For Subscribers

Bill Battle Can restructuring save a program that helps entrepreneurs but hurts the budget?

By Stephen Barlas

Opinions expressed by Entrepreneur contributors are their own.

A Senior House Republican is leading efforts to replace an SBAVC program that has spilled copious red ink since the dotcom boomwent bust. The Small Business Investment Company (SBIC)Participating Securities (PS) program made speculative, mostlyequity investments in entrepreneurial startups with little accessto VC funds, either because of their locations (outside SiliconValley, Boston and a few other places) or their business types(non-IT, nonsoftware, etc.). The supposedly self-supporting programhas lost about $2.7 billion since the tech bubble burst.

The Bush administration wants to drop the program entirely. ButRep. Don Manzullo (R-IL), chairman of the House Small BusinessCommittee, is trying to restructure it instead. He introduced theSBIC Participating Debenture Act of 2005 (H.R. 3429) in July. Itwould convert the PS program into a Participating Debentures (PD)program. SBICs would have to repay the SBA out of their revenue forthe interest payments the SBA makes on their behalf toinstitutional investors, who buy debentures.

Lee Mercer, president of the National Association of SmallBusiness Investment Companies, says the bill assures that a new PDprogram would be self-supporting. But the Bush administrationthinks the bill has some weaknesses. Jaime A. Guzmán-Fournier,associate administrator for the SBA's Office of Investment,says the PS program may have too many structural problems to risktrying to resuscitate it.

How do entrepreneurs feel about it? Mark A. Redding, CEO ofBanner Services Corp., a metal products manufacturer with 60employees in Carol Stream, Illinois, says he could not havepurchased the then-failing company in 2003 without equity from thePS program. He says, "Now, a viable small business, formerlyin decline, is regenerating itself after 44 years inbusiness."

Stephen Barlas is a freelance business reporter who coversthe Washington beat for 15 magazines.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business News

Netflix Co-CEO Says the Company Used AI on a TV Show for the First Time: 'Completed 10 Times Faster'

Netflix chief Ted Sarandos says audiences were "thrilled" with the AI-generated footage.

Starting a Business

How These 2 Stanford Students Turned a College Project Into a WNBA Partnership

Amanda Calabrese and Greta Meyer turned a college project into Sequel, the first spiral tampon, now backed by a WNBA partnership with the Indiana Fever.

Leadership

The Surprising Strategy Smart Leaders Use to Outpace Disruption

In a world where AI is reshaping industries overnight, agility is a leader's greatest asset. The companies thriving aren't the fastest or the biggest, but the ones built to adapt.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Side Hustle

I Took My Side Hustle Full-Time and Made $222,000 Last Year. Here's How — and Why Sometimes I Work Just 10 Hours a Week.

Carter Osborne launched his side business in 2017 to help with his tuition payments for graduate school.

Leadership

Lead From the Top: 5 Core Responsibilities of a CEO

Knowing exactly what the chief executive's role entails is critical for steering a company to success.