[Senate Report 114-265]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 104

114th Congress       }                       {              Report
                                 SENATE
 2d Session          }                       {                114-265

======================================================================



 
       THE SMALL BUSINESS INVESTMENT CAPITAL COMPANY ACT OF 2015

                                _______
                                

                  May 26, 2016.--Ordered to be printed

                                _______
                                

Mr. Vitter, from the Committee on Small Business and Entrepreneurship, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 552]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 552) to amend the Small 
Business Investment Act of 1958 to provide for increased 
limitations on leverage for multiple licenses under common 
control, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill, as amended, do 
pass.

                            I. INTRODUCTION

    The Small Business Investment Capital Company Act of 2015 
(S. 552) was introduced by Senators James Risch and Benjamin L. 
Cardin, on February 24, 2015. The bill's co-sponsors include 
Committee members Senator Kelly Ayotte, Jeanne Shaheen, the 
Committee's Ranking Member, and David Vitter, the Committee's 
Chair.
    The Small Business Investment Capital Company Act of 2015 
amends the Small Business Investment Act of 1958 to increase 
from $225 million to $350 million the maximum amount of 
outstanding leverage to be made available by the Small Business 
Administration (SBA) to two or more commonly-controlled small 
business investment companies not under capital impairment 
(referred to as the ``family of funds'' limit).
    During the markup of the bill, the bill was approved 
unanimously by voice vote. Identical legislative language was 
signed into law as a provision of H.R. 2029, the Consolidated 
Appropriations Act of 2016 (P.L. 114-113).

