What is the purpose of small business investment companies (SBICs)?
What will be an ideal response?
Small business investment companies (SBICs) are private firms licensed and regulated by the Small Business Administration to make "venture" or "risk" investments to small firms. SBICs supply equity capital and extend unsecured loans to small enterprises that meet their investment criteria. Because they are privately capitalized themselves (although backed by the Small Business Administration), SBICs are intended to be profit-making institutions, so they tend not to make very small investments.
SBICs finance small firms by making straight loans and by making equity-type investments that give the SBIC actual or potential ownership of the small firm's equity securities. SBICs also provide management assistance to the businesses they help finance. SBICs prefer to make loans to small firms rather than equity investment.
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