SBA lenders

The U.S. Small Business Administration (SBA) guarantees that loans issued by its lending partners will be repaid, which offers benefits to lenders that standard loans do not.

• Favorable rates and terms: An SBA guaranty enables you to offer lower rates and longer terms.
• Security: SBA will purchase the guaranteed portion of a loan if a borrower defaults.
• More clients: Work with borrowers you typically wouldn’t lend to without an SBA guaranty.

SBA has three business loan programs: 7(a), CDC/504, and Microloan. Each program has its own lending practices and eligibility requirements for lenders. Review the details of each, then decide which program is best for you.

7(a) loan program

Banks, savings and loans, credit unions, and other specialized lenders participate with SBA on a deferred basis to provide small business loans that are structured under 7(a) guidelines. If a borrower defaults on an SBA-guaranteed loan, the lender may ask SBA to purchase the guaranteed portion.

To participate in the 7(a) loan program, a lender must meet the following requirements:

• Have a continuing ability to evaluate, process, close, disburse, service, and liquidate small business loans
• Be open to the public to issue loans (and not be a financing subsidiary, engaged primarily in financing the operations of an affiliate)
• Have continuing good character and reputation, and otherwise meet and maintain the ethical requirements as identified in 13 CFR Part 120.140
• Be supervised and examined by a state or federal regulatory authority, satisfactory to SBA or apply as a Small Business Lending Company (SBLC) or Non-Federally Regulated Lender (NFRL) in accordance with SOP 50 56

CDC/504 loan program

A Certified Development Company (CDC) is a nonprofit corporation set up to contribute to the economic development of its community. CDCs are certified and regulated by SBA. They work with SBA and private-sector lenders to provide growing businesses with long-term, fixed-rate financing for major fixed assets, such as land, buildings, machinery, and equipment.

Typically, a project involving a 504 loan includes:

• A loan secured from a private sector lender with a senior lien covering up to 50% of the project cost
• A loan secured from a CDC — backed by a 100% SBA-guaranteed debenture — with a junior lien covering up to 40% of the total cost
• A contribution from the borrower of at least 10% equity of the total project cost

To participate in the CDC/504 loan program, a lender must meet certain requirements, including but not limited to:

• Be a nonprofit corporation in good standing
• Have a board of directors with at least nine voting directors (additional board of directors requirements are listed in 13 CFR 120.823)
• Have full-time professional management and a full-time professional staff
• Meet a minimum level of lending activity

Microloan program

The Microloan program provides small businesses with small, short-term loans — up to $50,000 — for working capital or to buy inventory, supplies, furniture, fixtures, machinery and equipment. SBA makes funds available to specially designated intermediary lenders, which are non-profit organizations with experience in lending and technical assistance. These intermediaries then issue loans to eligible borrowers.

To participate in the Microloan program, a lender must meet the following requirements: 

• Be a private nonprofit, quasi-public, or tribally-owned entity
• Have at least one year of experience directly issuing and servicing microloans

Have at least one year of experience providing in-house marketing, management, and technical assistance to its micro-level borrowers

Contact a lender relations specialist at your local SBA district office to start the application process.

Resources for CDCs

Lender portal login

SBA’s lender portal allows CDCs to view their own quarterly performance data, including their most current composite risk rating, the lender risk rating. CDCs can also access data on peer group and portfolio averages.

E-Tran

E-Tran is SBA’s online portal which CDCs can use to electronically submit loan guaranty packages and loan servicing request packages. CDCs may also use E-Tran to submit certain servicing actions using their unilateral authority.

To get an E-Tran account, apply online or email your request for an account to CLS@sba.gov.

Lending lifecycle

Approval-authorization

The Sacramento Loan Processing Center (SLPC) reviews all 504 loan applications. If an SBA loan officer needs additional information, documentation, or explanation, the SLPC will contact the CDC via email.

The authorization is SBA’s written agreement with the CDC providing the terms and conditions under which SBA will guarantee a business loan.

SBA establishes the wording for all standard 504 authorization conditions in the National 504 Authorization Boilerplate. Use the boilerplate as a template when you submit an authorization package.

The 504 authorization wizard makes it easier for you to create authorizations based on the boilerplate. If you’re unable to install the wizard, contact SBA at auth-504@sba.gov.

Closing

CDCs and SBA must use SBA Form 2286 for all 504 debenture closings.

Servicing loans

A loan moves from “approval” status to “regular servicing” status when the following three conditions are met

• It’s closed in accordance with the terms and conditions of the loan authorization
• The final disbursement has been made
• SBA’s guaranty fee has been paid

The Commercial Loan Service Centers (CLSC) in Fresno and Little Rock address loan servicing requests from CDCs. If you have a servicing request, submit it to the appropriate center that’s handling the loan.

However, you may take some servicing actions without prior approval from SBA. Even if an action doesn’t require SBA’s prior approval, you must document the reasons for your decisions. Keep those documents for SBA to review.

