[Congressional Record Volume 153, Number 99 (Tuesday, June 19, 2007)]
[Senate]
[Pages S7903-S7905]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself and Ms. Snowe):
  S. 1662. A bill to amend the Small Business Investment Act of 1958 to 
reauthorize the venture capital program, and for other purposes; to the 
Committee on Small Business and Entrepreneurship.
  Mr. KERRY. Mr. President, today I am introducing legislation with my 
colleague, Senator Snowe, to increase access to venture capital for 
small businesses. This type of financing is essential to grow a 
company, but it's hard to come by, particularly for start-up firms. The 
Small Business Administration, SBA, has played an important role in 
filling this gap for almost 50 years with the Small Business Investment 
Company, SBIC, program.
  Since the SBIC program's inception in 1958, SBIC firms have invested 
$48 billion in more than 100,000 small businesses. For fiscal year 2006 
alone, 30 percent of all SBIC investment dollars went to companies that 
had been in business for two years or less. Overall in that year, SBIC 
financing supported more than 2,000 small businesses which employed a 
total of 286,000 Americans.
  Many extremely successful companies that received their start from 
SBIC financing are now household names: Intel, Federal Express, Jenny 
Craig, and Outback Steakhouse are all SBIC success stories. Companies 
receiving SBIC financing have also consistently appeared on a variety 
of prominent business lists, including Inc. 500, BusinessWeek's ``Hot 
Growth Companies'' and ``Hot Growth Hall of Fame,'' Fortune magazine's 
``Best Companies to Work For'' and ``Most Admired Companies,'' and the 
FSB 100.

[[Page S7904]]

And they provide tens of thousands of jobs and contribute significantly 
to our Federal and local tax bases, paying back the investment many 
times over.
  Given the important contribution SBIC funds have made to our economy, 
our bill reauthorizes the SBIC program for another 3 years, through 
2010, ensuring the continued availability of this important small 
business financing tool. Additionally, the legislation simplifies the 
program's regulations to attract new investors and allow existing 
investors to increase their involvement. These provisions will ensure 
that dependable capital is available for small businesses for years to 
come.
  Entrepreneurs may start out small, but the contribution they make to 
our economy is huge--and particularly important in underserved 
communities. This legislation will also increase the leverage cap for 
small businesses owned by women and minorities as well as those located 
in low-income areas. It will simplify existing incentives for investing 
in the smallest businesses in order to give every entrepreneur a 
fighting chance. Finally, we have included a provision which ensures 
that SBICs licensed under the participating securities program will be 
able to easily make follow-up investments in successful companies.
  Small businesses are responsible for more than two-thirds of all new 
jobs in America. They employ more than half of the private sector work 
force, and pump over $900 billion into the economy annually. As small 
business owners are living the American dream, they should be able to 
count on the government to help create an environment where they can do 
what they do best: innovate, compete, and create good jobs for 
Americans.
  I thank Senator Snowe for joining me in introducing this bill, and I 
ask my colleagues to support it when it comes before the full Senate 
for consideration. Mr. President, I ask that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1662

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Venture 
     Capital Act of 2007''.

     SEC. 2. REAUTHORIZATION.

       Section 20 of the Small Business Act (15 U.S.C. 631 note) 
     is amended by inserting after subsection (e) the following:
       (1) the terms ``Administration'' and ``Administrator'' mean 
     the Small Business Administration and the Administrator 
     thereof, respectively;
       (2) the term ``low-income geographic area'' has the same 
     meaning as in section 351 of the Small Business Investment 
     Act of 1958 (15 U.S.C. 689), as amended by this Act;
       (3) the term ``New Markets Venture Capital company'' has 
     the same meaning as in section 351 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 689); and
       (4) the term ``New Markets Venture Capital Program'' means 
     the program under part B of title III of the Small Business 
     Investment Act of 1958 (15 U.S.C. 689 et seq.).

     SEC. 3. DIVERSIFICATION OF NEW MARKETS VENTURE CAPITAL 
                   PROGRAM.

