House Passes Bi-Partisan Legislation Raising Leverage for Small Business Investment Companies

The US House of Representatives passed the Small Business Investment Company Modernization Act, H.R. 6504, by an overwhelming bi-partisan vote of 359 to 36 to amend the Small Business Investment Act of 1958 by increasing from $225 million to $350 million the maximum amount of outstanding leverage to be made available by the Small Business Administration to two or more commonly controlled small business investment companies not under capital impairment.

Rep. David Cicilline (D-RI), a co-sponsor of the legislation, observed that H.R. 6504 is a common sense, bipartisan measure that raises the amount of leverage that a group of community-held and successful small business investment companies, referred to as a family of funds, can access. The Small Business Investor Alliance estimates that increasing the leverage from $225 million to $350 million in the legislation would facilitate approx. $500 million a year in new small business investment. Cong. Record, Dec. 19, 2012, H6839.

The sponsor of the legislation, Rep. Steve Chabot (R-OH), noted that the Small Business Investment Company program was created in 1958 and provides leverage to highly regulated private investors. These private investment funds are called small business investment companies, which raise private capital from institutions like banks and pension funds, and also borrow Federal capital to invest in promising small businesses. As required by law, 100 percent of the money is invested in US companies. He also said that the legislation will assist proven fund managers by allowing them to assess additional funds that they can use to assist small businesses. Cong. Record, Dec. 19, 2012, H6838-6839.

In addition to having bipartisan congressional support, the legislation has the support of the Small Business Investor Alliance, the association that represents small business investment companies, as well as the support of the U.S. Chamber of Commerce Additionally, the Obama Administration recommended this provision as a part of the President's Startup America initiative.