Manufacturers Would Gain SBA-Backed Capital under Rubio Proposal
(Bloomberg) -- Small U.S. manufacturing startups would gain new access to federally backed venture capital under a proposal from Senator Marco Rubio.
The Florida Republican is introducing legislation to expand a Small Business Administration program to direct more venture capital to growing manufacturing enterprises. Rubio, a member of the Small Business Committee, has argued that that private equity is too heavily skewed to information technology companies.
“As we move to the rebuilding phase, we must help small manufacturing firms that face a debilitating lack of access to critical finance,” Rubio said in a statement . “The success of these companies is critical to confronting the threat posed by the Chinese Communist Party’s economic ambitions and to bringing good jobs back to America.”
The program provides long-term debt to privately owned and managed Small Business Investment Companies licensed by the SBA that invest in small businesses with prospects for rapid growth. Rubio’s bill would provide $10 billion to SBICs focused on manufacturing by allowing the Small Business Administrator to purchase bonds from participating SBICs.
Rubio, who was the Small Business chairman last year, was instrumental in building support for the bipartisan Paycheck Protection Program that was part of the 2020 stimulus packages and that Congress is set to extend. His proposal for spurring investment in manufacturing comes as President Joe Biden is set to unveil next week his administration’s broad economic plan, for which he’ll be seeking bipartisan support.
The SBIC program, founded in 1958, has allowed qualified investment managers to bolster private capital with government-guaranteed debt. The current program matches each $1 of private investment funding with $2 in debt up to a cap of $175 million. According to the SBA, 5,641 small businesses received investments from SBICs from 2014 to 2018.
In fiscal 2020, the program had $32 billion invested in small businesses, with the SBA share of the risk at $13.4 billion. A total of $4.89 billion was invested in that year to 1,065 small businesses.
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