Updated 23 hours ago
Last progress December 2, 2025 (2 months ago)
Changes to SBIC leverage rules let certain private capital investments be excluded from leverage calculations and updates which small businesses qualify for those exclusions. The amendment sets dollar caps on exclusions, requires the caps be adjusted for inflation annually (with a statutory exception noted in the text), and makes the exclusions apply only to investments made after the law takes effect.
Amends the definition in Section 103(9) (15 U.S.C. 662(9)) to state that 'private capital' does not include funds obtained directly or indirectly from any Federal, State, or local government or any government agency or instrumentality, except for funds described in subclauses (I) through (III) of subparagraph (B)(iii), for the purpose of approval by the Administrator of any request for leverage.
Amends Section 303(b)(2)(A) (15 U.S.C. 683(b)(2)) to set a maximum single-company exclusion amount of $175,000,000 for companies that make quarterly or semiannual interest payments (as adjusted under subparagraph (E)), and $175,000,000 for other companies.
Amends Section 303(b)(2)(B) to set a maximum aggregate exclusion for commonly controlled companies at $350,000,000 for companies that make quarterly or semiannual interest payments (as adjusted under subparagraph (E)), and $350,000,000 for other commonly controlled companies.
Defines which companies’ investments may be excluded under clause (i): (I) a small business concern located in a low-income geographic area (per section 351) or a rural area (per Agricultural Act of 1961, 7 U.S.C. 1991(a)); (II) a small business concern operating primarily in a covered technology category (per 10 U.S.C. 149); or (III) a small manufacturer (as defined in section 501(e) of this Act). These categories are added to the clause listing eligible companies for exclusion.
Limits the aggregate amount that may be excluded for a company or companies under clause (i) to the lesser of 50 percent of the private capital of such company or companies or $125,000,000; this is subject to maintaining the limitation of subparagraph (A)(i) and consistent with a leverage determination ratio under section 301(c).
Primary entities affected
Small Business Investment Companies (SBICs): The changes alter how SBICs calculate leverage by permitting certain private‑capital investments to be excluded up to statutory dollar caps. That can free up SBIC borrowing capacity or change internal capital management and reporting.
Small businesses seeking SBIC investment: If SBICs can exclude more private capital from leverage limits, SBICs may be able to put more capital to work, potentially easing financing availability for qualifying small businesses.
SBA / program administrators and regulators: The agency must apply the new definitions, track excluded amounts, perform or publish CPI adjustments, and ensure compliance with the prospective-only rule.
Investors, fund managers, and lenders that work with SBICs: They will need to understand the new treatment of private capital when structuring investments, reporting capital calls, and forecasting leverage capacity.
How they are affected
Financial capacity: By excluding certain qualifying private capital from leverage calculations (within the newly set caps), SBICs may be able to raise or deploy more capital without exceeding statutory leverage constraints. That may expand investment activity in SBIC‑eligible small businesses.
Administrative burden: SBICs and the SBA will need to adjust internal systems and reporting to track excluded amounts, apply CPI adjustments annually, and ensure only post‑enactment investments receive the new treatment.
Risk exposure and public oversight: Expanding the range or amount of excluded private capital can change the amount SBICs borrow (and therefore the scope of SBA exposure), which may warrant additional oversight though the amendment itself appears limited to calculation rules.
Clarity and predictability: The CPI indexing of caps and the prospective application create predictable, forward‑looking rules that reduce ambiguity for future transactions while avoiding retroactive impacts.
Potential downstream effects and considerations
Market response: SBICs may adjust fundraising and deal structuring to maximize the permitted exclusions. That could increase investment in target small businesses but also change risk profiles.
Regulatory interpretation: SBA rulemaking or guidance may be needed to interpret qualifying criteria, implement CPI indexing mechanics, and handle edge cases (e.g., investments that partially qualify).
Limited scope: Because the change is targeted to leverage calculation mechanics and applies only prospectively, effects on historical transactions and existing portfolio companies are limited.
Updated 6 days ago
Last progress December 3, 2025 (2 months ago)
Read twice and referred to the Committee on Small Business and Entrepreneurship.
Last progress May 22, 2025 (8 months ago)
Introduced on May 22, 2025 by John Wright Hickenlooper