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New report from the Institute for Private Capital highlights unique benefits to investors of Small Business Investment Companies


WASHINGTON, DC (June 19, 2024) – Small Business Investment Companies (SBICs) represent a unique opportunity for investors to achieve superior returns and superior risk adjusted returns while supporting the growth of small businesses that are vital to the American economy, according to a new report by the Institute for Private Capital (IPC). This first-of-its-kind white paper sheds light on the performance of SBICs, revealing persuasive opportunities for investors.

 

“As the private credit and equity market continues to grow and evolve, Small Business Investment Companies have consistently overperformed for decades and offer a compelling opportunity for investors seeking both strong financial returns and meaningful economic impact,” said SBIA President Brett Palmer.

This report by the Institute for Private Capital strives to analyze and quantify SBIC performance over a 20-year period. The IPC White Paper shows that between 2000 and 2020, SBICs had an average internal rate of return (IRR) of 16.9%, which is 4.13% higher than a comparable set of non-SBIC peer funds. The study provides additional data-driven insights that highlight the unique benefits of SBIC investing, including these details:

 

Key Findings

 

  • SBIC funds outperform comparable non-SBIC peers by an average of 4.13% in terms of internal rate of return (IRR).
  • The average multiple on invested capital (MOIC) for SBICs is 2.3x, which is 0.74x higher than for comparable non-SBIC funds.
  • On an absolute basis, SBIC equity funds are the best performing. However, SBIC junior debt funds have the largest outperformance relative to their peer group.
  • On average, all SBIC strategy types and levels of leverage have superior performance when compared to a non-SBIC peer group.
  • Overall, the analysis suggests that SBIC performance from the perspective of institutional investors is, on average, superior to both comparable peer funds and public-market benchmarks.

 

CapitaLinx

CapitaLinx is SBIA’s exclusive matchmaking opportunity for small business investors in the lower middle market and provides a unique opportunity for institutional investors to meet high quality, small fund managers representing a diverse range of geographies and investment strategies. Held alongside two SBIA conferences each year – in April during the West Coast Capital Summit and in October on the East Coast during SBIA’s National Summit – CapitaLinx utilizes a robust, confidential, one-of-a-kind platform to facilitate one-on-one meetings between institutional investors and lower middle market funds, including SBICs.

For more information on the IPC white paper or to learn more about CapitaLinx, please contact us at (202) 628-5055 or email info@sbia.org.

For press inquiries, or if you would like to set up a time to speak with SBIA President Brett Palmer, please contact MaryBrown Sandys at (202) 628-5055 or press@sbia.org.

 

Click here to find the full report on the IPC website >

Read an executive summary >

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About the SBIC Program

The SBIC program is run by the Small Business Administration’s Office of Investment and Innovation and is an investment program designed to increase small business access to venture and private equity capital for growth, production, and modernization. For more than 60 years, SBICs have been providing capital to American small businesses to help them expand their operations and create jobs. Fund management teams that meet the SBA requirements and successfully complete the application process, are able to access low-cost leverage up to two times the private capital they raise. These funds then invest in a portfolio of U.S. small businesses, creating jobs, fostering innovation, and fueling economic growth. To learn more about the SBIC program, visit www.sba.gov/sbic.

About the Small Business Investor Alliance (SBIA)

The Small Business Investor Alliance (SBIA) is the premier organization of lower middle market private equity funds and investors. SBIA works on behalf of its members as a tireless advocate for policies that promote competitive markets and robust domestic investment for growing small businesses. SBIA has been playing a pivotal role in promoting the growth and vitality of the private equity industry for over 60 years. For more information, visit www.SBIA.org or call (202) 628-5055.

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