SBIC is an SBA financial support service. It is a privately owned company licensed and regulated by SBA. SBICs invest in small businesses eligible to invest through debt, equity, or a combination of the two. Plus, the loaned funds from the SBA Guarantee. SBIC companies usually target mature, profitable companies with sufficient cash flow to pay interest. However, each SBIC has its investment profile regarding the target industry, geography, company maturity, types and volume of financing it offers. There are some universal requirements. SBA does not invest directly in small businesses but does provide funding to qualified SBIC companies with expertise in specific sectors or industries. They usually use their capital SBIC and borrowed money with an SBA guarantee to lend to small businesses. Then these tiny investment firms use their funds, along with SBA-secured financing, to invest in small businesses.
Debt is a loan granted by SBIC to a company that the company must repay and any interest. Equity is an ownership interest that SBIC obtains in a company in exchange for providing financing. Sometimes, SBIC invests in a company through debt and equity. This investment includes both loans and equity. A typical investment is made in SBIC over three years. SBIC loans can range from $ 25,000 to $ 10 million.
- Debt: A typical SBIC loan ranges from $ 250,000 to $ 10 million, with an interest rate between 9% and 16%.
- Equity: SBICs will invest in your business in exchange for an ownership interest in your company. Typical investments range from $ 100,000 to $ 5 million.
- Debt Equity: Financing includes loans and equity. Interest rates on loans are typically between 10% and 14%. Investments range from $ 250,000 to $ 10 million.