Increased Capital Access for Growing Business Act

INCREASED CAPITAL ACCESS FOR GROWING BUSINESS ACT -- (House of Representatives - April 28, 2004)

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Ms. VELÁZQUEZ. Mr. Speaker, I yield myself such time as I may consume.

(Ms. VELÁZQUEZ asked and was given permission to revise and extend her remarks.)

Ms. VELÁZQUEZ. Mr. Speaker, I rise in support of H.R. 3170, the Increased Capital Access For Growing Businesses Act; and I want to commend my good friend and colleague, the gentlewoman from New York (Mrs. Kelly), for moving this matter so expeditiously. I also want to thank the gentleman from Ohio (Mr. Oxley) and the gentleman from Massachusetts (Mr. Frank), the ranking member, for their support in expediting the consideration of this measure.
With this legislation we have an opportunity to help more small companies access capital so that they can expand and grow their businesses. Business Development Companies are unique investment companies authorized by the 1980 Amendments to the Investment Company Act. They are publicly traded companies that invest primarily in small companies.

Since 1980, BDCs have proven to be a valuable source of funding for growing companies that do not have access to traditional sources of financing like bank lending or access to the public securities markets. At the same time, BDCs provide the investing public with an opportunity to invest in private equity, an opportunity traditionally limited to wealthy investors.

In 1980, when BDCs were first authorized by Congress, about two-thirds of all publicly held companies were eligible for BDC investment. While the securities and financial services industries evolved during the 1990s, Congress did not act to keep the BDC statute current. As a result, the number of public companies in which BDCs could invest in has been reduced drastically, effectively eliminating the option of BDC investment for many companies.

It is important to understand that just because a firm has gone public does not mean that it can access the financing necessary for growing and expanding. In the late 1990s, for instance, many companies went public that may not have been able to do so under current market conditions. As a result, after the market bubble burst, many of these companies found themselves unable to access traditional financing sources. These smaller, illiquid company stocks could have greatly benefited from financing offered by BDCs. Instead, the current statute severely restricts such investments by BDCs.

The current standard for eligibility, whether or not a company has outstanding marginable securities, has proven unworkable, as it is tied to a standard that is no longer relevant.

H.R. 3170 attempts to provide more certainty and update the law concerning permissible investments by BDCs. It creates a more workable standard to enable BDCs to provide financing to companies as originally intended by the 1980 amendments. This legislation attempts to provide a more objective standard, based on a market capitalization test, to modernize the definition of eligible portfolio companies.

H.R. 3170 modernizes U.S. securities laws to reflect changes in the marketplace. Small and growing companies are often widely regarded as engines of economic growth and job creation. Allowing BDCs to invest in more companies in need of capital will provide more opportunities, more jobs, and contribute to the economic expansion.

I urge my colleagues to support this legislation critical for small businesses and the U.S. economy.

Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.

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