[Senate Report 115-272]
[From the U.S. Government Publishing Office]
Calendar No. 353
115th Congress } { Report
SENATE
2d Session } { 115-272
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SMALL BUSINESS INVESTMENT OPPORTUNITY ACT OF 2018
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June 7, 2018.--Ordered to be printed
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Mr. Risch, from the Committee on Small Business and
Entrepreneurship, submitted the following
R E P O R T
[To accompany S. 2527]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business and Entrepreneurship,
having considered the bill (S. 2527) to amend the Small
Business Investment Act of 1958 to increase the amount of
leverage made available to small business investment companies,
having considered the same, reports favorably thereon without
amendment, and recommends that the bill do pass.
I. INTRODUCTION
The Small Business Investment Opportunity Act of 2018 (S.
2527) was introduced by Senator Benjamin L. Cardin, the
Committee's Ranking Member, for himself, Senator James E.
Risch, the Committee's Chairman, and Senator John Kennedy on
March 8, 2018.
This bill amends the Small Business Investment Act of 1958
to increase the Individual Leverage Limit for individual funds
participating in the Small Business Investment Company (SBIC)
program from $150,000,000 to $175,000,000.
The bill was approved unanimously by a roll call vote as
part of a manager's package.
II. HISTORY (PURPOSE & NEED FOR LEGISLATION)
The SBIC program was authorized in the 85th Congress by the
Small Business Investment Act of 1958 and is an integral part
of the Small Business Administration's (SBA's) programs that
provide a broad spectrum of access to capital for small
businesses across the United States. SBICs are privately owned
and managed investment funds, licensed and regulated by SBA,
that use their own capital plus funds borrowed with an SBA
guarantee to make equity and debt investments in qualifying
small businesses. The program operates at no expense to
taxpayers. Instead, the cost of the program is covered by fees
paid by SBICs and their portfolio companies.
Since the program started in 1958, the SBIC program has
deployed more than $67 billion of capital, made more than
166,000 investments in American small businesses, and licensed
more than 2,100 investment funds.
In the 111th Congress, the American Recovery and
Reinvestment Act of 2009\1\ simplified and raised the maximum
amount of leverage for an individual SBIC to 300 percent of its
private capital, or $150,000,000, whichever is less. The
maximum amount of leverage for licensees with two or more
licenses was raised to $225,000,000.
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\1\ P.L. 111-15.
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In the 114th Congress, Senator Risch and Ranking Member
Cardin introduced a bill (S. 552), with Chairman David Vitter
and Senators Jeanne Shaheen and Kelly Ayotte as cosponsors, to
increase the maximum amount of leverage for SBICs with more
than one fund from $225,000,000 to $350,000,000. The bill was
enacted as part of the Consolidated Appropriations Act of
2016.\2\
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\2\ P.L. 114-113.
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However, the leverage limit for SBICs having just one fund
was not increased. Consequently, the amount for an individual
fund has been fixed at $150,000,000 since 2009. In the interim,
inflation has diminished the value of the $150,000,000 maximum.
Today, adjusted for inflation, the current cap for a single
SBIC of $150 million should be nearly $170 million. The
Committee strongly recommends the individual fund limit
increase apply to any existing qualified fund that has
commenced its investment period two years prior to the date the
bill becomes law.
In the 115th Congress, a companion bill, the Small Business
Investment Opportunity Act of 2017 (H.R. 2333), was marked up
and passed by the House Small Business Committee on July 12,
2017 and passed by the full House on July 24, 2017.
Like the House bill, the Cardin-Risch Small Business
Investment Opportunity Act of 2018 ensures the SBIC program is
able to continue to deploy needed capital through the
availability of venture and private equity capital in a manner
that allows the Individual Leverage Limit to keep pace with
inflation and aligns it more closely with the 2015 increase in
the multiple licensee limit.
