[Senate Report 117-105]
[From the U.S. Government Publishing Office]

                                                      Calendar No. 280
117th Congress      }                            {            Report
 2d Session         }                            {            117-105


                  SBIC ADVISORY COMMITTEE ACT OF 2022


                  May 3, 2022.--Ordered to be printed


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

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany S. 2521]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 2521) to require the 
Administrator of the Small Business Administration to establish 
an SBIC Working Group, and for other purposes, reports 
favorably thereon, with an amendment in the nature of a 
substitute and an amendment to the title, and recommends that 
the bill, as amended, do pass.

                            I. INTRODUCTION

    A bill to require the Administrator of the Small Business 
Administration to establish an SBIC Advisory Committee, (S. 
2521) was introduced by Senator Ben Cardin and Senator Jim 
Risch on July 28, 2021.
    This bill directs the U.S. Small Business Administration 
(SBA) Administrator to establish an SBIC Advisory Committee to 
develop recommendations for increasing the diversity of the 
investments made by the SBIC program to include a greater 
number of businesses owned by members of underserved 
communities and businesses located in underfinanced States.
    During the markup of the bill, the Cardin substitute 
amendment and the Cardin long title amendment to the bill were 
approved by a voice vote as part of a manager's package. The 
Cardin substitute amendment changes the name of the SBIC 
working group to the ``SBIC Advisory Committee'' and revises 
the membership and selection process. Of the 16 appointees, one 
will be from SBA, 7 will be chosen by the SBA Administrator, 
and 8 will be chosen by the Administrator from lists submitted 
by the Chairs and Ranking Members of the Small Business and 
Entrepreneurship Committee of the Senate and the Small Business 
Committee of the House of Representatives. The Advisory 
committee would then have 18 months to draft a report on 
recommendations to improve access to the SBIC program for 
underserved communities and underfinanced States. The bill, as 
amended, was also approved by a voice vote as part of a 
manager's package.


    An SBIC is a privately owned and managed investment fund 
that is licensed and regulated by the SBA, which invest in 
small businesses through debt and equity. Concerns have been 
raised about SBICs' lack of diversity among investments in 
businesses and locations. In FY 2021, the SBIC made 1,080 
investments in small businesses. Of those investments:
           75 (7%) of those businesses were owned by 
        women, veterans, or minorities
           200 (19%) of the businesses were located in 
        low and moderate income (LMI) areas
           253 (23%) of those businesses were Special 
        Competitive Opportunity Gap Businesses.\1\
    \1\Special Competitive Opportunity Gap Businesses are defined by 
SBA as those businesses in LMI areas or are owned by minorities, women, 
and veterans. For FY2021, 22 businesses are both owned by women, 
veterans, or minorities and are located in LMI areas under this 
    Similarly, in 2021, the top five states, California, Texas, 
New York, Illinois, and Pennsylvania, made up approximately 40% 
of total dollars invested by the SBIC program, while Wyoming, 
North Dakota, and New Mexico received practically zero SBIC 
    \2\The top 5 states received $2.837 billion while the bottom 3 
received less than $300,000 combined.

                      III. HEARINGS & ROUNDTABLES

    In the 117th Congress the Committee on Small Business and 
Entrepreneurship held a hearing on June 9, 2021 entitled, 
``Review of the Small Business Investment Company Program.'' In 
her testimony, Ivelisse Rodriguez Simon, Managing Partner of 
Avante Capital Partners, spoke about the lack of diversity of 
the SBIC program and argued that increasing the number of women 
and minority fund managers would increase the diversity of the 
businesses that receive SBIC investments. Among Ms. Rodriquez 
Simon's recommendations was the creation of a diversity task 
force at SBA that would track and implement initiatives that 
drive diversity of managers and investments.

