A Summary of the SBA Investment Fund Program
The Small Business Administration, or SBA, is a government agency that focuses on the creation, support, and growth of small business in America. Through the provision of loans to small businesses as well as being able to assume responsibility for loans taken out by small businesses from other sources, the SBA allows for the betterment of America’s small businesses.
The SBA also aids victims of natural disasters to help restart the business and continue with normal operations as soon as possible. The SBA also allocates what they consider a fair amount of government contracts to small businesses as well as the sale of surplus to small businesses. One of the most important contributions to small businesses is the licensing of small business investment companies, or SBICs.
SBICs are the SBA investment fund that they invest in and aid in managing small business. This was brought about when the Federal Reserve Board reported a sever lack of long-term financial backing for small private businesses, which limited growth. As a response, the Small Business Investment Act of 1958 was passed, which allowed venture capitalists to borrow federal money to match or exceed privately raised funds to invest in small businesses. This allowed for a much greater amount of money to be invested in small businesses because the amount of privately raised funds required to effectively invest was effectively reduced to a fraction of the amount previously required to make a difference. One of the main reasons that this was so heavily stressed was that the United States government wanted to encourage technological innovations to remain competitive with the Soviet Union, which makes the formation of the SBICs another product of the Cold War that benefitted America.
By forming as an SBIC or as a minority enterprise small business investment company, more commonly referred to as MESBICs, the venture company is allowed to draw the aforementioned funds. With these funds then invested into a small business, the small business grows, and as it grows, it pays more taxes back to the government. These taxes are usually more than enough to cover the costs of the investment, which allows for more money to be invested back into small businesses. Because of the self-sufficiency of the program, it has been credited for the establishment, growth, and success of many thousands of small businesses as well as the hundreds of thousands of jobs that were created as a result. Unfortunately, many regulations were imposed by the SBA on the SBA investment fund in 2005 and as such, the role of SBICs has decreased dramatically.
The SBA investment fund can be credited with the creation and sustentation of thousands of businesses. Small businesses are the backbone of America’s economy, and through the program the revenue of the federal government levied from taxes increased dramatically with the induction of the program. It is unfortunate to see that such a program has been hindered, especially in these trying times when the small businesses of the country need that extra help to stay afloat.