III. DESCRIPTION OF BILL
This bill will expand the ability of SBA and its private-
sector partners to deploy more capital to innovative, fast-
growing small businesses through the SBIC program. The bill
increases the Individual Leverage Limit for an individual SBIC
from $150,000,000 to $175,000,000.
IV. COMMITTEE VOTE
In compliance with rule XXVI (7)(b) of the Standing Rules
of the Senate, the following vote was recorded on March 14,
2018.
A motion to adopt the Small Business Investment Opportunity
Act of 2018, a bill to amend the Small Business Investment Act
of 1958 to increase the amount of leverage made available to
small business investment companies, was approved unanimously
by a roll call vote as part of a manager's package. Senators
Risch, Rubio, Paul, Scott, Ernst, Inhofe, Young, Enzi, Rounds,
Kennedy, Cardin, Cantwell, Shaheen, Heitkamp, Markey, Booker,
Coons, Hirono, and Duckworth voted for the bill.
V. COST ESTIMATE
In compliance with rule XXVI(11)(a)(1) of the Standing
Rules of the Senate, the Committee estimates the cost of the
legislation will be equal to the amounts discussed in the
following letter from the Congressional Budget Office:
April 19, 2018.
Hon. James E. Risch,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 2527, the Small
Business Investment Opportunity Act of 2018.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Keith Hall,
Director.
Enclosure.
Small Business Investment Opportunity Act of 2018
Under current law, the Small Business Administration (SBA)
operates a program that provides loan guarantees to Small
Business Investment Companies (SBICs) that make investments in
qualifying small businesses. The amount of debt the SBA is
authorized to guarantee for any SBIC is capped at $150 million.
SBICs are required to pay various fees that are sufficient to
offset the program's estimated subsidy cost, that is, the
estimated long-term cost to the government of a loan guarantee,
calculated on a net-present-value basis. S. 2527 would raise
the amount of debt that the SBA can guarantee for a SBIC to
$175 million.
Using information from the SBA, CBO estimates that
implementing the bill would cost $3 million over the 2019-2023
period for the agency to update the program's regulations and
subsidy-cost model in 2019 and for additional analysis and
oversight of SBIC portfolios over that period. Most of those
costs would result from administrative activities and any
spending would be subject to the availability of appropriated
funds. Using information from the SBA, CBO estimates that
increasing the cap on the amount of debt that the SBA can
guarantee for SBICs would increase the volume and gross cost of
loan guarantees that the SBA could make; however, CBO estimates
that the estimated net subsidy cost to the government would not
be affected because the SBA would raise fees to cover any such
costs.
Enacting S. 2527 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
CBO estimates that enacting S. 2527 would not increase net
direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2029.
S. 2527 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
On July 21, 2017, CBO transmitted a cost estimate for H.R.
2333, the Small Business Investment Opportunity Act of 2017, as
reported by the House Committee on Small Business on July 12,
2017. The two pieces of legislation are similar and CBO's
estimates of their budgetary effects are the same.
The CBO staff contact for this estimate is Stephen Rabent.
The estimate was reviewed by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
VI. EVALUATION OF REGULATORY IMPACT
In compliance with rule XXVI(11)(b) of the Standing Rules
of the Senate, it is the opinion of the Committee that no
significant additional regulatory impact will be incurred in
carrying out the provisions of this legislation.
VII. SECTION-BY-SECTION ANALYSIS
Section 1: Short title
This section provides the short title for the Act, the
``Small Business Investment Opportunity Act of 2018''.
Section 2: Individual SBIC Leverage Limit increase
This section amends Section 303(b)(2)(A)(iii) of the Small
Business Investment Act of 1958, 15 U.S.C. 682(b)(2)(A)(ii), by
increasing the Individual Leverage Limit from $150,000,000 to
$175,000,000. The Committee strongly recommends the individual
fund limit increase apply to any existing qualified fund that
has commenced its investment period two years prior to the date
the bill becomes law.
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