504 liquidation

For 504 loans made under the Premier Certified Lenders Program (PCLP), or if the CDC is a designated Authorized CDC Liquidator (ACL), the CDC is primarily responsible for liquidating the loan. Otherwise, CLSCs are primarily responsible for liquidation.

Debenture purchase

You should ask the appropriate CLCS to purchase the debenture and place the loan into liquidation status when:

• The loan is 60 or more days past due with no prospect of a deferment or a work out.  
• The third party lender or other senior lien holder has initiated foreclosure proceedings.
• A bankruptcy, or other legal action which will adversely affect repayment of the 504 loan, has been initiated.

You must make a site visit and submit a detailed report to SBA within 15 days of SBA placing the loan into liquidation status.

Liquidation plan

After a site visit, you should prepare a 504 liquidation plan. Prepare the liquidation plan before you take any significant action to liquidate the loan. Submit the plan to SBA within 30 days after the purchase of the debenture.

Expenses

SBA will reimburse you for recoverable expenses relating to the liquidation of the loan subject to:

• Requests must be submitted electronically.
• A separate request must be submitted for each individual loan.
• Recoverable expenses can only be submitted when the aggregate total is $5,000 or more, or at the time the wrap-up report is submitted.
• Copies of invoices and other supporting documentation must be included.
• Requests may be submitted with the wrap-up report, regardless of dollar amount.

Offer in Compromise (OIC)

An OIC is a monetary offer typically made at the end of the liquidation of all business and other worthwhile assets. When the borrower is unable to pay their SBA loan in full after liquidation of all worthwhile collateral, it may be appropriate to settle for less than the full amount due.

If you want SBA to consider an OIC, submit your request using the OIC tabs.

Wrap-up report

You must submit a 504 liquidation wrap-up report to SBA within 90 days of completing all reasonable and cost-effective recovery efforts.

Litigation

ACLs and PCLP CDCs are responsible for conducting all litigation needed to ensure recovery on all of the 504 Loans in their portfolios. You must submit a 504 litigation plan to SBA for review and approval.

For non-ACLs and non-PCLP CDCs, SBA is responsible for handling litigation on 504 loans.

504 debt refinancing program

Small businesses can use the CDC/504 loan program to refinance qualifying existing debt in any year that the program is at zero subsidy. Borrowers are able to refinance up to 90% of the current appraised property value. The refinancing may also include eligible business expenses, with a maximum loan to value of 85%.

To qualify for refinancing, a business must have been in operation for at least two years. Additionally, the debt to be refinanced must be a commercial loan:

• That was incurred for the benefit of the small business concern not less than two years before the date of the 504 debt refinancing application
• The proceeds of which were used to acquire a 504 eligible fixed asset
• That is secured by 504 eligible fixed assets
• For which the borrower has been current on all payments for at least the last 12 months prior to application

Existing 504 projects and government-guaranteed loans are not eligible to be refinanced.

The Small Business Administration guarantees debentures issued by CDCs.  SBA debentures are securitized into Debenture Pools which are sold to investors as Development Company Participation Certificates (DCPCs). SBA guarantees the full faith and credit and timely payment on these certificates.

Debenture funding schedule

View SBA’s Information Notice regarding the Debenture Funding Schedule for 504 Loans – Calendar Year 2022. The schedule dates include the sale of both 10- and 20-year debentures.

Fiscal and Selling Agent (FSA)

Eagle Compliance, LLC serves as FSA for SBA’s CDC/504 loan program. As FSA, Eagle provides services and administrative support to SBA and CDCs related to the sale of 504 debentures and debenture pool certificates.

The SBA franchise directory helps lenders and CDCs to evaluate the eligibility of small businesses that operate under a franchising agreement.

Find Certified Development Companies (CDCs) authorized to issue 504 loans.

Conditions between intermediaries and SBA

Loan amount

An intermediary may not borrow more than $750,000 in its first year in the program. In later years, the intermediary’s obligation to SBA may not exceed an aggregate of $5 million, subject to statutory limitations on the total amount of funds available per state.

The intermediary must contribute, from non-federal sources, an amount equal to 15% of any loan that it receives from SBA. The contribution may not be borrowed. For purposes of this program, Community Development Block Grants are considered non-Federal sources.

Repayment terms

During the first year of the loan, an intermediary is not required to make any payments, but interest accrues from the date that SBA disburses the loan proceeds to the intermediary. After that, SBA will determine the periodic payments. The loan must be repaid within 10 years.

Interest rate

The interest rate is equal to the rate applicable to five-year obligations of the U.S. Treasury Department, adjusted to the nearest 0.125%, less 1.25%. Intermediaries that maintain an average loan size of $10,000 or less may qualify as specialized intermediaries. The interest rate for specialized intermediaries is equal to the rate applicable to five-year obligations of the U.S. Treasury Department, adjusted to the nearest 0.125%, less than 2%.

