SBICs could balloon on ideal rates BY ALEXANDER SOULE
casoule@westfairinc.com
H
eading into October, an Oregon software company called Emme agreed to move its headquarters to Bristol in exchange for $3 million in funding from Connecticut Innovations and a pair of firms, one of which is running a Small Business Investment Company (SBIC) fund. Perhaps Connecticut could use a few more SBICs. That could soon happen. As part of the Obama administration’s Startup America initiative, the Small Business Administration (SBA) is now collaborating more closely with institutional investors to identify and provide capital to experienced private equity managers, who in turn find companies worth investing in. Despite SBA committing $1 billion to its “impact investment” program – including $150 million this year – the SBICs the agency is relying on to invest that money collectively invested in fewer companies in the first half of 2012. Entering October, however, the interest rate on SBIC debentures hit a record low of 2.245 percent, with the Small Business Investor Alliance stating that previous drops have helped spur more investment through the program. The SBIC program was created in 1958, and enjoys several advantages, including not having to register with the U.S. Securities and Exchange Commission (SEC). However, many SBICs are run by partnerships with assorted financing vehicles that make filings to the SEC. “The SBIC program aligns market forces with the clear public policy need of growing small businesses,” said Brett Palmer, president of the Small Business Investor Alliance, in a written statement. “This low rate will attract new investors to small business investment companies, which in turn means more private investment will flow to the nation’s best job creators.” As of the start of September, there were 300 SBICs nationally, according to SBA – about 50 fewer than at the end of 2008 during the economic crisis. In the first half of 2012, those SBICs provided financing for 830 businesses, down 26 percent from the number they had financed a year before. The total dollars those SBICs pushed into the marketplace, however, was down just 2 percent to $2.1 billion, working out to about $2.6 million in
financing per business. The number of SBIC applicants in the pipeline was likewise down, numbering fewer than 60. In all, SBA estimates the SBIC program has created or sustained some 45,500 jobs nationally in the first half of 2012. SBICs in Connecticut are located mostly in Fairfield County, and include: • Altus Capital Partners in Wilton; • Balance Point Capital Partners in
Westport; • Brookside Pecks Capital Partners in Stamford; • Critical Capital Growth Fund in New Canaan; • Equinox Capital in Greenwich; • MSR in Westport; • New Canaan Funding; • RFE Investment Partners in New Canaan; and • Valentis SB, an affiliate of Wexford
Capital in Greenwich. Add to that list GreenLeaf Capital, an affiliate of J.H. Whitney & Co. in New Canaan, whose private equity investments include brands like Eastern Mountain Sports and Igloo Products. This past February SBA took into receivership another J.H. Whitney SBIC affiliate called JHW GreenTree Capital, on grounds it exceeded risk limitations in investing $93 million.
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Kristina Cook | (914) 694-3600, ext. 3033 | kcook@westfairinc.com FAIRFIELD COUNTY BUSINESS JOURNAL • Week of October 8, 2012 15