SBA Raises Caps on Funds Investing in Startups, Low-Income Areas

The Small Business Administration is making more money available for programs that encourage investment in early-stage companies and low-income communities.

The SBA announced Thursday that it has raised the amount it can invest in firms through its early-stage investment fund by $50 million, to $200 million. It also said it has increased lending caps on its impact investment fund by $70 million, to $150 million.

Both funds are part of the SBA's Small Business Investment Company program in which the SBA provides low-interest loans to private investment groups. The early-stage investment fund provides funding to startups and other early-stage companies and the impact investment fund lends to businesses in poor communities and to companies investing in clean energy and education.

The SBA's next solicitation for the early-stage fund will be in the fall of 2013, it said.

SBICs are private firms registered with the SBA that raise money from private sources to invest in small businesses. They can apply for low-interest matching loans from  the SBA once they reach a certain threshold of private funding.

"By increasing the amount we are investing in both early stage and impact investing, we are expanding the playing field and injecting new energy and momentum into our economy, bolstering new business starts and leveraging the greatest driver of innovation and job creation in the world — the entrepreneur," Karen Mills, the SBA administrator, said in a news release.

Regulatory reforms following the financial crisis have made SBICs more attractive as investments for banks and other investors. Banks, which get Community Reinvestment Act credit for their SBIC investments, are crucial supporters of the funds.

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