Small Business

The Small Business Investment Act of 1958 created a program to help small businesses obtain financing for starting, maintaining, and expanding operations. Under the program, small business investment companies fund small businesses by purchasing their stock or issuing them loans. In 1972, Congress amended the act to establish specialized small business investment companies to fund small businesses owned by socially or economically disadvantaged persons. This fact sheet provides information on (1) the performance of the programs between 1990 and 1994, including trends in the number, the funding, the losses, the capitalization, and the size of the investment companies, as well as specialized small business investment companies' participation in the Three Percent Preferred Stock Repurchase Program; (2) investment companies' investment activities during that period; and (3) the educational backgrounds and work experiences of personnel in the Small Business Administration who manage the program.

GAO found that: (1) in general, between fiscal years (FY) 1990 and 1994, the number of SBIC and SSBIC participating in the program declined and federal funding decreased, while net losses increased; (2) SBIC and SSBIC brought more private capital into the programs, while the total amount of leverage provided to SBIC and SSBIC declined; (3) as of December 1994, 192 SBIC and SSBIC were in liquidation, with SBA expecting to recover $443 million of the $790 million of funds owed; (4) 17 SSBIC paid SBA $15.3 million to repurchase preferred stock with a par value of $43.4 million under the Three Percent Preferred Stock Repurchase Program; and (5) SBIC and SSBIC provided between $490 million and $806 million in funding for small businesses between FY 1990 and 1993 and provided $1 billion in funding in FY 1994. GAO also found that: (1) SBIC have made a greater proportion of equity investments while SSBIC have primarily provided loans; (2) more than 90 percent of SBA Investment Division employees have at least a bachelor's degree, most of which are in the accounting, finance, or business administration fields; and (3) most Investment Division employees have an average of 11 years of SBA work experience, and 7.7 years work experience primarily in the accounting, auditing, banking, and investment fields.