Micro-SBIC and Emerging Managers Program Act of 2021

To amend the Small Business Investment Act of 1958 to establish a Micro-SBIC program, and for other purposes. 1. Short title This Act may be cited as the Micro-SBIC and Emerging Managers Program Act of 2021 2. Micro-SBIC license Part A of title III of the Small Business Investment Act of 1958 ( 15 U.S.C. 681 et seq. 321. Micro-SBIC license (a) Establishment The Administrator shall establish a program to issue Micro-SBIC licenses to applicants for the purpose of making investments in and loans to qualified small business concerns. (b) Administration To the extent practicable, the Administrator shall administer the program established under this section in a similar manner to the program established under section 301. (c) Applications An applicant shall submit an application to the Administrator at such time, in such manner, and containing such information as the Administrator may require, including— (1) evidence that the applicant holds private capital of not less than $5,000,000; and (2) evidence that the management of the applicant has significant business expertise relevant to the applicant’s investment strategy. (d) Selection of Micro-SBICs The Administrator shall select applicants to be granted a license to operate a Micro-SBIC under this section. (e) Guidance The Administrator shall issue guidance that encourages the participation of nontraditional applicants by reducing requirements for applicants. Such guidance— (1) may include the requirements established under part 107 of title 13, Code of Federal Regulations; and (2) shall allow applicants who have not previously managed an investment company to demonstrate significant business expertise relevant to the applicant’s investment strategy by reliance upon the presence of at least two track record investment committee members or participation in the Emerging Managers Program established under section 322. (f) Procedures for issuing licenses (1) Status Not later than 90 days after the initial receipt by the Administrator of an application under this subsection, the Administrator shall provide the applicant with a written report detailing the status of the application and any requirements remaining for the completion of the application. (2) Approval or disapproval Except as provided in paragraph (3) and within a reasonable time after providing the report under paragraph (1), and in accordance with such requirements as the Administrator may provide, the Administrator shall— (A) approve the application and issue the applicant a license to operate as a Micro-SBIC; or (B) disapprove the application and notify the applicant in writing of the disapproval, including reasons for the disapproval. (3) Provisional approval (A) In general The Administrator may provide provisional approval to an applicant to— (i) encourage investment company applicants with an investment mandate from the committed private market capital of the investment company that does not conform to the requirements relating to private capital in subsection (c) at the time of application; (ii) allow the applicant to more effectively raise capital commitments from the private market by such provisional approval; and (iii) allow the applicant to more precisely request the desired amount of leverage from the Administrator pending the securing of capital from private market investors. (B) Limitation An applicant provided provisional approval under subparagraph (A) shall apply for approval under paragraph (2) not later than 12 months after being granted such provisional approval. (g) Maximum leverage (1) In general The maximum amount of outstanding leverage made available to any one Micro-SBIC may not exceed— (A) 50 percent of the private capital of such Micro-SBIC, not to exceed $25,000,000; or (B) in the case of a Micro-SBIC owned by persons that also own a small business investment company licensed under section 301, 100 percent of the private capital of such Micro-SBIC, not to exceed $50,000,000. (2) Investments in certain business (A) In general In calculating the outstanding leverage of a Micro-SBIC for purposes of subparagraph (A), the Administrator shall exclude the amount of the costs basis of any investments made in an entity described in subparagraph (B) in an amount not to exceed— (i) $25,000,000; or (ii) in the case of a Micro-SBIC owned by persons that also own a small business investment company licensed under section 301, $50,000,000. (B) Entities An entity described in this subparagraph is— (i) a Special Competitive Opportunity Gap Business (as defined by the Administrator); (ii) a small business concern located in a HUBZone; (iii) a small business concern located in a community that has been designated as an empowerment zone or an enterprise community under section 1391 (iv) a small business concern located in a community that has been designated as a promise zone by the Secretary of Housing and Urban Development; or (v) a small business concern located in a community that has been designated as a qualified opportunity zone under section 1400Z–1 (3) Portfolio diversification The Administrator shall revise section 107.740 of title 13, Code of Federal Regulations, to provide for a higher overline limit (h) Report The Administrator shall include in the annual report required under section 10(a) of the Small Business Act a description of— (1) the number of applications received under this subsection, including the number of applications received from applicants the management of which is at least majority composed of socially disadvantaged individuals or veterans; (2) the number of licenses issued under this section, including the number of such licenses issued to applicants the management of which is at least majority composed of socially disadvantaged individuals or veterans; (3) the number of investments made by Micro-SBICs in Special Competitive Opportunity Gap Businesses, disaggregated by the type of Special Competitive Opportunity Gap Business; and (4) the number of investments made by Micro-SBICs, disaggregated by debt, debt with equity features, and equity only. (i) Definitions In this section: (1) Applicant The term applicant (2) Management The term management (3) Micro-SBIC The term Micro-SBIC (4) Micro-SBIC license The term Micro-SBIC license (5) Socially disadvantaged individual The term socially disadvantaged individual (A) has the meaning given in section 8(a)(5) of the Small Business Act; and (B) includes an individual who is a woman. (6) Track record investment committee member The term track record investment committee member (7) Veteran The term veteran 322. Emerging Managers Program (a) Establishment The Administrator shall establish a program to be known as the Emerging Managers Program (b) Leverage Leverage made available to a small business investment company or Micro-SBIC that is managed by at least two individuals who are emerging managers shall not be considered as part of the leverage made available to a covered manager. (c) Report Not later than 5 years after the date of enactment of this Act, the Administrator shall submit to the Committee on Small Business of the House of Representatives and the Committee on Small Business and Entrepreneurship of the Senate a report evaluating the effectiveness of the Emerging Managers Program established under this section, including with respect to increasing the number of applications received by and licenses issued to emerging managers. (d) Definitions In this subsection: (1) Covered manager The term covered manager (A) a manager with substantial experience in operating small business investment companies; and (B) as determined by the Administrator, a manager of a private equity fund or venture fund that is not licensed as a small business investment company. (2) Emerging manager The term emerging manager .

Summary: Micro-SBIC and Emerging Managers Program Act of 2021 This bill establishes programs for the Small Business Administration (SBA) to (1) issue certain applicants a license to operate a Small Business Investment Company (SBIC) and (2) provide assistance to SBICs operated by emerging managers. An SBIC is a privately owned company, licensed and regulated by the SBA, which invests in small businesses through debt and equity. First, the bill lowers the threshold to receive an SBIC license to include applicants that hold private capital of at least $5 million and have significant business expertise relevant to the applicant's investment strategy. The bill also sets limits on the amount of financing these SBICs may receive from the SBA. Additionally, the bill allows managers with substantial experience operating SBICs to enter an agreement, approved by the SBA, to provide guidance and assistance to SBIC applicants that are managed by at least two emerging managers who have an investment record of less than 10 years or who focus on underserved markets.