A group of banks that accept government funding for small-business investment companies would benefit from a bill a Senate committee is expected to approve Wednesday.
The legislation includes a big increase in government funding for the program, which partially guarantees and funds money invested by some venture capital firms.
Sixty-six banks operate the ventures, which are privately owned, venture-capital firms that are licensed and regulated by the Small Business Administration.
Herb Spira, tax counsel to the Independent Bankers Association of America, said his group backs the proposal because it would increase to as much as $680 million, from $381 million, the amount available for the government to invest in SBIC projects.
The bill also would levy fees on investment companies, including a charge for using the government's guarantee.
Other parts of the bill are designed to reduce the government's risk, including a measure mandating higher capital requirements for new SBICs. Mr. Spira said the capital rule may deter some small banks from starting the investment companies. But he said most banks will not have difficulty.
"I don't think these leverage requirements will be a problem," said Mr. Spira, noting that most banks involved with an investment company already are sufficiently capitalized to meet the requirements.
The bill would also force the SBA to adopt rules preventing conflicts of interest between SBIC managers and investors. And, it would require investment companies to pass an audit conducted by outside accountants.
Republicans and Democrats are expected to split along party lines for the bill, with Republicans supporting the measure, according to Kenneth Bricker, a spokesman for the Senate small-business committee.
Mr. Smith writes for the Medill News Service.
