Statement of IO&R Subcommittee Ranking Member Yvette Clarke before Subcommittee hearing on the Small Business Investment Company Program

Statement

Thank you Mr. Chairman

Capital is the lifeblood of every small business, without it, most firms simply would not survive. In 1958, Congress recognized a need for long-term funding for growth-oriented small businesses and created the Small Business Investment Company, or SBIC, program. SBIC's are privately owned and managed investment funds, licensed by the SBA, that use their own capital plus SBA guarantee funds to make investments in qualifying small businesses. Since its inception, the SBIC program has provided more than $65 billion of long-term debt and equity capital to more than 165,000 small firms; in FY '12 alone, investments from SBIC's help create or retain 69,000 jobs.

While we know it takes capital to run a business, and continued investment to grow, the current economic environment presents significant obstacles to startup and early-state businesses seeking funding. Though there has been steady improvement, the Federal Reserve has reported that credit markets remain historically tight. Unfortunately, as a result, many firms are unable to access traditional debt financing. For this reason, the alternatives offered by offered by the SBICs to small businesses, including simple equity as well as hybrid equity/debt financing, is critical and will only play a more important role in job creation moving forward.

Although SBICs have helped bridge the gap between the need for capital demanded by entrepreneurs and the amount of funding available in the private market, there is room for improvement. SBA has estimated that the total unmet need for early-stage equity financing for small businesses is approximately $60 billion each year. Specifically, investments in low-income, underserved and minority communities fall well short of the rest of the country. According to SBA data, the percentage of SBIC investments to women, minority and veteran-owned businesses, as well as LMI areas, declined 17% last year, and is on pace for another decline in 2013.

Clearly, changes at SBA, including new investment strategies, will be required to make a significant impact on the unmet capital needs of startups and businesses in traditionally underserved communities. In the best of times, capital access can be something of an ordeal. Today, that task has become especially challenging, and not just for businesses seeking traditional funding.

During today's hearing, we will take the pulse of the SBIC program; examine areas ripe for improvement, and hear from witnesses on the front lines helping today's Main Street businesses become tomorrow's Fortune 500 companies.I'd like to thank our witnesses and look forward to hearing their testimony on how to facilitate investment in our nation's entrepreneurs and small businesses.

Thank you and I yield back.

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