Manzullo Introduces Venture Capital Fund to Offset SBA's Program

WASHINGTON - House Small Business Committee Chairman Don Manzullo (R-Ill.) has introduced legislation to create a new venture capital program under the SBA to stimulate equity investment in America's small businesses and create jobs. The SBIC Participating Debenture Act of 2005 (H.R. 3429), introduced July 26, would create the new Participating Debenture debt security program to replace the Small Business Investment Companies (SBIC) Participating Securities program. The new Participating Debenture program would create provisions that currently do not apply to the Participating Securities program. Manzullo said interest will be payable irrespective of the SBIC's profitability and will be chargeable against the SBIC's private capital. Distributions must be made to SBA from any defined net receipts whether or not there are realized earnings for accounting or tax purposes, under the new program. Also, after SBA-guaranteed interest is brought current with any SBIC distribution, additional distributions are made to SBA and private investors according to their interests in the SBIC until unpaid leverage is paid in full. The SBA's share of the profits in a Participating Debenture SBIC will be "greatly increased" compared to SBA's share in the Participating Securities program, Manzullo said. This is accomplished by a two-tier profit sharing formula which increases SBA's base share from about 10% to about 27% in any fund that has a gross internal rate of return greater than approximately 17%. At the current 10-Year Treasury rate, SBA's share of all profits in a Participating Securities fund is 7.5%.