The House of Representatives on Tuesday approved legislation authored by Rep. Steve Chabot (R-Westwood) to increase the amount of capital available to small businesses.  Chabot’s legislation, H.R. 6504, the Small Business Investment Company Modernization Act of 2012, was approved by the House under suspension of the rules by a vote of 359-36 with one member voting "Present."

This bipartisan legislation, introduced on September 21, 2012 by Chabot, Rep. David Cicilline (D-Rhode Island) and Rep. Renee Ellmers (R-North Carolina), will facilitate additional investment in small businesses by Small Business Investment Companies (SBICs) by adjusting the maximum amount of leverage available to multiple SBICs from $225 million to $350 million. This adjustment is expected to make available to small businesses approximately $500 million a year in new capital. 

Importantly, due to the structure of the program, this legislation does not require appropriations. As a result, new capital will be available to small businesses without any expense to taxpayers.

Small businesses are the real job creators in this country, employing more than half of the U.S. workforce and creating ­­­60-70% of new jobs every year.  In order to grow and create new jobs, however, small businesses need access to capital.  One way that small businesses access capital is through SBICs, private investment funds that raise private capital from institutions like banks and pension funds and invest in America’s small businesses.  Since their creation in 1958, SBICs have invested in over 110,000 businesses, and in the past six years alone, Ohio businesses have benefitted from more than $307 million in investments.   

The text of Chabot’s remarks from the House Floor during consideration of H.R. 6504 follows:

Statement of Congressman Steve Chabot

Floor Consideration of H.R. 6504

December 18, 2012

I rise today to ask for your support of H.R. 6504, a bipartisan bill I introduced on September 21, 2012 with Representative Renee Ellmers and Representative David Cicilline.  This bill will increase investments to small businesses by $500 million per year and does not require an appropriation.  This bill has the support of the Small Business Investor Alliance, the association that represents SBICs and other small business investors.  The bill also has the support of the U.S. Chamber of Commerce, the world’s largest business organization.  This provision appeared in the 2013 Obama budget as part of his Legislative Start-up America initiative.

The Small Business Investment Company program was created in 1958, and provides leverage to highly-regulated private investors.  These private investment funds are called Small Business Investment Companies, or SBICs for short.  SBICs raise private capital from institutions like banks and pension funds and they also borrow federal capital and then invest it in our country’s most promising small businesses.  As required by law, 100 percent of the money is invested in companies located in America.  Small businesses need the capital to grow and create jobs to support our local and regional economies.

SBICs have invested in over 110,000 businesses since the creation of this program.  23 percent of the investments are made in the Manufacturing sector of our economy and 18 percent of the investments are made in Transportation.  The manufacturing economy is very important to my state of Ohio, and we need to continue committing to it. In the past 6 years, Ohioan businesses have benefitted as more than $307 million has been invested in Ohio since 2006.  One of the SBIC funds in Ohio testified in October of 2011 in front of the House Small Business Committee about the benefits of the SBIC program, and in support of the legislation we have in front of us here today.  Northcreek Mezzanine, which is located in Cincinnati, Ohio, has already invested in five (5) companies since it became an SBIC a little less than 3 years ago. 

It is important for my colleagues to know that this bill does not a congressional appropriation.  The SBIC debenture program is a zero subsidy program.  That means that the SBICs that participate must pay an upfront fee to cover any losses.  It is good public policy like this that really helps businesses grow and access capital without costing the taxpayer any money.

This legislation increase the amount of leverage that companies like Northcreek Mezzanine can borrow to increase their investments in small businesses.  We have here a bill that increases the leverage to $350 million for successful investors.  The SBA has done a great job of regulating SBAs and we see that they only license SBICs that are the best in the market.  We can be sure that the amount of new capital used by this bill will go to qualified small business investors.

It is important that we do what we can to help businesses access the capital they need to expand and create jobs.  Each job report that comes out reminds me of the need to do the things that really work to get our economy moving again.  Congress can take a small but important step to getting the capital to businesses that need it the most. Vote for H.R. 6504 on the floor today.