Small Business Investment Act

104 169

    Smaller Enterprise Defined

    • The law defines a smaller enterprise as one with less than $6 million net financial worth (including its affiliates) and an average net income of less than $2 million (after federal income taxes) in the two years before the assistance. It defined a long term or equity capital deal as at least one year.

    Investment Companies Licensed

    • The law established the Small Business Investment Division of the SBA to license "small business investment companies" for at least 30 years (at least 10 years for a limited partnership).

      The license is issued based upon the need and availability of small business financing in the area, business reputation of the owners and management and probability of success and financial soundness. Exceptions can be made for applicants with at least $3 million in private capital and a viable business plan that includes a timetable for reaching the $6 million threshold.

    Other Requirements

    • The agency also must approve where the proposed investment company (and its branch offices) wants to locate. The company's articles of incorporation must specify why it was formed, location of its office and the classes and amount of its capital stock. The agency must approve the company's articles and any amendments.

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