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How to Seek SBIC Financing
SBIC Branch Offices
Small business investment companies (SBICs)
exist to supply equity capital, long-term loans and management assistance to
qualifying small businesses.
The privately owned and operated SBICs use
their own capital and funds borrowed from the U.S. Small Business
Administration (SBA) to provide financing to small businesses in the form of
equity securities and long-term loans. SBICs are profit seeking
organizations that select small businesses to be financed within rules and
regulations set by SBA. Specialized SBICs (SSBIC) are a particular type of
SBIC that provide assistance solely to small businesses owned by socially or
economically disadvantaged persons.
SBICs invest in a broad range of industries.
Some SBICs seek out small businesses with new products or services because
of the strong growth potential of such firms. Some SBICs specialize in the
field in which their management has special competency. Most SBICs, however,
consider a wide variety of investment opportunities.
Only firms defined by SBA as small are eligible
for SBIC financing. The SBA defines a company as small when its net worth is
$18.0 million or less, and its average net (after tax) income for the
preceding two years does not exceed $6.0 million. For businesses in
industries for which the above standards are too low, alternative size
standards are available. In determining whether a business qualifies, all of
the business's parents, subsidiaries and affiliates are considered.
Approaching an
SBIC
1. Research the
SBICs
If you own or operate a small business and
would like to obtain SBIC financing, you should first identify and
investigate existing SBICs that may be interested in financing your company.
Use this directory as a first step in learning as much as possible about
SBICs in your state, or in other areas important to your company's needs. In
choosing an SBIC, consider the types of investments it makes, how much money
is available for investment and how much might be available in the future.
You should also consider whether the SBIC can offer you management services
appropriate to your needs.
2. Plan in
Advance
You should determine your company's needs and
research SBICs well in advance-long before you will actually need the money.
Your research will take time, as will the SBIC's research of your business.
3. Prepare a
Business Plan
When you've identified the SBICs you think are
best suited to provide financing for your company, you will need to prepare
a presentation. Your initial presentation will play a major role in your
success in obtaining financing. It is up to you to demonstrate that an
investment in your firm is worthwhile. The best way to show worth is by
presenting a detailed and comprehensive business plan or prospectus that
includes, at a minimum, the following information:
A.
Identification
o
The name of the business as it appears on the official records
of the state or community in which it operates.
o
The city, county, and state of the principal location and any
branch offices or facilities.
o
The form of business organization, and if a corporation, the
date and state of incorporation.
B.
Product or Service
o
A description of the business performed, including the
principal products sold or services rendered.
o
A history of the general development of the products and/or
services during the past five years (or since inception).
o
Information about the relative importance of each principal
product or service to the volume of the business and to its profits.
C.
Product Facilities and Property
o
Description of real and physical property and adaptability to
other business ventures.
o
Description of the technical attributes of production
facilities.
D.
Marketing
o
Detailed information about your business's customer-base,
including potential customers. Indicate the percentage of gross revenue
generated by your five largest customers.
o
A marketing survey and/or economic feasibility study.
o
A description of the distribution system by which you provide
products or services.
E.
Competition
o
A descriptive summary of the competitive conditions in the
industry in which your business is engaged, including your concern's
position relative to its largest and smallest competitors.
o
A full explanation and summary of your business's pricing
policies.
F.
Management
o
Brief resumes of the business's management personnel and
principal owners including their ages, education, and business experience.
o
Banking, business, and personal references for each member of
management and for the principal owners.
G.
Financial Statements
o
Balance sheets and profit and loss statements for the last
three fiscal years or from your business's inception.
o
Detailed projections of revenues, expenses, and net earnings
for the coming year.
o
Statements of the amount of funding you are requesting and the
time requirement for the funds.
o
The reasons for your request for funds and a description of
the proposed uses.
o A description of the benefits you expect your business to gain from the financing: improvement in financial position, expense reduction, increase in efficiency, and any other information that may be pertinent to your particular business