The SBIC or Small Business Investment Company program is a little less known program in SBA or Small Business Administration. But the benefit of utilizing this program is that, you can get financing for the small business idea that you are seeking such as Hustle Life.
SBIC is basically a private lending company that’s regulated and licensed.
The offered venture capital financing of SBIC is oftentimes to small businesses with higher risks while the SBIC loans are guaranteed by SBA.
Another benefit of SBIC for aspiring entrepreneurs is that, apart from funding of their small business and the creation of more jobs, SBIC is offering assistance and management expertise to companies.
Common Funding from SBIC
More often than not, the range of loan from SBIC is running from 250,000 to 10,000,000 dollars. The rate of interest on the other hand is about 9 to 16 percent. Some of the SBIC funding comes in form of equity or ownership in the business. SBIC also has the authority to decide to invest in a business of their interest in exchange for ownership share in the company. The common investment is ranging from 100,000 to 5,000,000 dollars.
An important thing that should be known about SBIC funding is the fact that it can potentially take control of your business. In exchange of giving small business money, it gives SBIC the power of having control of the business for the next 7 years. This level of authority may vary depending on the situation. Therefore, if you opt to continue filing an application to SBIC, make sure that you are asking the right questions such as how they would like to exercise their power over your business.
3-Step Plan to Start with SBIC
Now let us say that you are decided to push through, here are the things that you must do.
Step number 1. Search for potential investors. Try finding for SBICs to find investors whose goals are in line with your plans. You can narrow down your search by the state for a faster and easier search.
Step number 2. Set an appointment with an SBIC and show your proposed business plan.
Step number 3. Discuss your proposal for financing. Before doing so, get vital info on specific SBIC you wish to approach and prime your communication and connection with that particular company.