# Presentation: 714745

## SBIC Program Overview

- The US Small Business Administration
- November 2007

## What is the SBIC Program?

- Created by Congress in 1958 to bridge the gap between entrepreneurs’ need for capital and traditional financing sources
- Multi billion $, government-sponsored “fund of funds”
- Invests long term capital in privately owned and managed investment firms (licensees)
- Public-private partnership
- Administered by the Investment Division, US Small Business Administration

## What is the SBIC Program?

- An institutional LP, managing $9.8 billion in outstanding leverage and commitments
- An investor in 370 private equity partnerships
- Supported by diverse private partners providing roughly $9.4 billion in capital resources to small businesses nationwide

- Source: SBIC Data Management Branch, Weekly Report as of September 30th, 2007 (Fiscal Year End).

## What is the SBIC Program?

-  An Engine for Growth in the US Economy

_**In Fiscal Year 2007**_**:**
- SBIC financings totaled $2.7 billion
- 2,057 companies benefited from SBIC financing
- 669, or 33% of SBIC financings went to companies less than 2 years old
- 13.2% of SBIC financings were made to “Competitive Opportunity Gap Businesses”

- Source: SBIC Data Management Branch, Weekly Report as of September 30th, 2007 (Fiscal Year End).

## What is the SBIC Program?

**Domain Furniture, Inc.**
**DoubleClick.com**
**Douglas Machine, Inc.**
**Duracraft Corporation**
**Etak, Inc.**
**Educational Development**
**Encore Wire Corp.**
**Envoy Corporation**
**Evergreen Solar, inc.**
**Federal Express**
**FIserv**
**Fusion Systems Corp.**
**Gendex**
**General Sciences Corp.**
**Genicom Corp.**
**Geotek Communications, Inc.**
**Global Village Communications**
**Gymboree Corporation**
**Hanger Orthopedic Group, Inc.**
**Harman International Ind.**
**HS Resources, Inc.**
**Healthcare Compare Corp.**
**Healthcare Services**
**HealthSouth Rehabilitation**
**Industrial Training Corp.**
**Information Analysis, Inc.**
**Infotec Commercial Systems**
**Intel Corp.**
**Jenny Craig, Inc.**

- What is the SBIC Program?

- A source of funding for many successful companies

**A&W Brands Holding Co**
**Actel Corporation**
**Adaptec**
**Airport Systems Int’l, Inc.**
**America OnLine**
**Amgen, Inc.**
**Apple Computer**
**Assembly Solutions, Inc.**
**BeutiControl Cosmetics, Inc.**
**Bright Start, Inc.**
**CTC Distribution Services**
**Callaway Golf Company**
**Cardio Logic Systems, Inc**
**Cerner Corporation**
**Chesapeake Biological Labs**
**Citation Computer Systems, Inc.**
**Cognex Corporation**
**Compaq, Inc.**
**Comptek Research, Inc.**
**Connecticut Culinary Institute**
**Cooper Natural Resources, Inc.**
**Costco**
**Cray Research**
**Cutter & Buck**
**Data Stream Systems**
**Devon Group, Inc.**
**Digimark, Inc**

**Kent Electronics**
**Kentucky Kingdom, Inc.**
**Kronos, Inc.**
**Labor Ready, Inc.**
**Lam Research**
**LaMadeleine, Inc.**
**Lifeline Systems, Inc.**
**Maxim Integrated Products**
**Metrolina Outreach Mammography**
**Microcom**
**Micromodule Systems**
**Microtouch Systems, Inc.**
**Mother’s Work, Inc.**
**Neoterik Health Tech, Inc.**
**NetFrame Systems, Inc.**
**Newcomb Communications, Inc.**
**New England Critical Care**
**NuCo2, Inc.**
**Octel Communications Corp.**
**Optical Data Systems**
**Orbital Sciences Corp.**
**Outback Steakhouse**
**Peoplesoft, Inc.**
**Performance Polymers**
**Petstuff, Inc.**
**Potomac Group, inc. (MediFAX)**
**Protocol Systems**
**RF Power Products**
**Radio One**

**Read-Rite**
**Restoration Hardware, Inc.**
**Rock Bottom Restaurants**
**Sage Software**
**Seasafe, Inc**
**Security Dynamics Technology**
**Staples**
**Steelweld Equip. Co.**
**Sun Microsystems**
**Symbol Technologies, inc.**
**Synoptics Communications, Inc.**
**Techne Corp.**
**Telesis Corp.**
**Teradata Corp.**
**The Computer Group (TCG)**
**The Last Best Place Catalog**
**The Merchandising Group (TMG)**
**The Systems Center**
**Tricord Systems, Inc.**
**Vertex Communications**
**Vivid Technologies, Inc.**
**WebMethods**
**Wellfleet Communications**
**Wire Networks, Inc.**
**Extreme Networks, Inc.**
**Zydacron, Inc.**

## How Does the Program Work?

- SBIC managers must meet rigorous
- requirements to be licensed:
- Senior-level decision making experience in a private equity / mezzanine fund relevant to proposed fund
- Evidence of strong deal flow in investment area for proposed fund
- Investment experience as a principal rather than an agent (i.e. investment banker, consultant, broker)
- Realized track record of superior returns benchmarked against funds of same vintage year and style
- Hands-on experience adding value at the portfolio company level
- Cohesive team, with complementary skills, history and strong chemistry
- Private capital comprised of diverse private LPs

## How Does the Program Work?

- Debenture Securities
- Interest only, bullet with 10 year maturity
- Coupon Rate = 5.788%, or 106.8 bps over the 10 Year Treasuries Rate on 8/22/07
- Origination fee = 3.0% (1.0% at commitment; 2.0% at draw)
- Annual fee on leverage drawn = .717%*
- Unsecured, non-recourse to General Partners
- Leverage available up to 2x private capital paid-in
- Leverage ceiling is $130 million for FY 2008
- No prepayment penalty

** The annual fee is a contingent payment, fixed at time of leverage commitment.  The current rate floats according to the SBIC Program’s required subsidy rate.*

## How Does the Program Work?

- SBICs can invest in:
- Loans, debt with equity features or equity
- 100% “Small Business”
- Net worth < $18M and average after-tax income for prior two years <$6M
- Of which, 20% must be “Smaller Enterprise” (net worth < $6M and average after-tax income for prior two years <$2M)
- Not more than 20% of the private, committed capital can be invested in a single company without prior SBA approval
- Project financing is prohibited (real estate, single purpose projects)
- SBICs may control small businesses for up to seven years which may be extended with SBA approval