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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.

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