Collateral and default

As security for repayment of SBA loan, an intermediary must pledge to SBA a first lien position in the Microloan Revolving Fund and Loan Loss Reserve Fund (see definitions below), and all notes receivable from Microloans. If an intermediary is unable to pay SBA, or violates the terms of its loan agreement, SBA may demand payment in full.

The intermediary isn’t required to pay SBA any loss or deficiency that may remain after liquidation of the collateral, unless the loss was caused by fraud, negligence, violation of any of the ethical requirements, or violation of any other provision of this part.

Microloan Revolving Fund (MRF)

The MRF is an account into which an intermediary must deposit the proceeds from SBA loans, its contributions from non-federal sources, and payments from its Microloan borrowers. An intermediary may only withdraw from this account the money needed to establish the Loan Loss Reserve Fund, proceeds for each Microloan it makes, and any payments to be made to SBA.

Loan Loss Reserve Fund (LLRF)

The LLRF is an account that an intermediary must maintain in order to pay any shortage in the MRF caused by delinquencies or losses on Microloans. The balance on the LLRF must equal 15% of the balance owed to it by its Microloan borrowers.

After an intermediary has been in the Microloan program for five years, it can request that SBA allow it to reduce the amount in its LLRF to as little as 10% of its portfolio.

Conditions between intermediaries and borrowers

An intermediary may only make Microloans to eligible small businesses. Proceeds from Microloans may be used only for working capital and acquisition of materials, supplies, furniture, fixtures, and equipment. SBA doesn’t review Microloans for creditworthiness.

Amount and maturity

Generally, intermediaries should not make a Microloan of more than $10,000 to any borrower. An intermediary may not make a Microloan of more than $20,000 unless the borrower demonstrates that it is unable to obtain credit elsewhere at comparable interest rates and that it has good prospects for success.

An intermediary may not make a Microloan of more than $50,000, and no borrower may owe an intermediary more than $50,000 at any one time. Each Microloan must be repaid within six years.

Interest rate

The maximum interest rate that can be charged to a Microloan borrower is as follows:

Technical assistance

An intermediary can ask SBA for assistance to improve its knowledge, skill, and understanding of microlending. SBA awards a grant to a more experienced intermediary, which assists the inexperienced intermediary.

SBA can also provide technical assistance for prospective intermediaries in areas of the country that are either not served or underserved by an existing intermediary.

Find authorized intermediary lenders participating in SBA’s microloan program.

About the SBIC program

Since 1958, the mission of the Small Business Investment Company (SBIC) program has been to stimulate and supplement the flow of private equity capital and long-term debt financing that American small businesses need to operate, expand and modernize their businesses.

SBA does this by licensing and providing capital to professionally managed equity and debt investment funds as Small Business Investment Companies. SBA capital comes in the form of, a government-guaranteed loan to the fund to match privately raised capital. The SBA-guaranteed loan, paired with private capital, increases access to financing for qualifying U.S. small businesses and startups while potentially improving risk-adjusted returns for private investors.

Types of SBICs

Standard Debenture SBICs: The Standard Debenture SBIC license is designed to align with the cash flows of mezzanine, private credit and other investment strategies with a current pay component that may have a more internal rate of return (IRR) orientation. Standard Debenture SBICs are eligible to receive SBA-guaranteed loans with interest payments on SBA loans due semi-annually. Because of the semi-annual interest component, Standard Debenture SBICs have historically been a strong fit for funds pursuing strategies that invest in small businesses that have consistent cash flows over the term of the fund, such as private credit or mezzanine investing strategies.

Accrual SBICs: The Accrual SBIC license is designed to align with the cash flows of longer duration equity funds with a more long-term focus and multiple orientation. Accrual SBICs are eligible for SBA-guaranteed loans, Accrual Debentures, where accrued interest and principal are due upon maturity and may be prepaid upon a distribution event.

Reinvestor (Fund-of-Funds) SBICs: The Reinvestor SBIC license is based on a fund-of-funds model to invest equity in underlying funds with an underserved focus that, in turn, invest directly into small businesses and start-ups. Fund-of-funds Reinvestor SBICs:

• Utilize the Accrual Debenture instrument
• Are eligible for a match of 2x private capital raised (Up to a maximum of $175 million in guaranteed principal and interest)
• Must invest ≥ 50% of the portfolio in underlying funds

Non-Leveraged SBICs: Non-Leveraged Licenses are SBA licensed private funds that do not apply for funding from SBA. There are several benefits to obtaining an SBIC license without SBA leverage commitment, including eligibility for Community Reinvestment Act (CRA) credit for bank investors.

Benefits of forming an SBIC

As a licensed SBIC, funds can leverage their private investment dollars with SBA-guaranteed debt that allows them to increase their investments in U.S. small businesses and startups. When it’s time to realize its investment, the SBIC repays the SBA-guaranteed debt plus interest and distributes returns to its private investors.

