranteesand$5millionforoperationalassistance(RepresentativeGwenMoore)$30million$5millionOfferedonJune15,2005.
Failedbyvoicevote.
H.
R.
4234,theSmallBusinessGulfCoastRevitalizationActof2005(RepresentativeNydiaVelázquez)$50million$10millionIntroducedonNovember5,2005,andreferredtotheHouseCommitteeonSmallBusiness.
Nofurtheraction.
H.
R.
4303,theSecuringEquityfortheEconomicDevelopmentofLowIncomeAreasActof2005(RepresentativeGwenMoore)$100million$25millionIntroducedonNovember10,2005,andreferredtotheHouseCommitteeonSmallBusiness.
Nofurtheraction.
SBANewMarketsVentureCapitalProgramCongressionalResearchService21CongressLegislationandSponsorFundingNecessarytoSupportNMVCDebentureGuaranteeofFundingforOperationalAssistanceGrantsLegislativeAction110thH.
R.
1719,theSecuringEquityfortheEconomicDevelopmentofLowIncomeAreasActof2007(RepresentativeGwenMoore)$100million$25millionIntroducedonMarch27,2007,andreferredtotheHouseCommitteeonSmallBusiness.
Nofurtheraction.
H.
R.
3567,theSmallBusinessInvestmentExpansionActof2007(RepresentativeJasonAltmire)$30million$5millionIntroducedonSeptember18,2007,andreferredtotheHouseCommitteeonSmallBusiness;reportedbytheHouseCommitteeonSmallBusinessonSeptember25,2007;passedbytheHouseonSeptember27,2007,byavoteof325-72;receivedintheSenateonSeptember28,2007,andreferredtotheSenateCommitteeonSmallBusinessandEntrepreneurship.
Nofurtheraction.
S.
1663,theSecuringEquityfortheEconomicDevelopmentofLowIncomeAreasActof2007(SenatorJohnKerry)NA$20millionIntroducedonJune19,2007,andreferredtotheSenateCommitteeonSmallBusinessandEntrepreneurship;incorporatedintoS.
1662,theSmallBusinessVentureCapitalActof2007,whichaddressedtheSmallBusinessAdministration'sSmallBusinessInvestmentCompanyprogram;thatbill,asamended,wasreportedbytheSenateCommitteeonSmallBusinessandEntrepreneurshiponOctober16,2007.
Nofurtheraction.
S.
2920,theSBAReauthorizationandImprovementActof2008(SenatorJohnKerry)NA$20millionIntroducedonApril24,2008,andplacedontheSenateLegislativeCalendarunderGeneralOrdersunderReadtheFirstTimeonSeptember24,2008;placedontheSenateLegislativeCalendarunderGeneralOrdersunderReadtheSecondTimeonSeptember28,2008.
Nofurtheraction.
SBANewMarketsVentureCapitalProgramCongressionalResearchService22CongressLegislationandSponsorFundingNecessarytoSupportNMVCDebentureGuaranteeofFundingforOperationalAssistanceGrantsLegislativeAction111thH.
R.
1491,theSecuringEquityfortheEconomicDevelopmentofLowIncomeAreasActof2009(RepresentativeGwenMoore)$100million$25millionIntroducedonMarch12,2009,andreferredtotheHouseCommitteeonSmallBusiness.
Nofurtheraction.
H.
R.
3722,theEnhancedNewMarketsandExpandedInvestmentinRenewableEnergyforSmallManufacturersActof2009(RepresentativeAnnKirkpatrick)$100million$20millionIntroducedonOctober6,2009,andreferredtotheHouseCommitteeonSmallBusiness;incorporatedintoH.
R.
3854,theSmallBusinessFinancingandInvestmentActof2009,introducedbyRepresentativeKurtSchraderonOctober20,2009;thatbillwasreportedbytheHouseCommitteeonSmallBusinessonOctober26,2009,andpassedbytheHouse,byavoteof389-32,onOctober29,2009;receivedintheSenateandreferredtotheSenateCommitteeonSmallBusinessandEntrepreneurshiponNovember2,2009.
Nofurtheraction.
112thH.
R.
2872,theJobCreationandUrbanRevitalizationActof2011(RepresentativeNydiaVelázquez)$75million$15millionIntroducedonSeptember8,2011,andreferredtotheHouseCommitteeonSmallBusiness.
Nofurtheraction.
113thNone114thNone115thNone116thH.
R.
6312,theCOVID-19ReliefforSmallBusinessesActof2020(RepresentativeNydiaVelázquez)$10billion$2billionIntroducedonMarch19,2020,andreferredtotheHouseCommitteeonSmallBusiness.
Nofurtheraction.
H.
R.
6342,theSBICCapitalInfusionActof2020(RepresentativeShariceDavids)$10billionIntroducedonMarch23,2020,andreferredtotheHouseCommitteeonSmallBusiness.
Nofurtheraction.
Source:LegislativeInformationServicedatabase,CongressionalResearchService.
SBANewMarketsVentureCapitalProgramCongressionalResearchServiceR42565·VERSION20·UPDATED23AuthorInformationRobertJayDilgerSeniorSpecialistinAmericanNationalGovernmentDisclaimerThisdocumentwaspreparedbytheCongressionalResearchService(CRS).
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