Regulatory and Compliance Intersection of Investment Advisors to Small Business Investment Companies and Private Fund Advisors | Foreside

Background

A Small Business Investment Company (“SBIC”) is a privately owned and operated company that makes long-term investments in American small businesses and is licensed by the U.S. Small Business Administration (the “SBA” or “Administration”). The SBA conducts the SBIC Program through its Investment Division, located in Washington, D.C. The SBIC Program encourages the creation of SBIC funds to increase the flow of investment capital to small businesses and smaller enterprises in the United States. A discussion of the application process and requirements to become an SBIC is beyond the scope of this article. For further information on the application and licensing process, please refer to the SBA website.

It is common for a private fund (“PF”) manager to own and operate an SBIC fund(s). The principal reason for a PF manager firm to become licensed as an SBIC is access to financing (leverage) provided by the SBA. Fund managers…

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