For more than a decade, SBICs have delivered returns to their investors that are in line with those available from other private equity funds in the market. Since 1998, SBICs that benchmark in the top half of private equity have delivered a 5 to 10-point boost in the IRR delivered to LPs as a result of SBA leverage.

Here are some additional benefits beyond the potential for enhanced returns of becoming an SBIC:

Rapid fund deployment: The potential to capitalize on as much as two-thirds of a fund with SBA leverage means managers spend less time fundraising and more time investing.

Access to long-term capital: SBA provides long-term funding, which is often patient capital that aligns with the long-term growth plans of small businesses and startups. This type of capital is essential for businesses that need time to grow and establish themselves.

Flexible terms and investment opportunities: The duration of SBA’s financing instruments can be matched up with short- or long-term investments. SBICs have the flexibility to invest in a wide range of industries and sectors, promoting diversity in their investment portfolio. This flexibility allows managers to adapt to market trends and capitalize on emerging opportunities.

Exempt from SEC registration: SBICs are exempt from SEC registration, yet LPs benefit from SBA’s careful monitoring of each fund’s performance and regulatory compliance.

Exempt from Volcker Rule: SBICs are exempt from the bank investment limitations set forth in the Volcker Rule as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Increased financial scale: SBA leverage allows funds to scale up their strategies and extend their financings to more businesses.

Tax advantages for LPs: An SBIC’s LPs may be eligible for tax benefits as investments in SBICs are presumed to be a “qualified investment” for Community Reinvestment Act credit.

Characteristics of a successful SBIC

Investment funds licensed as SBICs typically have four basic characteristics:

1. Experienced management team: Team members have complementary skills and a history of working with each other.
2. Proven investment strategy: Fund pursuing a familiar strategy that the principals have successfully pursued as investors or operators in the past.
3. Track record of success: Demonstrated prior track record of successful investments in the targeted strategy, possibly augmented by analogous, relevant operations management, entrepreneurial or other commercial experience.
4. Appealing fund structure: The SBIC’s structure aligns the incentives of the SBIC’s managers and investors with the overall mission of SBA.

Regulations governing SBICs

The full regulations governing the SBIC program can be found in Section 13 CFF 107.720, but in summary, SBICs must invest in U.S. small businesses, which are defined as having the following: 

• Tangible net worth of less than $24 million and average net income after Federal income taxes for the preceding two completed years of less than $8 million.
• Or, the industry size standard covering the industry in which the applicant is primarily engaged. 

At least 25% of an SBIC’s financings must be in smaller enterprises, defined as having the following: 

• Net worth less than $6 million and average net income after Federal income taxes for the preceding two years of less than $2 million.
• Or, the size standard for the industry in which it is primarily engaged. 

SBICs may not invest in, with certain exceptions (for more detail review section 13 CFF 107.720), any of the following:

• Passive businesses
• Real estate businesses
• Project financing
• Farm land purchases
• Businesses contrary to public interest
• Foreign investments
• Associated suppliers 

Distribution waterfall guidelines

Standard Debenture SBICs: Can distribute returns to their investors over the lifecycle of the fund, provided they are current with the semi-annual interest payments on the 10-year loan.

Accrual and Reinvestor SBICs:  Can distribute capital to their investors over the lifecycle of the fund provided accrued interest and annual charges due to SBA are paid off prior to distributions to private investors. Accrual and Reinvestor SBICs can make tax distributions without first paying down accrued interest. 

Non-Leveraged Licensees: Can distribute profits to their investors without seeking prior approval from SBA, but only if they maintain enough “Regulatory Capital” to meet minimum capital requirements specified in §107.210 or its SBA-approved “Wind Down Plan.”

SBIC application process

Applying for an SBIC license is a three-part process: 

1. Pre-screening review 
   (Short Form 2181)
2. Management Assessment Questionnaire (MAQ) and MAQ fee 
   (Long Form 2181 or Subsequent Fund Form 2181 and Form 2181 Exhibits)
3. Final License Application and Licensing fee

Pre-screening

Applicants may consider completing and submitting a Pre-screen Form 2181 to SBA to receive feedback. This an optional step, but one that is highly recommended for first-time applicants to the SBIC Program.  The feedback is informal and non-binding, but it helps prospective applicants better understand SBA’s underwriting criteria and reassess their own fit with the program.

The Pre-screen 2181 contains a subset of forms contained in the full MAQ. Specifically, the Short Form 2181 contains the following:

• The Overview
• Narrative
• Investment Track Record
• Principal Biographies 

Completing this form can help prospective applicants prepare for the MAQ without incurring the cost of the MAQ Application Fee. This information gives background context to aid SBA in providing informal feedback.

Management Assessment Questionnaire (MAQ)

Once you have decided to move forward with the application process, the next step is to prepare and submit the MAQ, which consists of the following:

• Form 2181 (Long Form or Subsequent Fund Form)
• Form 2181 Exhibits A – D
• Attachments/Supplemental Materials
• Payment of Initial Licensing Fee / “MAQ Fee”),

After receipt of your MAQ (including payment of the Initial Licensing Fee / “MAQ Fee”), a Licensing Investment Analyst and SBA Legal Counsel will be assigned to review your application. 

