[Capitol Account] A Trade Group Chief Talks Small Business Investing

April 4, 2025

SBIA President Brett Palmer sat down with Capitol Account to discuss SBIA’s mission, legislative priorities, and how Small Business Investment Companies drive much needed capital to American Main Street businesses and create jobs. Following are excerpts from the interview:

 

Capitol Account: What kind of companies are your members investing in?

Brett Palmer: Everything from metal benders to business-to-business services. Industrial services like [firms] that make the chemicals that seal roofs of commercial buildings or things like that. The sort of businesses that aren't sexy for Silicon Valley and that are way too small for Wall Street.

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CA: That said, the president seems pretty aligned with your agenda.

BP: I do think that our members are exactly what this administration wants to succeed. They want investments in small businesses. They want investments in manufacturing. They want investments in areas of the country that have otherwise been forgotten. And that's what we do. We've had a very receptive audience with this administration.

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CA: You testified earlier this week at a House hearing that looked at the role of public-private partnerships in fueling economic growth. There was a lot of talk about small business investment companies. What are they?

BP: A private equity or venture fund that raises private capital. They get licensed by the SBA, and that license process validates that they’re good actors. Not just that they're not breaking the law, but they have to have a track record of successful investing and that the businesses they've invested in have succeeded.

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CA: Where does the government money come in?

BP: They can borrow from a credit facility at the SBA and amplify their capital. So if you raise $50 million, you then can borrow $100 million from the SBA. So now there's $150 million going to small businesses. And it's not the government saying, you shall invest in this company or you shall invest in that company. The private market then finds those businesses that are worthwhile and they think can grow. The private sector leads.

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CA: Are taxpayers on the hook for these deals?

BP: If there ever is a poor investment decision, the private capital gets lost before any taxpayer money gets lost. So you're not gambling with house money…In the past two years, they haven't had to write off a single dime of any of those loans, which is pretty extraordinary. And the program itself has run at a zero subsidy rate since about 1998. Which means that any losses that were incurred were paid for, and then some, by the fees paid by small business investment companies.

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CA: It does seem that private equity has become a negative term in Washington, associated with rich people pillaging companies. Will that change now that Republicans are running things?

BP: It's worth noting that for small business investors, the only way they can make money – and I do mean the only way – is to grow the small business. If you have a small business and you cut, there's nothing left…All the hard decisions are [in] what's the best way to grow? And that's why we have pretty much universal support – Republican, Democrat, House, Senate.

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