Investing In SBICs

by David Jenyns on March 25, 2009

If you can’t afford the time necessary to develop your own portfolio or the expenses involved in professional management, a new investment vehicle called SBIC (Small Business Investment Company) might be your answer.

An SBIC is a finance company organized under the Small Business Investment Act of 1958. This was specifically designed to stimulate the growth of the nation’s economy by supplying small businesses with private equity capital and long-term loans. In addition, SBIC’s offer unique tax advantages plus a degree of leverage on invested capital not found in any other form of investment.

Realizing the vital importance of small business to the nation’s economy, Congress passed the Small Business Investment Act of 1958, authorizing the establishment of a new type of small business banking institution—the SBIC.

Initially, an SBIC was allowed to finance small companies only through the purchase of convertible debentures or by making long-term loans.

Smart investors are always looking to the past for new ideas, hidden insights and lessons learned. The story of the SBICs is a good one to know if you plan on getting involved in any financial investment vehicles.

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