Once the application has been filed and accepted for processing, Licensing and SBA Legal will review the MAQ submission, performing operational and investment due diligence and legal review of the relevant documents. Upon completion of due diligence and reviews, Licensing will recommend to the Investment Committee whether the applicant appears to have the minimum qualifications necessary to manage the proposed SBIC.

If the Investment Committee concludes, by majority vote, that the management team appears to be qualified, the applicant is invited for a one-hour formal interview. After the interview, the Investment Committee will consider whether your management team has the experience and skills necessary to manage an SBIC.  If they vote affirmatively, your application will be reviewed by the SBA Agency Licensing Committee for approval. If the SBA Agency Licensing Committee votes affirmatively, the SBA Administrator will vote on your application. If approved by both Committees and the SBA Administrator, your application will be approved for a “Green Light” letter inviting you to submit a final License Application once sufficient capital has been raised to hold an initial closing. 

An Applicant may hold multiple closings within 12 months of its initial closing based on the date of formal SBA license approval. A final close must be held within 12 months of receipt of formal SBA license approval. A fund may not accept additional capital commitments 12 months after the date of formal SBA license approval.

Subsequent funds

Applicants who meet all eligibility criteria under 13 CFR § 107.305 for Expedited Subsequent Funds Licensing, may apply using the Subsequent Funds Form 2181 which is comprised of a subset of the forms required in the Long Form 2181.

License Application

The License Application is submitted when the applicant has sufficient Regulatory Capital to hold a close and has completed all required forms. The application builds upon the previously submitted MAQ and includes additional forms and documentation. The entire package includes the following:

• Form 2181 (UPDATED to include any changes since the Green Light Letter)
• Form 2181 Exhibits A – D (UPDATED to include any changes since the Green Light Letter)
• Form 2181 Exhibits E – G
• Copies of all final legal documents + redlined copies detailing any and all changes to previously submitted legal documents
• Payment of all application and Final Licensing Fee and other fees which may at that time be due (e.g., the Resubmission Penalty Fee, if applicable and if not already paid)

Upon receipt of the License Application and full payment all Licensing Fees, a Licensing Investment Analyst and SBA Legal Counsel will review the materials and recommend whether the SBA’s Agency Licensing Committee and SBA Administrator vote stands or whether there is evidence of material adverse changes which would trigger a revote.  If no material adverse changes are identified, the License Application will be submitted to the SBA Administrator for formal final approval. 

Throughout this process, from Pre-screening through Licensing, you will work closely with the analysts and managers of SBA’s Office of Investment and Innovation. At various times, you may receive both informal questions and formal SBA Comment Letters.  Prompt and courteous replies will minimize delays in licensure.

Licensing fees

Initial Licensing Fees as of the publish date of this document are as follows:

The Final Licensing Fee as of the publish date of this document is calculated as the “Final Licensing Base Fee” plus 1.25 basis points multiplied by the Leverage dollar amount being requested by the applicant and conditionally approved by SBA, communicated as the “Total Intended Leverage Commitment.” As the fee is based on the amount being requested, the Applicant will multiply the Total Intended Leverage Commitment dollar amount provided at the time of Green Light approval by 1.25 basis points and add this amount to the Final Licensing Base Fee, where the Final Licensing Base Fee is based on the applicant’s Fund Sequence as follows:

Detailed application instructions and forms

See the SBIC Application and related Forms. 

Advantages of an SBIC

Limited partners (LPs) of SBIC-licensed funds benefit from several advantages that aren’t available to other types of investment funds.

Regulatory benefits

Certain exemptions from registration requirements with the SEC are available to SBICs and their advisers.

Rapid deployment of funds

With a leverage commitment from the U.S. Small Business Administration (SBA) up to two times the private capital raised, fund managers are able to minimize the time spent on fundraising and focus on making investments.

Flexible fund structure

SBICs are allowed to organize themselves as stand-alone entities, drop-down vehicles, or side-car vehicles.

Strong, stable returns

The low cost of SBA capital provides fund managers with pricing flexibility across cycles, while the 10-year term on SBA debentures avoids the problems of duration mismatch.

Community Reinvestment Act credit

Investments in SBICs may be eligible for Community Reinvestment Act credit.

Underlooked opportunity to invest in small business

Despite being the bedrock of the American economy, U.S. small businesses remain underserved and represent a value opportunity for investors.

Portfolio financing and reporting requirements

Quarterly and annual financial report

SBIC Licensees must submit Quarterly financial reports with respect to fund-level financials and portfolio company financings (Forms 468 and 1031). Form 468 is due within 45 days after the close of each quarter, commensurate with portfolio valuation due dates as finalized under §§ 107.503 and 107.650. Quarterly Form 468 is a “short” version of the Annual Form 468 to reduce the reporting burden while enabling transparency into program investment performance and improved monitoring. Annual Form 468 is due within 90 days of the close of the fiscal year end.

