Yury Iofe

Small Business Investment Company introduction



Posted: Saturday, July 24, 2010

by Yury Iofe
http://www.ubssolution.com

VC Equity Financing

SBA's Small Business Investment Company (SBIC) Program is an investment partnership through which SBA provides capital to small businesses. SBICs are privately owned and managed investment funds, licensed and regulated by the SBA.

SBICs are similar to venture capital, private equity and private debt funds in terms of how they operate and their ultimate objective to generate high returns for their investors. But, SBICs limit their investments to qualified small business.

Venture capital that for reasons of size, assets, and stage of development cannot seek capital from more traditional sources, such as public markets and banks. Venture capital is a type of equity financing that addresses the funding needs of entrepreneurial companies. Investments made in exchange for shares in the invested company.

Financing:

Aims for higher risks in exchange for potential higher returns;

Financing young, high-growth companies.

For a longer investment horizon than traditional financing;

Invests equity capital, rather than debt;

Actively monitors companies via board participation, strategic marketing, governance, and capital structure.

SBA provides venture capital through the (SBIC) Small Business Investment Company Program, a unique public-private investment partnership. SBA itself does not make direct investments. It works with SBICs that are privately owned and managed investment firms licensed by SBA to provide financing to small businesses with private capital they raise and with funds borrowed at favorable rates through SBA

What is Venture Capital?

An unsecured Financing to young, private companies with the potential for rapid growth.

It typically comes from high net worth individuals ("angel investors") and venture firms and carries a high degree of risk. It is long-term investment project that allows companies the time to mature into profitable organizations.

VC is an active form of financing. Investors seek to add value to the companies in which they invest in an effort to help them grow and achieve a greater return on the investment. This requires active involvement; almost all venture capitalists will, at a least, want a seat on the board of directors.

But eventually, the objective of equity investors is to achieve a superior rate of return through the eventual and timely exit strategy.

The Process

Business Plan Submission. The venture capital reviews a business plan, talks to the business if it meets the fund's investment criteria

Due Diligence . Venture Capital performs due diligence, including looking at the company's management team, market share, products and services, operating history, and financial statements.

Investment . After completion of due diligence if venture capital remains interested, an

investment is made in the company in exchange for company's equity and/or debt.

Execution. Venture capital becomes actively involved in the company.

Exit. Exits are usually performed via mergers, acquisitions, and IPOs (Initial Public

Offerings).

Yury Iofe, MBA

Universal Business Structured Solution

More educational resources by Yury Iofe:

http://www.ubssolution.com/

http://www.ubssolution.com/Education.html

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