Embarking on the SBIC licensing process can be a daunting task. As a federal regulatory program, applicants must be willing to work within a detailed regulatory scheme. Below is a brief description of some of the required parts of the SBIC licensing program. This list is not all-inclusive as to the entire SBIC licensing process; instead, it is meant to give potential applicants an idea of what the program requires. Due to the complexities of this process, legal counsel is advisable.

Management Assessment Questionnaire
The Management Assessment Questionnaire or “MAQ” (pronounced “mac”) is a series of structured questions concerning the applicant’s plans for the prospective SBIC and the experience and qualifications of the proposed management team. The MAQ consists of electronic files and is available through Locke Lord or the SBA. Locke Lord provides detailed guidance and support throughout the completion of the MAQ and will serve as contact person for the SBA in the evaluation process.

The SBA has issued a Memorandum regarding the necessary management team qualifications. Please click here to view.

License Application
After the SBA has approved the initial MAQ filing and given a “green light” letter to the applicant, the preparation of the license application begins. The license application includes information gathered on the MAQ, more detail concerning financial commitments and several legal documents needed to create an SBIC. When the applicant begins the application, it should be highly confident of minimum capital levels required by the SBA. Firm commitments of $5 million of Regulatory Capital are required for Debentures SBICs under the SBIC regulations, but the SBA may, and often does, require a higher amount, generally around $20 million or more for debenture SBICs. If the applicant intends to be non-leveraged, SBA regulations require it to have commitments of at least $3 million plus a plan for getting to $5 million, but again, the SBA may require a higher amount. In order to file an application, the applicant must have received signed firm commitments from qualified investors for the appropriate minimum.

SBIC Regulations Classes
SBIC Regulation training classes are held several times per year in Washington DC. The purpose of this course is to familiarize the applicant with the ins and outs of investing within the SBIC regulatory framework. The classes are critical and required by the SBA for licensing. At least one principal of the proposed SBIC must attend the regulatory training before a license will be issued. In addition, all principals must attend the training before any leverage will be issued. Individuals may register for these classes by contacting the Small Business Investor Alliance (SBIA).

SBIC Audit
The SBA requires each Licensee to submit an audited Annual Financial Report at the close of its fiscal year. The Annual Financial Report consists of the financial statements and other schedules included in SBA Form 468 and can be located on the SBA’s Web site. A link to this form is located on the “SBIC Forms” page of SBICLaw.com. The preparation of the Annual Financial Report is the responsibility of the Licensee. SBA regulations require that an Independent Public Accountant perform the audit and express an opinion on financial statements and supplementary schedules based on the audit.