AND Direct, LLC as Business Development or Small Business Investment Company (SBIC) FAQ’s
Q. What is a Small Business Investment Company (SBIC)?
A. An SBIC is a Small Business Administration designation for “a privately-owned investment company that is licensed by the Small Business Administration (SBA). Small Business Investment Companies (SBICs) supply small businesses with financing in both the equity and debt arenas.” The SBA guarantees the loans and investments of the SBIC and in some cases allows them to leverage their capital at 3:1.
Q. Why is being designated as an SBIC important to the project and business plan?
A. There are important reasons and for seeking an SBIC designation, all of which have the purpose of creating a more competitive offering and expanding the capital base for investments;
1. SBIC’s private capital can be leveraged or borrowed against (from the SBA) up to 3 times the amount. This means more money to invest in the community's small businesses.
2. SBIC’s investments (loans or stock purchases) are guaranteed against default or bankruptcy. These guarantees lower risk and gives investor/partners security, which makes our offering more competitive and private capital easier to raise.
3. SBIC’s, because they invest in low income, underserved areas and new markets, qualify as Community Development Financial Institutions or Community Development Entities (CDE’s) and can thus offer investors/partners tax credits or deductions, like Low-Income Housing Tax Credits (LIHTC), New Markets Tax Credits (NMTC) Business Energy Investment Tax Credits (BEITC), ect. These tax credits and deductions increase the effective rate of return for investor/partners which makes our offering more competitive and private capital easier to raise.
Q. Besides being a vehicle for attracting and leveraging capital, what does an SBIC do?
A. An SBIC is essentially a business development, investment and fund management firm. The 1st function of the SBIC is to DEVELOP an "Investment strategy." The “Investment Strategy” is the methodology and plan for Fund construction and management;
1. Identifying the types of businesses to include (Industry and Sector)
2. Establishing the company-level requirements for inclusion
3. Risk mitigation
a. Unsystematic (Diversification)
b. Default (Aggregate and Individual Risk, Market Planning)
The 2nd function of the SBIC is to MARKET the “Investment Strategy” to potential investor/partners. This means developing a Private Placement Memorandum (PPM) or “the Offering.” This PPM will outline the “Investment Strategy,” highlight the expertise and track record of the Fund Manager and emphasize the security, rates of return, terms and any other value-add or investor services, so as to attract interest and ultimately secure capital.
The 3rd function of the SBIC is to EXECUTE the “Investment Strategy” and actively MANAGE the fund, so that all purposes, requirements and operational compliance issue are met while delivering ROI to the investor/partners.
Q. Why is being designated as an SBIC important to the project and business plan?
A. There are important reasons and for seeking an SBIC designation, all of which have the purpose of creating a more competitive offering and expanding the capital base for investments;
1. SBIC’s private capital can be leveraged or borrowed against (from the SBA) up to 3 times the amount. This means more money to invest in the community's small businesses.
2. SBIC’s investments (loans or stock purchases) are guaranteed against default or bankruptcy. These guarantees lower risk and gives investor/partners security, which makes our offering more competitive and private capital easier to raise.
3. SBIC’s, because they invest in low income, underserved areas and new markets, qualify as Community Development Financial Institutions or Community Development Entities (CDE’s) and can thus offer investors/partners tax credits or deductions, like Low-Income Housing Tax Credits (LIHTC), New Markets Tax Credits (NMTC) Business Energy Investment Tax Credits (BEITC), ect. These tax credits and deductions increase the effective rate of return for investor/partners which makes our offering more competitive and private capital easier to raise.
Q. Besides being a vehicle for attracting and leveraging capital, what does an SBIC do?
A. An SBIC is essentially a business development, investment and fund management firm. The 1st function of the SBIC is to DEVELOP an "Investment strategy." The “Investment Strategy” is the methodology and plan for Fund construction and management;
1. Identifying the types of businesses to include (Industry and Sector)
2. Establishing the company-level requirements for inclusion
3. Risk mitigation
a. Unsystematic (Diversification)
b. Default (Aggregate and Individual Risk, Market Planning)
The 2nd function of the SBIC is to MARKET the “Investment Strategy” to potential investor/partners. This means developing a Private Placement Memorandum (PPM) or “the Offering.” This PPM will outline the “Investment Strategy,” highlight the expertise and track record of the Fund Manager and emphasize the security, rates of return, terms and any other value-add or investor services, so as to attract interest and ultimately secure capital.
The 3rd function of the SBIC is to EXECUTE the “Investment Strategy” and actively MANAGE the fund, so that all purposes, requirements and operational compliance issue are met while delivering ROI to the investor/partners.
"Our communities need impactful projects like these to re-enfranchise themselves, and AND Direct, LLC hopes to be "their Partner In The New Economy."
Please click the link to find out how you can support this project (Donate, Invest or Volunteer); http://anddirect.net/current-events/community-and-economic-
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