SBA's Investment Programs
In 1958 Congress created The Small Business Investment Company (SBIC) program. SBICs, licensed
by the Small Business Administration, are privately owned and managed investment firms. They are
participants in a vital partnership between government and the private sector economy.
All SBICs are profit-motivated businesses. A major incentive for SBICs to invest in small
businesses is the chance to share in the success of the small business if it grows and
prospers.
Equity (venture) capital or financing is money raised by a business in exchange for a share of
ownership in the company. Ownership is represented by owning shares of stock outright or having the
right to convert other financial instruments into stock of that private company. Two key sources of
equity capital for new and emerging businesses are angel investors and venture capital
firms.
Typically, angel capital and venture capital investors provide capital unsecured by
assets to young, private companies with the potential for rapid growth. Such investing covers most
industries and is appropriate for businesses through the range of developmental stages. Investing
in new or very early companies inherently carries a high degree of risk. But venture capital is
long term or “patient capital” that allows companies the time to mature into profitable
organizations.