                        IV. DESCRIPTION OF BILL

    This bill establishes an SBIC advisory committee 
(committee) to provide recommendations to SBA on how to 
increase demographic and geographic diversity in the management 
and investments of SBIC funds. The committee consists of 16 
members, with the Associate Administrator of the Office of 
Innovation and Investment as the chairperson (or another 
designee as determined by the SBA Administrator). The 
Administrator has authority to appoint 4 members to the 
committee, and must also appoint 2 members each from lists of 3 
provided by the Chairs and Ranking Members of the Senate and 
House Small Business Committees. Within 18 months, the 
committee must submit a report to Congress and the SBA 
Administrator with recommendations on how the SBA could expand 
SBIC program access to underserved and underfinanced 
communities. All appointed members of the SBIC Advisory 
Committee shall have no conflict of interest in the SBIC 

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on February 15, 
    A motion to adopt S. 2521, a bill to direct the 
Administrator of the Small Business Administration (SBA) to 
establish an SBIC Advisory Committee, as amended by the Cardin 
substitute amendment, was agreed to by a majority voice vote of 
a quorum present as part of a manager's package. Senators Paul, 
Ernst, and Marshall asked to be recorded as voting no.

                           VI. COST ESTIMATE

    The Committee has not yet received the Congressional Budget 
Office's estimate of the cost of S. 2521 as ordered reported. 
When the Congressional Budget Office completes its cost 
estimate, it will be posted on the Internet at www.cbo.gov.


    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.


Section 1. Short title

    This section designates the act as the ``SBIC Advisory 
Committee Act of 2022''.

Sec. 2. SBIC Advisory Committee

    This section defines terms used to establish and carry out 
the SBIC Advisory Committee. The section also outlines the 
composition of the committee, including how selections are 
made, the process for Members of Congress to recommend 
panelists, the designation of a Chairperson, and the duties of 
the Committee. Finally, this section directs the Committee to 
issue a report on recommendations to diversify the program 
within 18 months to the SBA Administrator, the Committee on 
Small Business and Entrepreneurship of the Senate, and the 
Committee on Small Business of the House of Representatives. 
The SBIC Advisory Committee will terminate upon completion of 
the report and is subject to the Federal Advisory Committee 

                          VIV. MINORITY VIEWS

Minority Views of Senator Paul

    The SBA has authority to request input and stakeholder 
feedback on this topic. The SBA also has several interagency 
task forces and working groups established across the agency 
that have added to internal bureaucracy, creating bottlenecks 
for programs and services. Establishing the SBIC Advisory 
Committee would take time and resources away from SBA personnel 
providing services supporting small businesses and curbing risk 
to taxpayers.
    The private investment market is already meeting the needs 
of diverse startups and entrepreneurs. For instance, as Ms. 
Ivelisse Rodriguez Simon, Managing Partner of Avante Capital 
Partners explained during the June 9, 2021 hearing entitled, 
``Review of the Small Business Investment Company Program there 
are a large number of existing diverse investment managers in 
the private market. The private market is currently empowering 
diverse individuals in the venture and private equity fields 
without the existence of the SBIC Advisory Committee. Further, 
Ms. Sarah Chen, co-founder and managing partner of Beyond the 
Billion, stated that globally, 80 percent of fund managers are 
women and minorities.\3\ Ms. Chen confirms this trend in 
diverse fund managers and investment in women and minority-
owned businesses in the private investment market.
    Additionally, the private market is distributing historic 
levels of capital to diverse businesses. In 2021, private 
venture capital investment reached record levels with the 
National Venture Capital Association and Pitchbook recording 
nearly $330 billion in investment in U.S. businesses of which 
$6.4 billion went to female-only founded startups.\4\ 
Similarly, in 2021 the American Investment Council reported 
private equity invested over $1 trillion in America's 
communities with 74% of capital investments supporting 5,205 
small businesses.\5\ The private market is creating diversity 
in representation and capital distribution without the use of 
government-backed leverage, rendering the SBIC Advisory 
Committee an unnecessary waste of taxpayer dollars.
female-founded-companies- get-little-of-

                                                 Rand Paul,
                                                    Ranking Member.