Portfolio financing report

For each financing of a small business, excluding guarantees, SBIC Licensees must submit a portfolio financing report within 30 days of the close of the quarter in which portfolio company financings occurred. 

Accounting and valuation standards

Appendix 14 provides guidance to SBICs on accounting policies and procedures, financial reporting to SBA, and selection of an auditor. It also contains guidelines for independent public accountants engaged to conduct annual audits of SBICs.

Appendix 15 describes the policies and procedures which SBICs must follow in valuing their loans and investments. It also provides the techniques and standards which are generally applicable to such valuations.

Appendix 16 provides for two-digit number designations for major categories under which accounts are listed, and three-digit number designations for individual general ledger accounts.

Non-leveraged licensees may submit GAAP-compliant valuations.

Standard Debenture (semi-annual interest)

Standard Debentures are loans issued to SBIC Licensees at face value requiring semi-annual payment of interest on outstanding leverage. SBA guarantees all principal and unpaid interest. This type of debenture is designed to align with the cash flows of debt-oriented investment strategies and strategies with a recurring current pay component.

Accrual Debenture

Accrual Debentures are loans issued to SBIC Licensees at face value that accrue interest over a ten-year term, where SBA guarantees all principal and unpaid accrued interest. This type of debenture is designed to align with the cash flows of long-duration, equity-oriented investment strategies.

SBA Leverage Commitments

An SBIC may request Leverage Commitments against SBA’s Total Intended Leverage Commitment by obtaining SBA’s conditional commitment to guarantee debentures. Instructions are available in the commitment application instructions.

SBA Leverage Draws

An SBIC may draw down (call) against SBA’s Leverage Commitment to guarantee debenture. Follow the draw application instructions.

Interest rates and other fees

Regulatory examinations

The SBA Office of Investment and Innovation Examinations Division performs periodic remote and on-site examinations of SBICs every one to two years to monitor regulatory compliance with SBIC program statutory, regulatory and policy requirements. Examiners also ensure the accuracy of information SBICs submit to SBA.

The regulations governing examinations of SBICs, including fees, are set forth in 13 CFR 107.690-692.

SBIC licensing forms

Applying for an SBIC license is a three-part process: 

1. Pre-screening review 
   (Short Form 2181)
2. Management Assessment Questionnaire (MAQ) and MAQ fee 
   (Long Form 2181 or Subsequent Fund Form 2181 and Form 2181 Exhibits)
3. Final License Application and Licensing fee

New SBIC Program Application – Effective September 26, 2025

Pre-screen Form: 2181 (Short)

The Pre-screen 2181 contains a subset of forms contained in the full MAQ. Specifically, the Short Form 2181 contains:

• The Overview
• Narrative
• Investment Track Record
• Principal Biographies 

Management Assessment Questionnaire (MAQ): Form 2181 (Long) or  Form 2181 (Subsequent Fund)

Once you have decided to move forward with the application process, the next step is to prepare and submit the MAQ, which consists of:

• Form 2181 (Long Form or Subsequent Fund Form)
• Form 2181 Exhibits A – D
• Attachments/Supplemental Materials
• Payment of Initial Licensing Fee / (“MAQ Fee”)

License Application: MAQ Form 2181 and Form 2181 Exhibits 

The License Application builds upon the previously submitted MAQ and includes additional forms and documentation.  The entire package includes the following:

• Form 2181 (updated to include any changes since the Green Light Letter)
• Form 2181 Exhibits A – D (updated to include any changes since the Green Light Letter)
• Form 2181 Exhibits E – G
• Copies of all final legal documents + redlined copies detailing any and all changes to previously submitted legal documents
• Payment of all application and Final Licensing Fee and other fees which may at that time be due (e.g., the Resubmission Penalty Fee, if applicable and if not already paid)

Legacy SBIC Program Application– Accepted through September 30th, 2023 

• Legacy Management Assessment Questionnaire (Form 2181 and Part I of Form 2182)
• Legacy License Application (Revised and updated Forms 2181, 2182, and 2183)

Other SBIC licensing forms

• Model Limited Partnership Agreement (LPA) Version 3.0 for Standard and Impact SBICs
  (submitted as part of Exhibit Q to Form 2183)
• Commitment Guaranty Template – See SOP chapter 6 for template

Private capital forms

• SBA Form 2181 Exhibit F – Capital Certificate
• Request for Approval of Transfer Certificate

SBIC financial reporting forms

SBIC Licensee Financial Statements and Investment Performance

• Form 468 Instructions – SBIC Financial Reports
• Form 468 – SBIC Financial Report
• Reinvestor SBIC Exhibit to Form 468 

