SBIA Applauds House Committee Passage of BDC Modernization Legislation
November 15, 2017 | The Small Business Investor Alliance
WASHINGTON, D.C. (November 15, 2017) – The Small Business Investor Alliance (SBIA), the leading association of lower middle market private equity funds and investors, today applauded the House Financial Services Committee on the passage of bipartisan economic growth legislation that modernizes the Business Development Company industry. The Small Business Credit Availability Act (H.R. 4267) modernizes rules for Business Development Companies (BDCs), which would help BDCs access more capital for domestic investment. Representative Steve Stivers (R-OH) sponsored the bill.
The BDC industry is growing rapidly, and modernizations made to how BDCs are regulated will help unleash more available capital to small businesses. Currently, BDCs have over $80 billion in outstanding investments in middle market businesses. This financing helps businesses expand and create jobs, providing much needed growth to the U.S. economy. Growing companies across the country rely on BDCs for capital to purchase equipment, build facilities, and expand.
Middle market firms are responsible for more than half of U.S. job growth since 2011, and BDCs provide vital growth capital to these growing businesses.
“I’m pleased to work with SBIA to continue to advance domestic investment for small and mid-size businesses,” Rep. Stivers said. “We must make it easier for BDCs to provide growth capital to businesses, so they can continue to create jobs and opportunities in our communities.”
“SBIA thanks Rep. Stivers, Rep. Moore, Rep. Sherman, Rep. McHenry, and the House Financial Services Committee for their continued support of domestic investment and the BDC industry. Overwhelming bipartisan support for expanded access to growth capital sends a strong message of hope to small businesses,” said Alliance President Brett Palmer.
“The overall health of the U.S. economy depends on the ability of smaller businesses to grow. Modernizing the way BDCs are regulated will increase capital formation while maintaining the responsible investor protections now in place, and this will be the focus of our work.” said Ian Simmonds, Chair of the SBIA BDC Council and Chief Financial Officer of TPG Specialty Lending.
Among the key provisions of the legislation are streamlining the BDC regulatory process: including simplifying the offering process, updating proxy rules, and expanding access to capital by changing the asset coverage ratio. BDCs are currently limited to a 1:1 debt-to-equity ratio as opposed to other financial vehicles that are often leveraged at a 9:1 ratio or higher. Even with a modest increase, BDC leverage would remain low while enabling BDCs to deploy significantly more capital to smaller businesses. This change also allows BDCs to reduce the risk in their portfolios. These and other priority reforms are part of the SBIA BDC Modernization Agenda. SBIA’s BDC Council worked with members of the committee to introduce the bill.
SBIA’s BDC Council is committed to working with Congress and other stakeholders to advance consensus-driven improvements to current BDC regulations that will make it easier to deploy capital to domestic small businesses.
To learn more about BDCs and the SBIA BDC Council please visit: BDCsWorkforAmerica.org
About the Small Business Investor Alliance
The Small Business Investor Alliance (SBIA) is the premier organization of lower middle market private equity funds and investors. SBIA works on behalf of its members as a tireless advocate for policies that promote competitive markets and robust domestic investment for growing small businesses. SBIA has been playing a pivotal role in promoting the growth and vitality of the private equity industry for over 50 years. For more information, visit www.SBIA.org
