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Just a Mirage?

Proposed legislation may expand SBIC financing-someday.

This story appears in the August 2003 issue of Entrepreneur. Subscribe »

Many entrepreneurs looking for bank loans have faced adesert-like landscape lately. A bill proposed by Sen. Olympia Snowe(R-ME) would help quench their thirst. The bill nearly made it topassage once, and with strong bipartisan support, it stands a goodchance of becoming more than a mirage, once Snowe finds anothervehicle to attach it to. The Small Business Investment Company(SBIC) loan enhancement bill would increase the flow of capitalinto Debenture SBICs. The bill alters the tax code so nonprofitorganizations like pension plans and university endowment funds caninvest in Debenture SBICs, one of the three types of SBICs licensedby the SBA. Debenture SBICs receive guaranteed loans from the SBAand make loans to small businesses for terms of generally one tofive years. The money can be used to finance inventories, accountsreceivable and pretty much any other business need except realestate.

Under current tax law, investors in Debenture SBICs have to paytaxes on the income they earn from their loans. Snowe's billwould eliminate this requirement. Lee Mercer, president of theNational Association of SBICs, believes this would increase theflow of capital into Debenture SBICs by at least $200 million ayear in additional private capital. ll participants complete onlineprofiles prior to

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