Phil Castle, The Business Times
Matt Varilek hopes to convince more investment fund managers to participate in a government program that not only offers them the potential to earn higher returns, but also offers access to more capital to small businesses.
“It’s truly a classic public-private partnership,” said Varilek, administrator of the U.S. Small Business Administration Region VIII, a seven-state area that includes Colorado.
Varilek said he’s recruiting applicants for the SBA Small Business Investment Company (SBIC) program. Under the program, the SBA offers access to capital to private investment fund managers who in turn invest in small businesses. Under one variation of the program, investments are targeted to a specific industry sector or geographic area.
Varilek said he’s particularly interested in the early stage SBIC program in which funds are invested in early stage businesses — those that have yet to realize positive cash flow from operations in any fiscal year.
Those businesses tend to have more difficulty accessing capital, Varilek said, from traditional bank loans or even other SBA-backed financing programs.
SBA-guranteed debenture leverage of up to $50 million is available for early stage SBICs, but half their funds must be invested in early stage companies. Because SBICs receive capital at a low interest rate, they can enjoy higher net returns, Varilek said.
While the early stage SBIC program has worked in other states, there are no early stage SBICs in Colorado, he said.
SBICs must go through a licensing process that evaluates the fund structure, economics and experience of the investment managers. The first step in that process is completing a management assessment questionnaire. The deadline to submit questionnaires for early stage SBICs is Feb. 27.
For more information about the early stage SBIC program, call (303) 844-0500 or visit www.sba.gov/inv/earlystage.