New Financing Option for Small Businesses: SBIC Impact Investment Initiative Launches

By Karen Axelton

Small businesses seeking capital in Michigan have a new source of options thanks to the Small Business Administration. The SBA last month announced that InvestMichigan! Mezzanine Fund will be the first licensed Impact Investment Fund in the SBA’s new Impact Investment Initiative. The $130 million venture capital fund will provide capital to businesses that are headquartered in Michigan, have a significant presence in Michigan or are in the process of expanding their operations in Michigan so they can grow and create jobs.

The InvestMichigan! fund is the first stage in a $1 billion commitment over five years through the SBA’s Impact Investment funds, part of the Obama administration’s Startup America initiative announced in January. Karen Mills, SBA Administrator, said Michigan was chosen as the launch state because of its economic struggles as well as opportunities.

Startup America is a White House initiative to bring together public and private organizations to help entrepreneurs. It will use the infrastructure of the SBA’s Small Business Investment Company Program (SBIC), which supplements private equity capital and long-term loan funds to help small businesses expand. In FY 2010, according to SBA data, the SBIC program provided $1.59 billion of financing to nearly 900 U.S. small businesses.

The Impact Investment Initiative is expected to put up to $1.5 billion into the hands of small businesses over the next five years. It will combine public and private funding for high-growth companies that generate not only a financial but also a “social” return. The program will focus on businesses in underserved markets or in sectors that have been defined as national priorities. Impact investments can be:

• Place-based, targeting small businesses located in or employing residents of low or moderate income areas or economically distressed areas; or
• Sector-based, targeting industry sectors that the Administration has identified as national priorities. (Currently only clean energy and education have been identified as priority sectors.)

The SBA will collaborate with private, institutional investors to identify impact investments and provide licensing and capital to fund managers who qualify to organize and operate an Impact Investment SBIC.

For more information on the Impact Investment Initiative, visit the SBA website.

Image by Flickr user TexasGOPVote (Creative Commons)

This entry was posted on Thursday, August 18th, 2011 at 6:00 am and is filed under Capital Access, Raising Capital, Small Business, small business, Venture Capital. You can follow any responses to this entry through the RSS 2.0 feed.


You can leave a response, or trackback from your own site.