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In 1958, Congress created the Small Business Investment Company (SBIC) program. SBICs, licensed by the Small Business Administration, are privately owned and managed investment firms.

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In 1958, Congress created the Small Business Investment Company (SBIC) program. SBICs, licensed by the Small Business Administration, are privately owned and managed investment firms. They are vital participants in a partnership between the government and the private-sector economy. With their own capital and funds borrowed at favorable rates through the federal government, SBICs provide venture capital to both new and established small independent businesses. All SBICs are profit-motivated businesses. A major incentive for SBICs to invest in small businesses is the chance to share in the success of the small business if it grows and prospers. Here is a list of the various types of investment programs.

1. Seed financing

This is a small amount of capital provided to an inventor entrepreneur to prove a concept and to qualify for start-up capital. This may involve product development and market research as well as building a management team and developing a business plan.

2. Start-up

This is capital provided to companies completing product development and initial marketing. Companies may be in the process of organizing or they may be in business for a year or less, but they have not sold their product commercially. Usually such firms have made market studies, assembled key management, and developed a business plan and thus are ready to do business.

3. Early stage

This is capital provided to companies that have expended their initial capital (often in developing and market-testing a prototype) and require funds to initiate full-scale manufacturing and sales.

4. Expansion financing

This working capital is for the initial expansion of a company that is producing and shipping and has growing accounts receivable and inventories. Although the company has made progress, it may not yet be showing a profit.

5. Later-stage financing

This is capital for the major expansion of a company whose sales volume is increasing and that is breaking even or profitable. Funds are used for further plant expansion, marketing, working capital, or development of an improved product.

6. MBO/LBO/acquisition
   

Acquisition financing provides funds to finance an acquisition of another company. Management/leverage buyout funds enable an operating management group to acquire a product line or business.

Source: Small Business Administration (www.sba.gov).