Debenture SBICs
Debenture SBICs, because their interest payment obligations start immediately, generally make loans to companies with reliable and predictable cash flow. SBICs can obtain SBA leverage of up to the lesser of $175 million or 3X the SBIC’s private capital raised. The maximum SBA leverage for a family of affiliated SBICs is $350 million. The SBA debentures are unsecured notes issued by the SBA that have ten-year maturities and bear interest payable twice a year. The general partner of the SBIC is not personally liable for their repayment.

Unleveraged SBICs
Unleveraged SBICs do not borrow money from the SBA. A primary benefit which motivates private equity funds to obtain an unleveraged SBIC license is the ability for the fund to raise LP capital from banks, which is generally prohibited for non-SBICs.

Early Stage SBICs
The SBA authorized Early Stage SBICs to promote entrepreneurship and support high growth companies. An Early Stage SBIC must invest at least 50% of its capital in companies that have never been cash flow positive. In September 2017 SBA announced that the Early State SBIC Program would not be renewed. In the announcement, SBA encourages venture capital fund managers to seek unleveraged SBIC licenses.

Impact SBICs
Under the Impact Investment Fund Program, Impact SBICs must invest 50% of their capital in companies located in underserved communities (including economically distressed areas) and rural communities, companies in designated sectors, such as clean energy, education and certain advanced manufacturing or in certain fund-identified impact investing strategies. Impact SBIC license applicants were eligible for an expedited licensing process. SBA terminated the Impact Investment Fund Program in September 2017. SBA stated that while the program was being terminated SBA is still committed to granting SBIC licenses to funds that finance small businesses in underserved areas or focus on investments having positive social impact.