SBIC Report: GAO Issues 2015 Investment Report on SBIC Funds

February 10, 2016

The Government Accountability Office (GAO) issued a report on Small Business Investment Companies (SBICs) titled “Characteristics and Investment Performance of Single and Multiple Licensees.” The Jan. 27 report found that the characteristics of single- and multiple-licensee entities were similar in terms of geographic distribution and management distribution. The licensees invested in a similar range of industries and geographic areas.

Overall Number of SBICs by Type as of September 30, 2014

Multiple-License SBICs Single-License SBICs
Debenture 13 57
Participating Securities 23 30
Specialized 1 8
Bank-Owned/Non-Leveraged 22 23
TOTAL 176 118

Multiple Licensees Demonstrate Better Aggregate Investment Performance

The performance of the two groups of SBICs varied, with multiple-licensee funds showing better aggregate performance even though the attributes of the investments were similar. From 2005 through 2014, only 6 percent of multiple-license debenture SBICs were put into liquidation. In that same period, 39 percent of single licensees were put into liquidation.

Multiple Licensees Show Large Growth in Percentage of Overall Leverage Controlled

The multiple-licensee funds controlled most of the $7 billion SBIC leverage at the end of fiscal year 2014. Multiple licensees controlled $5.2 billion of leverage, or 74 percent of the leverage. This is up significantly from 2005, when multiple licensees controlled only 24 percent of the outstanding leverage.

Other Findings

  • The overall number of SBICs is shrinking, but the number of multiple-licensee SBICs is growing.
  • Few multiple licensees use the maximum amount of leverage.
  • Multiple and single licensees made most of their investments in the industries of manufacturing, professional services, information, and health care and social assistance.
  • SBIC investments were made in all states plus Washington, D.C., as well as Puerto Rico and the Virgin Islands.
  • Investments in low- or moderate-income (LMI) areas were similar, at 19 percent of overall multiple-licensee total dollar investments and 18 percent of single-licensee total dollar investments.

For the full text of the report, click here.

The private equity practice group at McGuireWoods is dedicated to keeping clients advised of new legislative and business developments as they occur. If you have any questions regarding these issues, please feel free to contact Mark A. Kromkowski (312.849.8170) or your primary attorney at McGuireWoods.


For more SBIC Insights, see our alert "SBIC Report: SBA Announces Proposed Rule Creating the Impact SBIC."

Subscribe
Back to top