SBIC Bill Hikes Government-Backed Loans to $250M, But Cuts Off State Funding

The “Investing in All of America Act of 2025” overhauls how the Small Business Administration (SBA) guarantees funding for Small Business Investment Companies (SBICs), which are private funds designed to invest in small businesses. Specifically, the bill significantly raises the maximum amount of SBA-guaranteed funding (called leverage) an SBIC can receive, setting the new limit as high as $250 million for certain funds that pay interest quarterly or semi-annually. However, it also tightens the rules on where the SBICs’ own money, or “private capital,” can come from, explicitly excluding most Federal, State, or local government funds when the SBA calculates leverage limits.

The Fine Print on Private Capital

Think of SBICs as venture capitalists with a government safety net. To get government-backed leverage, they must raise a certain amount of their own private capital first. This bill changes the game by saying that if you’re an SBIC looking for SBA leverage, you can no longer count money you raised from state economic development agencies or municipal funds as your “private capital.” This is a big deal, especially for regional SBICs that partner closely with local governments to spur economic growth in specific areas. If an SBIC relied on, say, a state pension fund to meet its minimum capital requirements, it might suddenly find itself short, potentially limiting its ability to access the full federal guarantee. The only government funds that still count are from state development companies, university endowments, or entities the SBA Administrator specifically authorizes—a vague provision that grants the SBA significant, undefined power.

Bigger Checks, Bigger Risks

For SBICs that can meet the new, stricter private capital definition, the reward is substantial. The maximum leverage cap for a single SBIC jumps from the current $175 million to $200 million, or even $250 million if they follow a specific interest payment schedule. For groups of commonly controlled SBICs, the combined cap can reach up to $475 million. This means that successful, well-capitalized SBICs can now deploy much larger sums of government-guaranteed money into small businesses. While this could be great for those small businesses getting the investment, it also concentrates a much larger amount of taxpayer risk into fewer, bigger funds. If a large SBIC fails, the taxpayer exposure is now significantly higher.

Incentives for Targeted Investing

To balance the higher risk, the bill introduces a smart incentive aimed at directing capital where it’s needed most. It allows SBICs to essentially get a “credit” on their leverage calculation for investments made in specific priority areas. Specifically, if an SBIC invests in a small business located in a low-income or rural area, or one operating in a covered technology category, or a small manufacturer, that investment can be excluded from their total leverage calculation. This exclusion is capped at the lesser of $125 million or 50% of the SBIC’s private capital. This provision is designed to push private capital toward underserved markets. For example, a tech entrepreneur trying to start a manufacturing plant in a rural town might find it much easier to attract SBIC funding because the SBIC benefits from the leverage exclusion, making that investment more attractive than a similar one in a major metro area.