Small Business Investment Bill Cuts Base Leverage Cap to $200M, Incentivizes Rural Tech Investment

The “Investing in All of America Act of 2025” is all about changing the rules for Small Business Investment Companies (SBICs), which are private funds that use government-backed leverage (guaranteed loans) to invest in small businesses. Think of this bill as a targeted overhaul of how these funds raise money and where they are encouraged to spend it.

The New Math of Private Capital

First up is a change to the definition of “private capital.” When an SBIC applies for that sweet, government-guaranteed leverage, the bill explicitly says that any funds they raised from Federal, State, or local government sources cannot count toward their private capital base. This is a big deal because the amount of government leverage an SBIC can get is directly tied to the amount of private capital they have. If an SBIC successfully raised money from a state economic development fund, for example, that money no longer helps them qualify for more federal leverage. This move seems aimed at ensuring the SBIC program truly leverages private dollars, but it could penalize funds that have successfully partnered with public entities.

Maxing Out the Leverage Cap

The bill also messes with the maximum amount of government leverage an SBIC can access. For a single fund, the cap is actually reduced from $300 million down to $200 million. Ouch. However, there’s an immediate incentive: if that SBIC agrees to make quarterly or semiannual interest payments on the leverage, the cap bumps back up to $250 million. So, if you’re a fund manager, you now have a strong reason to keep those payments timely. For groups of affiliated SBICs under common control, the maximum leverage jumps significantly, from $350 million up to $475 million—but again, only if they make timely interest payments. This higher cap for commonly controlled funds could concentrate a lot of government-backed risk among a few large investment groups.

Trading Leverage for Targeted Investments

Here’s where the bill tries to steer capital toward specific areas. The core change is an expansion of the rule that allows SBICs to exclude certain investments from their total leverage calculation, effectively letting them access more government financing. This is the bill’s big carrot. An SBIC can now get this exclusion for investments in three key areas:

1. Rural and Low-Income Areas: Small businesses located in these areas are now eligible. This is a clear attempt to get capital flowing to places often overlooked by traditional venture capital.
2. Covered Technology: Investments in businesses operating primarily in a “covered technology category” also qualify. While the bill references an existing section for the definition, this provision clearly signals a push to fund strategic tech development.
3. Small Manufacturers: Businesses defined as “small manufacturers” are also included.

This exclusion is capped at the lesser of 50% of the SBIC’s private capital or $125 million. For a fund, that $125 million exclusion is huge—it allows them to deploy more capital than they otherwise could, provided they direct it toward these targeted businesses. For a small manufacturer in a rural area, this could mean the difference between getting funded and staying stuck. The catch is that this only applies to investments made after the bill becomes law, meaning current investments don't count toward the exclusion. Essentially, the government is offering a bonus financing limit to SBICs willing to invest in places and sectors it deems strategically important.