SBA leverage commitment forms

• Guidance for an SBIC to apply for or request SBA Leverage Commitment
  • Instructions for Commitment Requests (MAQ submitted after August 17, 2023)
  • Instructions for Commitment Application (MAQ submitted before August 17, 2023)
• Form 652 Assurance of Compliance for Nondiscrimination
• SBA Form 2181 Exhibit G – Transferor’s Liability Contract
  • Legacy Form 2183 Exhibit L – Transferor’s Liability Contract
• SBA Form 2181 Exhibit F – Capital Certificate
  • Legacy Form 2183 Exhibit K –  Capital Certificate
• Form 1065 Applicant Licensee’s Assurance of Compliance for the Public Interest
• Form 1846 Statement Regarding Lobbying for Loan Guarantees and Loan Issuance
• Form 34 Bank Identification
• Form 33 Instructions for the Authorization to Disburse Proceeds
• Debit Authorization
• Form 468 – SBIC Financial Report (if requiring update)
• SBA Form 25 Resolution of the Board of Directors or General Partner (see Table 1)  
  Provides certain resolutions with Leverage Commitment. Licensees should select the SBA Form 25 based on their organizational structure:

• Form 27 Opinions of Counsel (see Table 2)

SBA leverage draw forms

• Memorandum of Instructions for SBIC Draw Requests
  Guidance for an SBIC to submit a Draw Request against SBA’s Leverage Commitment in connection with the SBIC’s issuance of SBA-Guaranteed Debentures.
• Form 468 – SBIC Financial Report
• Form 27 (see Table 2)
• Leverage Security Instruments (see Table 3)

SBIC leverage pre-payment forms

• Instructions for Prepayment of SBIC Pooled Debentures
• Prepayment Notice Template 

SBIC financing forms

SBIC examination forms

SBA will send the following forms to the SBIC prior to the examination:

• Disclosure statement
  • Form 856 Disclosure Statement for Leveraged Licensees
  • Form 856A Disclosure Statement for Non-Leveraged Licensees
• Form 857 Request for Information Concerning Portfolio Financing by SBICs
• SBIC ownership confirmation
  • Form 1405 Stockholder’s Confirmation for Corporate SBICs
  • Form 1405A Ownership Confirmation for Partnership SBICs

SBIC program information and presentations

• SBIC Program Reforms Overview presentation
• Fund-of-Fund SBIC presentation
• Accrual Debenture Informational Summary (Effective 4/30/2024)

Statute and regulations

Regulations provide the implementing rules to govern the SBIC program as authorized by the Small Business Investment Company Act of 1958, as amended. 

• Federal Register: Small Business Investment Company Investment Diversification and Growth; Technical Amendments and Clarifications (Effective 3/04/2024)
• Federal Register: Small Business Investment Company Investment Diversification and Growth (Effective 8/17/2023)
• 13 CFR Part 107 – Small Business Investment Companies
• 13 CFR Part 121 – Small Business Size Regulations

Accounting and valuation standards

SBA accepts FASB GAAP compliant valuations for non-leveraged licensees.

Appendix 14 provides guidance to SBICs on accounting policies and procedures, financial reporting to the U.S. Small Business Administration (SBA), and selection of an auditor. It also contains guidelines for independent public accountants engaged to conduct annual audits of SBICs.

Appendix 15 describes the policies and procedures which SBICs must follow in valuing their loans and investments. It also provides the techniques and standards which are generally applicable to such valuations.

Appendix 16 provides for two-digit number designations for major categories under which accounts are listed, and three-digit number designations for individual general ledger accounts.

Policy guidance

From time to time, SBA will issue policy guidance to provide further clarification on specific areas and special topics. This section lists guidance by topic.

• Investment Policy Statement, Small Business Investment Company Critical Technology Initiative
• SBIC Policy Guidance 2025-001: Interpretive Guidance on Investments in Small Businesses Engaged in the Extraction, Conversion, or Other Processing of Critical Minerals
• SBIC Policy Guidance 2025-002: Material Adverse Change

Credit and risk

• Policy Guidance: Buyout of Participating Securities SBICs Policy Letter (01/2011)

SBIC Reporting Requirements

• SBIC Annual Year-End Reporting Requirements

Funding the SBIC program

• Instructions for Prepayment of SBIC Pooled Debentures
• Trust Certificate Rates: SBIC Debenture Pools
• Trust Certificate Rates: SBIC Participating Security Pools
• Offering Circulars – Debenture
• SBA Annual Charge
• SBIC Debenture Pools: Prepayment Schedule and Deal Factors
  • Debenture Prepayment Schedule through 03/01/2026
  • Debenture Deal Factors through 03/01/2026

Leverage commitments and draws

• Instructions for Debenture Draw Application Dates (10/2024 – 12/2024)
• Instructions for Debenture Draw Application
• Instructions for Commitment Application
• Policy Guidance: Debenture Refinancing Policy Letter

Standard Operating Procedures (SOPs)

To streamline procedural guidance regarding the SBIC Program, SBA published a single consolidated SOP document, SOP 10 10 01, which outlines the SBA guidelines for issuing and administering Small Business Investment Companies (SBICs). 