       (a) Selection of Companies in Each Geographic Region.--
     Section 354 of the Small Business Investment Act of 1958 (15 
     U.S.C. 689c) is amended by adding at the end the following:
       ``(f) Geographic Requirement.--In selecting companies to 
     participate as New Markets Venture Capital companies in the 
     program established under this part, the Administrator shall 
     select, to the extent practicable, from among companies 
     submitting applications under subsection (b), at least 1 
     company from each geographic region of the Administration.''.
       (b) Participation in New Markets Venture Capital Program.--
       (1) Administration participation required.--Section 353 of 
     the Small Business Investment Act of 1958 (15 U.S.C. 689b) is 
     amended in the matter preceding paragraph (1), by striking 
     ``under which the Administrator may'' and inserting ``under 
     which the Administrator shall''.
       (2) Small manufacturer participation agreements required.--
     Section 353 of the Small Business Investment Act of 1958 (15 
     U.S.C. 689b) is amended--
       (A) by striking ``In accordance with this part,'' and 
     inserting the following:
       ``(a) In General.--In accordance with this part,'';
       (B) in subsection (a)(1), as so designated by this 
     paragraph, by inserting after ``section 352'' the following: 
     ``(with at least 1 such agreement to be with a company 
     engaged primarily in development of and investment in small 
     manufacturers, to the extent practicable)''; and
       (C) by adding at the end the following:
       ``(b) Rule of Construction.--Subsection (a)(1) shall not be 
     construed to authorize the Administrator to decline to enter 
     into a participation agreement with a company solely on the 
     basis that the company is not engaged primarily in 
     development of and investment in small manufacturers.''.

     SEC. 4. ESTABLISHMENT OF OFFICE OF NEW MARKETS VENTURE 
                   CAPITAL.

       Title II of the Small Business Investment Act of 1958 (15 
     U.S.C. 671) is amended by adding at the end the following:

     ``SEC. 202. OFFICE OF NEW MARKETS VENTURE CAPITAL.

       ``(a) Establishment.--There is established in the 
     Investment Division of the Administration, the Office of New 
     Markets Venture Capital.
       ``(b) Director.--The Office of New Markets Venture Capital 
     shall be headed by a Director, who shall be a career 
     appointee in the Senior Executive Service, as those terms are 
     defined in section 3132 of title 5, United States Code.
       ``(c) Responsibilities of Director.--The responsibilities 
     of the Director of the Office of New Markets Venture Capital 
     include--
       ``(1) to administer the New Markets Venture Capital Program 
     under part B of title III;
       ``(2) to assess, not less frequently than once every 2 
     years, the nature and scope of the New Markets Venture 
     Capital Program and to advise the Administrator on 
     recommended changes to the program, based on such assessment;
       ``(3) to work to expand the number of small business 
     concerns participating in the New Markets Venture Capital 
     Program; and
       ``(4) to encourage investment in small manufacturing.''.

     SEC. 5. LOW-INCOME GEOGRAPHIC AREAS.

       (a) In General.--Section 351 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 689) is amended--
       (1) by striking paragraphs (2) and (3) and inserting the 
     following:
       ``(2) Low-income geographic area.--The term `low-income 
     geographic area' has the meaning given the term `low-income 
     community' in section 45D of the Internal Revenue Code of 
     1986 (relating to the new markets tax credit).''; and
       (2) by redesignating paragraphs (4) through (8) as 
     paragraphs (3) through (7), respectively.
       (b) Application of Amended Definition to Capital 
     Requirement.--The definition of a low-income geographic area 
     in section 351(2) of the Small Business Investment Act of 
     1958, as amended by subsection (a), shall apply to private 
     capital raised under section 354(d)(1) of the Small Business 
     Investment Act of 1958 (15 U.S.C. 689c(d)(1)) before, on, or 
     after the date of enactment of this Act.

     SEC. 6. LIMITATION ON TIME FOR FINAL APPROVAL OF COMPANIES.

       Section 354(d) of the Small Business Investment Act of 1958 
     (15 U.S.C. 689c(d)) is amended by striking ``a period of 
     time, not to exceed 2 years,'' and inserting ``2 years''.

     SEC. 7. APPLICATIONS FOR NEW MARKETS VENTURE CAPITAL PROGRAM.

       Not later than 60 days after the date of enactment of this 
     Act, the Administrator shall prescribe standard documents for 
     an application for final approval by a New Markets Venture 
     Capital company under section 354(e) of the Small Business 
     Investment Act of 1958 (15 U.S.C. 689c(e)). The Administrator 
     shall ensure that such documents are designed to 
     substantially reduce the cost burden of the application 
     process on a company making such an application.

     SEC. 8. OPERATIONAL ASSISTANCE GRANTS.

       Section 358(a)(4)(A) of the Small Business Investment Act 
     of 1958 (15 U.S.C. 689g(a)(4)(A)) is amended to read as 
     follows:
       ``(A) New markets venture capital companies.--
     Notwithstanding section 354(d)(2), the amount of a grant made 
     under this subsection to a New Markets Venture Capital 
     company shall be equal to the lesser of--
       ``(i) 10 percent of the private capital raised by the 
     company; or
       ``(ii) $1,000,000.''.