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    Small business investment companies (SBIC) are for-profit 
venture capital firms, privately-owned and managed but licensed 
and regulated by the SBA.
    The Small Business Investment Company (SBIC) program was 
established pursuant to the Small Business Act of 1958, in 
order to help stimulate capital investments in U.S.-based small 
businesses. Companies with tangible net worth of $19.5 million 
or less and average net incomes of less than $6.5 million over 
the previous two years are eligible for SBIC investment.
    Since the 2008-2009 SBICs have boomed with total loan 
volumes increasing to $3.5 billion in 2013. The increase 
stemmed partly from changes to the program made by the American 
Recovery & Reinvestment Act of 2009. The law encouraged 
formation of new funds and shortened processing times for new 
licenses. That same year (Fiscal Year 2010), SBICs attracted 
record funding from both the SBA and private capital sources.
    SBICs are considered precursors to today's private venture 
capital industry. They were established to encourage investment 
in innovative small businesses at the start of the space-race 
era. SBICs generally invest between $250,000 and $5 million, 
according to the Small Business Investor Alliance. The SBIC 
Program ensures that SBICs invest in businesses, primarily 
based in the U.S., that are engaged in productive enterprises--
not vehicles for financial or real estate investment, for 
example.
    Although they often do not possess the high profiles of 
well-known venture capital firms, there are more than 300 SBICs 
in the U.S., with more than $16 billion in capital under 
management, according to the SBA. This online tally of 
licensees lists contact information, investment criteria, and 
the type of funding each SBIC provides--they make both loans 
and equity investments.
    Outstanding leverage to be made available by the SBA to two 
or more commonly controlled small business investment companies 
not under capital impairment is referred to as the ``family of 
funds'' limit. A family of funds refers to multiple licensed 
funds operated by the same team of SBIC fund managers. These 
funds under common control are currently limited to $225 
million of SBA-guaranteed debt, and several teams of fund 
managers have already bumped against this cap.
    During the 112th Congress, then-Small Business Committee 
Chair Landrieu and then-Ranking Member Olympia Snowe filed S. 
3253, the EXCEL Act of 2012, on May 24, 2012. The bill included 
the program authorization level increase and the increase in 
the family of funds leverage limit to $350 million, as well as 
a number of other program enhancements. While the stand-alone 
bill was not acted upon further by the Committee, the increase 
was included in several other pieces of legislation during the 
112th Congress.
    Senate Amendment 1833 (S. Amdt. 1833), an amendment in the 
nature of a substitute to the Jumpstart Our Business Startups 
(JOBS) Act of 2012 (H.R. 3606), contained language to raise the 
family of funds limit to $350 million from $225 million and to 
increase the SBIC program's the family of funds limit to $350 
million from $225 million and to increase the SBIC program's 
authorization level to $4 billion. S. Amdt. 1833, the 
Invigorate New Ventures and Entrepreneurs to Succeed Today 
(INVEST) in America Act of 2012, was introduced on March 15, 
2012 by Senator Jack Reed along with Chair Landrieu and 
Senators Carl Levin, Sherrod Brown, Jeff Merkley, Daniel Akaka, 
Sheldon Whitehouse, Al Franken, Tom Harkin, Richard Durbin, 
Jeanne Shaheen, and Robert Menendez. S. Amdt. 1833 was 
ultimately not included in the final version of H.R. 3606.
    Additionally, Chair Landrieu included SBIC program 
enhancements in Senate Amendment 2521 (S. Amdt. 2521), which 
she filed to S. 2237, the Small Business Jobs and Tax Relief 
Act of 2012, on July 11, 2012. Division B of S. Amdt. 2521, 
entitled the Success Ultimately Comes from Capital, 
Contracting, Education, Strategic Partnerships, and Smart 
Regulations (SUCCESS) Act, included the EXCEL Act of 2012 as a 
portion of Title II. Although it came up short of the 60 votes 
needed to end debate, the amendment received a strong 57 
bipartisan votes when it received a vote on the Senate floor on 
July 12, 2012.
    Shortly thereafter, Chair Landrieu filed the SUCCESS Act as 
a standalone bill. On July 25, 2012, Chair Landrieu introduced 
S. 3442, the SUCCESS Act of 2012, with eight co-sponsors 
including Committee members Senators Cardin and Shaheen, as 
well as Senators Blumenthal, Boxer, Gillibrand, Lieberman, 
Merkley, and Whitehouse.
    Ultimately, however, none of the bills or amendments were 
signed into law during the 112th Congress.
    During the 113th Congress, on March 11, 2013, then-Chair 
Landrieu reintroduced S. 511, the EXECL Act, which included the 
same increase from $225 million to $350 million as the maximum 
amount of outstanding leverage for two or more commonly-
controlled SBICs.
    On March 13, 2013, the Committee's then-ranking member, 
Senator Risch, introduced S. 550, the Small Business Investment 
Company Modernization Act of 2013. This bill would have 
increased the family of funds limit (multiple licensees under 
common control) from $225 million to $350 million.

