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                                                      Calendar No. 353
115th Congress      }                                    {      Report
                                 SENATE
 2d Session         }                                    {     115-272

======================================================================



 
           SMALL BUSINESS INVESTMENT OPPORTUNITY ACT OF 2018

                                _______
                                

                  June 7, 2018.--Ordered to be printed

                                _______
                                

          Mr. Risch, from the Committee on Small Business and
               Entrepreneurship, submitted the following

                              R E P O R T

                         [To accompany S. 2527]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business and Entrepreneurship, 
having considered the bill (S. 2527) to amend the Small 
Business Investment Act of 1958 to increase the amount of 
leverage made available to small business investment companies, 
having considered the same, reports favorably thereon without 
amendment, and recommends that the bill do pass.

                            I. INTRODUCTION

    The Small Business Investment Opportunity Act of 2018 (S. 
2527) was introduced by Senator Benjamin L. Cardin, the 
Committee's Ranking Member, for himself, Senator James E. 
Risch, the Committee's Chairman, and Senator John Kennedy on 
March 8, 2018.
    This bill amends the Small Business Investment Act of 1958 
to increase the Individual Leverage Limit for individual funds 
participating in the Small Business Investment Company (SBIC) 
program from $150,000,000 to $175,000,000.
    The bill was approved unanimously by a roll call vote as 
part of a manager's package.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    The SBIC program was authorized in the 85th Congress by the 
Small Business Investment Act of 1958 and is an integral part 
of the Small Business Administration's (SBA's) programs that 
provide a broad spectrum of access to capital for small 
businesses across the United States. SBICs are privately owned 
and managed investment funds, licensed and regulated by SBA, 
that use their own capital plus funds borrowed with an SBA 
guarantee to make equity and debt investments in qualifying 
small businesses. The program operates at no expense to 
taxpayers. Instead, the cost of the program is covered by fees 
paid by SBICs and their portfolio companies.
    Since the program started in 1958, the SBIC program has 
deployed more than $67 billion of capital, made more than 
166,000 investments in American small businesses, and licensed 
more than 2,100 investment funds.
    In the 111th Congress, the American Recovery and 
Reinvestment Act of 2009\1\ simplified and raised the maximum 
amount of leverage for an individual SBIC to 300 percent of its 
private capital, or $150,000,000, whichever is less. The 
maximum amount of leverage for licensees with two or more 
licenses was raised to $225,000,000.
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    \1\ P.L. 111-15.
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    In the 114th Congress, Senator Risch and Ranking Member 
Cardin introduced a bill (S. 552), with Chairman David Vitter 
and Senators Jeanne Shaheen and Kelly Ayotte as cosponsors, to 
increase the maximum amount of leverage for SBICs with more 
than one fund from $225,000,000 to $350,000,000. The bill was 
enacted as part of the Consolidated Appropriations Act of 
2016.\2\
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    \2\ P.L. 114-113.
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    However, the leverage limit for SBICs having just one fund 
was not increased. Consequently, the amount for an individual 
fund has been fixed at $150,000,000 since 2009. In the interim, 
inflation has diminished the value of the $150,000,000 maximum. 
Today, adjusted for inflation, the current cap for a single 
SBIC of $150 million should be nearly $170 million. The 
Committee strongly recommends the individual fund limit 
increase apply to any existing qualified fund that has 
commenced its investment period two years prior to the date the 
bill becomes law.
    In the 115th Congress, a companion bill, the Small Business 
Investment Opportunity Act of 2017 (H.R. 2333), was marked up 
and passed by the House Small Business Committee on July 12, 
2017 and passed by the full House on July 24, 2017.
    Like the House bill, the Cardin-Risch Small Business 
Investment Opportunity Act of 2018 ensures the SBIC program is 
able to continue to deploy needed capital through the 
availability of venture and private equity capital in a manner 
that allows the Individual Leverage Limit to keep pace with 
inflation and aligns it more closely with the 2015 increase in 
the multiple licensee limit.

                        III. DESCRIPTION OF BILL

    This bill will expand the ability of SBA and its private-
sector partners to deploy more capital to innovative, fast-
growing small businesses through the SBIC program. The bill 
increases the Individual Leverage Limit for an individual SBIC 
from $150,000,000 to $175,000,000.

                           IV. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on March 14, 
2018.
    A motion to adopt the Small Business Investment Opportunity 
Act of 2018, a bill to amend the Small Business Investment Act 
of 1958 to increase the amount of leverage made available to 
small business investment companies, was approved unanimously 
by a roll call vote as part of a manager's package. Senators 
Risch, Rubio, Paul, Scott, Ernst, Inhofe, Young, Enzi, Rounds, 
Kennedy, Cardin, Cantwell, Shaheen, Heitkamp, Markey, Booker, 
Coons, Hirono, and Duckworth voted for the bill.

                            V. COST ESTIMATE

    In compliance with rule XXVI(11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:

                                                    April 19, 2018.
Hon. James E. Risch,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2527, the Small 
Business Investment Opportunity Act of 2018.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

Small Business Investment Opportunity Act of 2018

    Under current law, the Small Business Administration (SBA) 
operates a program that provides loan guarantees to Small 
Business Investment Companies (SBICs) that make investments in 
qualifying small businesses. The amount of debt the SBA is 
authorized to guarantee for any SBIC is capped at $150 million. 
SBICs are required to pay various fees that are sufficient to 
offset the program's estimated subsidy cost, that is, the 
estimated long-term cost to the government of a loan guarantee, 
calculated on a net-present-value basis. S. 2527 would raise 
the amount of debt that the SBA can guarantee for a SBIC to 
$175 million.
    Using information from the SBA, CBO estimates that 
implementing the bill would cost $3 million over the 2019-2023 
period for the agency to update the program's regulations and 
subsidy-cost model in 2019 and for additional analysis and 
oversight of SBIC portfolios over that period. Most of those 
costs would result from administrative activities and any 
spending would be subject to the availability of appropriated 
funds. Using information from the SBA, CBO estimates that 
increasing the cap on the amount of debt that the SBA can 
guarantee for SBICs would increase the volume and gross cost of 
loan guarantees that the SBA could make; however, CBO estimates 
that the estimated net subsidy cost to the government would not 
be affected because the SBA would raise fees to cover any such 
costs.
    Enacting S. 2527 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting S. 2527 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    S. 2527 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    On July 21, 2017, CBO transmitted a cost estimate for H.R. 
2333, the Small Business Investment Opportunity Act of 2017, as 
reported by the House Committee on Small Business on July 12, 
2017. The two pieces of legislation are similar and CBO's 
estimates of their budgetary effects are the same.
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was reviewed by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                  VI. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI(11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation.

                    VII. SECTION-BY-SECTION ANALYSIS

Section 1: Short title

    This section provides the short title for the Act, the 
``Small Business Investment Opportunity Act of 2018''.

Section 2: Individual SBIC Leverage Limit increase

    This section amends Section 303(b)(2)(A)(iii) of the Small 
Business Investment Act of 1958, 15 U.S.C. 682(b)(2)(A)(ii), by 
increasing the Individual Leverage Limit from $150,000,000 to 
$175,000,000. The Committee strongly recommends the individual 
fund limit increase apply to any existing qualified fund that 
has commenced its investment period two years prior to the date 
the bill becomes law.

                                  [all]