Overview of the SBIC Program

Why banks may want to consider investing in an SBIC fund.

What is the SBIC Program?

The SBIC (Small Business Investment Company) program has been helping small businesses around the country access the capital they need to grow for more than 60 years. Privately owned and managed investment funds, SBICs are licensed and regulated by the US Small Business Administration. By providing capital to small businesses, SBIC funds help stimulate job creation, innovation, and economic growth.

While the majority of SBICs provide debt financing or similar instruments to small businesses, several early stage SBIC funds have emerged that are focused on venture capital investments. SBICs represent a unique opportunity for regional and national banks to gain exposure to venture capital, an asset class that has historically aimed to deliver higher returns than elsewhere in the market.

What Moneta's Investors Are Saying

Steve Fleming

President and CEO, River City Bank

“In addition to the strong financial returns SBIC funds provide for our bank, it’s the relationship with the fund’s investment team that we truly value. That’s particularly the case for asset classes like venture capital and private equity that we typically don’t have access to because it broadens our team’s knowledge around new and evolving sectors beyond the realm of our existing clientele. That, in turn, allows us to develop a stronger and more holistic underwriting process to better serve these local venture-backed businesses.”

Peter Wiese

EVP and CFO, Tri Counties Bank

“When evaluating an investment, Tri Counties Bank performs a detailed financial and underwriting analysis which incorporates the credibility that the SBIC certification process provides. We know that the SBA has heavily scrutinized the fund’s track record and managers as a part of the certification process.  In addition, this underwriting process includes a deep dive on the past performance and credibility of the management team.”

James Beckwith

President and CEO, Five Star Bank

“As a regional bank, Five Star Bank believes in investing in an SBIC fund. SBICs that invest in venture-backed companies give us exposure to these businesses as they explore            alternative financial products, such as venture debt, which further diversifies our investment strategy.”

The Benefits of SBIC Investing

As a community bank, you may want to consider investing in an SBIC to:

Generate more alpha

When you invest in venture capital, you’re gaining exposure to an array of carefully vetted high-growth technology companies. That has the potential to provide significant alpha to your portfolio.

Cultivate new business opportunities

Our portfolio companies often look to us for advice on who to approach for a variety of banking needs.

Earn CRA credits

Bank investments into SBIC funds qualify as economic development and are eligible for Community Reinvestment Act (CRA) credits.

When you invest in an SBIC, you also have the confidence working with a SBA Certified Fund. Only a handful of VCs have been approved as an SBIC fund by the Small Business Administration (SBA).

Want to learn more about SBIC investing?

Check out these resources:

The SBIC program overall

Description of the Small Business Investment Company Program Participation by Unleveraged Funds

Read more

Why banks might  invest in SBICs

Small Business Investment Companies: An Investment Option for Banks

Read more

The case for SBIC investing

An Interview with River City Bank President and CEO Steve Fleming: How Community Banks can Invest in VC Funds

Read more

Why Five Star Bank invested in a VC firm

An Interview with Five Star Bank's President and CEO James Beckwith: Why Five Star Bank invested in an SBIC

Read more

Investing in a venture capital fund is highly speculative, involves a high degree of risk, and is designed only for sophisticated investors who are able to risk losing their entire investment in such a fund and who have limited need for liquidity.

This overview is intended for informational purposes only; does not constitute investment advice or a recommendation, an offer to sell, or the solicitation of an offer to buy; and is not the basis for any contract to purchase or sell any securities or other instruments in any jurisdiction, and should not provide the basis for any investment decision.  Any offer to invest in any investment opportunity will only be made by means of official offering documents identified as such.

Past performance is not necessarily indicative of future results. There can be no assurance that venture capital investments will achieve the performance results stated, and there is no guarantee against the loss of part or all of an investor’s investment.

No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained herein. No reliance may be placed for any purpose on the information and opinions contained in this document or their accuracy or completeness and nothing contained herein shall be relied upon as a promise or representation whether as to past or future performance. Certain information has been derived from materials furnished by outside sources and neither Moneta Ventures, LLC or its affiliates assumes any responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. Nothing contained herein should be construed as legal, business or tax advice. Each prospective investor should consult its own attorney, business adviser and tax adviser as to legal, business, tax and related matters concerning the information contained herein.