                      III. HEARINGS & ROUNDTABLES

    In the 111th Congress:
    On October 1, 2009, the Committee held a roundtable 
discussion titled, ``Reauthorization of SBA Finance Programs 
and the Impact of the Small Business Provisions in the Recovery 
Act,'' at which it was pointed out that the family of funds 
limit should be increased because several funds were 
approaching the current limit.
    In the 112th Congress:
    On March 22, 2012, the Committee held a roundtable 
discussion titled, ``A Spotlight on Small Business Investment 
Companies and their Role in the Entrepreneurial Ecosystem,'' 
which featured various stakeholders in the SBIC community, to 
highlight the success of the SBIC program, and to examine 
opportunities for improvement. The 14 roundtable participants 
included representatives from the SBA, SBICs, SBIC investors, 
and small businesses. The discussion centered on the success of 
the SBA programs. Several business owners shared their stories 
about how SBA programs assisted with their companies' growth. 
Additionally, SBA's Deputy Associate Administrator for 
Investment, Mr. Harry Haskins, specifically discussed the 
positive impacts associated with increasing the family of funds 
limit. He highlighted that the capital can be managed at 
minimal risk and no cost to the taxpayer because the fees 
associated with the program cover the costs.
    On November 29, 2012, the Committee held a hearing 
entitled, ``Creating Jobs and Growing the Economy: Legislative 
Proposals to Strengthen the Entrepreneurial Ecosystem.'' The 
purpose of the hearing was to discuss the legislative proposals 
included in the SUCCESS Act of 2012 (S. 3442), which was the 
result of recommendations gathered during a series of three 
Committee roundtables examining the entrepreneurial ecosystem 
during the 112th Congress. Among the provisions that the 
Committee examined during the hearing were those included in 
the version of the EXCEL Act that Chair Landrieu and former 
Ranking Member Snowe introduced during the 112th Congress. 
Witnesses testified that funding levels at the time were close 
to hitting the cap limit and that increasing the limit would 
allow the program to continue its growth and success.
    In the 113th Congress:
    On March 14, 2013, the Committee held a roundtable entitled 
``Helping Small Businesses Weather Economic Challenges & 
Natural Disasters: Review of Legislative Proposals on Access to 
Capital and Disaster Recovery.'' The purpose of the roundtable 
was to discuss four legislative proposals on small business 
access to capital and disaster recovery on which the Committee 
would focus during the 113th Congress, including the EXCEL Act 
and the Small Business Investment Company Modernization Act of 
2013. Both included an increase of the family of funds limit to 
$350 million. Again, the discussion highlighted the importance 
of increasing the limit, especially since the program had 
proven to be cost effective.
    The EXCEL Act was considered during a markup on June 13, 
2013 and was reported favorably with amendments on June 17, 
2013.

                        IV. DESCRIPTION OF BILL

    The bill amends the Small Business Investment Act of 1958 
to increase from $225 million to $350 million the maximum 
amount of outstanding leverage to be made available by the 
Small Business Administration (SBA) to two or more commonly 
controlled small business investment companies not under 
capital impairment (referred to as the ``family of funds'' 
limit).

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on April 23, 
2015.
    A motion to adopt the Small Business Investment Capital 
Company Act of 2015, a bill to amend the Small Business 
Investment Act of 1958 to provide for increased limitations on 
leverage for multiple licenses under common control, was 
approved unanimously by voice vote with the following Senators 
present: Senators Vitter, Risch, Fischer, Gardner, Ernst, 
Ayotte, Enzi, Shaheen, Cantwell, Cardin, Heitkamp, Booker, 
Coons, Hirono, and Peters.

                           VI. 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:

                                                      May 28, 2015.
Hon. David Vitter,
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. 552, the Small 
Business Investment Capital Company Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

S. 552--Small Business Investment Capital Company Act of 2015

    S. 552 would raise the maximum amount of debt that the 
Small Business Administration (SBA) can guarantee for a group 
of companies participating in the Small Business Investment 
Company (SBIC) program that are operated together (defined as 
``a family of funds'') from $225 million to $350 million.
    Under current law, businesses participating in the SBIC 
program 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. Based on information 
from the SBA, CBO expects that increasing the maximum loan 
guarantee level for a family of funds would not affect the 
estimated net subsidy cost, nor would the changes increase the 
SBA's cost to administer the program, which is recorded in the 
budget on a cash basis. Therefore, CBO estimates that 
implementing S. 552 would not affect discretionary spending. 
Enacting S. 552 would not affect direct spending or revenues; 
therefore, pay-as-you-go procedures do not apply.
    S. 552 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by Theresa Gullo, Assistant Director 
for Budget Analysis.

                  VII. EVALUATION OF REGULATOY 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. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. SECTION-BY-SECTION ANALYSIS


Section 1. Title

    This section provides the short title, ``Small Business 
Investment Capital Company Act of 2015''.

Section 2. Increased limitations on leverage for multiple licenses 
        under common control

    This section increases from $225 million to $350 million 
the maximum amount of outstanding leverage to be made available 
by the SBA to two or more commonly controlled small business 
investment companies not under capital impairment (referred to 
as the ``family of funds'' limit).

                                  [all]