     SEC. 9. AUTHORIZATION OF APPROPRIATIONS.

       Section 368(a) of the Small Business Investment Act of 1958 
     (15 U.S.C. 689q(a)) is amended--
       (1) in the matter preceding paragraph (1), by striking 
     ``fiscal years 2001 through 2006'' and inserting ``fiscal 
     years 2007 through 2010''; and
       (2) in paragraph (2), by striking ``$30,000,000'' and 
     inserting ``$20,000,000''.

  Ms. SNOWE. Mr. President, as Ranking Member of the Senate Committee 
on Small Business and Entrepreneurship, I rise today to join with 
Chairman Kerry in introducing the ``Small Business Venture Capital Act 
of 2007,'' a bill to reauthorize and improve the Small Business 
Administration's (SBA) Small Business Investment Company (SBIC) 
Program. I am deeply committed to supporting our nation's small 
businesses by increasing their access to capital. Small businesses 
employ more than half (57 percent) of the total private-sector 
workforce and are responsible for the creation of more than two-thirds 
of all new jobs. Clearly, increasing investments in small businesses is 
crucial to our on-going economic success.
  This bill, a product of genuine bipartisan negotiation, will reform 
and enhance the SBIC program, which is so

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vital to fostering innovation, growth, and job creation in small 
businesses throughout our country. SBICs are privately owned and 
managed venture capital investment companies that are licensed and 
regulated by the SBA. SBICs use their own capital, combined with funds 
borrowed from other private investors and supported by an SBA 
guarantee, to make equity and debt investments in qualifying small 
businesses. The SBA shares in the profits of SBICs. The structure of 
the program is unique and has been a model for similar public-private 
partnerships around the world.
  The program has been successful in mobilizing private venture capital 
investment and leveraging private investment with additional funds 
supported by SBA guarantees. According to the SBA's annual reports to 
Congress, the SBIC program has provided billions in financing to small 
businesses since its inception. For example, companies like Staples, 
FedEx, Outback Steakhouse, America Online, Costco, Apple Computers, and 
Intel have all received SBIC investments at one time in their history.
  Each year, financing brought about by the SBIC program allows small 
businesses to create or retain tens of thousands of jobs. For example, 
during Fiscal Year 2006, the SBIC program invested $2.987 billion in 
2,121 small businesses. Of these, 40 percent were located in 
government-designated Low and Moderate Income (LMI) areas of the 
county. Those LMI-district companies received $669 million of the total 
dollars invested by SBICs in 2006. Since its beginning in 1958, the 
SBIC program has provided approximately $48 billion of long-term debt 
and equity capital to more than 100,000 small businesses. In fact, in 
my home State of Maine, SBICs invested nearly $21 million during FY 
2006.
  A key proposal in this bill is a technical change made to simplify 
the maximum leverage limits contained in the current statute. Under 
current law, the maximum leverage cap or the maximum amount of 
government-guaranteed capital an SBIC can control for Fiscal Year 2007, 
is $127.2 million for any one SBIC or for multiple SBICs controlled by 
the same management team. The cap increases automatically on an annual 
basis by the percentage increase in the Consumer Price Index (CPI). The 
problem with current law is that because the leverage cap applies to a 
whole family of SBICs, it is often impossible for a successful SBIC to 
operate a second or third fund due to a lack of available leverage. 
Additional leverage would remedy this issue. Accordingly, the bill 
increases the leverage cap for anyone fund to $150 million, and the cap 
for multiple funds held under one management team to $225 million.
  Furthermore, this bill will increase leverage available for 
investment in minority- and women-owned businesses, which are having 
trouble accessing SBIC dollars. In Fiscal Year 2004, minority-owned 
firms received 5.2 percent of financing dollars. Women-owned businesses 
obtained just 2.2 percent of financing dollars. To try to increase 
financing available to such small businesses, the bill increases 
leverage limits to $175 million for a single fund and $250 million for 
a group of funds held under an SBIC license if the SBIC certifies that 
at least 50 percent of its investments are made in companies that are 
owned by either women or minorities, or are located in a low-income 
geographic area.
  Mr. President, I urge my colleagues to support this bill. Too much is 
at stake for small businesses, and the economy as a whole, to allow 
this critical legislation to languish. Failing to advance this bill 
would diminish our chances for innovation, and stifle the 
entrepreneurial opportunities this program has and will continue to 
produce.
                                 ______