This SOP replaces all prior SBIC-related SOPs and Technotes, including, but not limited to, 10 04, 10 06, 10 07, 10 09 and Technotes 2-17 and Policy Guidance OIPG001, OIIPG002 and OIIPG003.

• SOP 1010 01: Small Business Investment Companies (SBIC) Program (01/2025) – Effective
• SOP 1004:  Processing Applications for SBIC Licenses (09/2014) – Retired
• SOP 1006:  Oversight and Regulations of SBICs Investment Division (05/2007) – Retired 
• SOP 1007:  SBIC Liquidation Program (12/2007) – Retired
• SOP 1009:  SBIC Examination Guidelines (10/2013) – Retired

Data reports

SBIC Program Overview Report

SBIC Program: Financing to Businesses by State

Contact an SBA-licensed Small Business Investment Company (SBIC) looking to invest in small businesses.

SBA’s Surety Bond Guarantee (SBG) program enables surety companies and agents to issue bonds backed by the SBA. This helps small businesses obtain contract surety when they might otherwise face barriers.

• Prior Approval program:
  • Agents must be authorized by a prior-approval surety to issue SBA-backed bonds on its behalf
  • Sureties authorize agents; agents get emailed instructions to access Capital Access Financial System (CAFS) and use the E-app system
  • Agents submit applications electronically via E-app, uploading necessary business and bond documents
  • For contracts up to $500,000, agents can use Quick Bond Guarantee, submitting SBA Form 990 and SBA Form 994, as well as Bond and contract documents (for final bond guarantee applications only)
  • Bond application required forms are SBA Form 994, SBA Form 994B and SBA Form 991 (if work has already started)
  • The surety or agent must also submit SBA Form 990 via E-app
• Preferred program:
  • Sureties can issue and manage bonds without SBA’s prior approval, and must log issued bonds into CAFS within 30 days.
  • Required forms include SBA Form 994 (and Form 991 if work has started)
• SBA charges sureties 20% of the fee charged to the small business
• In case of contractor default, sureties can submit claims for SBA reimbursement of losses using SBA Form 994H, plus bond, contract, indemnity agreement, claims notice, and expense documentation

If you’re a surety company or licensed agent underwriting contract surety bonds, SBA offers two paths:

1. Prior approval. Requires:
   • U.S. Treasury approval to issue bonds
   • Standard underwriting practices
   • Compliance with state premium rules
   • Compliance with 13 CFR Part 115, Subparts A & B
2. Preferred. In addition to the above:
   • Underwriting limit of $9M–$14M (federal contracts)
   • Underwriting and claims authority vested in salaried employees
   • Compliance with 13 CFR Part 115, Subparts A, B & C

Guarantee rates

• SBA guarantees up to 90% for bonds on contracts:
  • Up to $100,000, or
  • Issued to economically disadvantaged firms, HUBZone, 8(a), veteran-owned
• SBA guarantees 80% for other contracts:
  • Up to $9M (or $14M with federal officer certification)

Application requirements

Submit via email or mail:

• Company details and organizational chart
• Information on mergers/acquisitions or structural changes
• Three-year forecast (number and value of bonds)
• Three-year performance history (bonds issued, defaults, recoveries)
• Underwriting and claims procedures and manuals

Address:
U.S. Small Business Administration
Office of Surety Guarantees
Attn: OSG Director
409 3rd St. SW, Suite 8600
Washington, DC 20416
Email: suretybonds@sba.gov

SBA works with a variety of surety companies across the U.S. that participate in the SBG Program, including:

Participating prior approval surety companies

• American Contractors Indemnity Co (Tokio Marine/HCC), Los Angeles, CA
• Antilles Insurance Company, San Juan, Puerto Rico
• Atlantic Specialty Insurance Company (Intact), Southfield, MI
• Berkley Insurance Company, Morristown, NJ
• Bondex Insurance Company, Florham Park, NJ
• Cincinnati Insurance Company, Fairfield, OH
• Contractors Bonding & Insurance Company, Seattle, WA
• CCI Insurance Company, Hagatna, Guam
• First Net Insurance Company, Hagatna, Guam
• Gray Casualty & Surety Company (Gray Surety), Metairie, LA
• Gray Insurance Company (Gray Surety), Metairie, LA
• Great Midwest Insurance Company (Skyward), Houston, TX
• Harco National Insurance Co (IFIC Group), Raleigh, NC
• Hudson Insurance Company, New York, NY
• Insurors Indemnity Company, Waco, TX
• International Fidelity Insurance Company (IFIC Group), Newark, NJ
• Jet Insurance Company, Dallas, TX
• Lexington National Insurance Corporation, Cockeysville, MD
• Liberty Mutual Insurance Company (Liberty Mutual Surety), King of Prussia, PA
• Merchants National Bonding, Inc. (Merchants Bonding), West Des Moines, IA
• Nationwide Mutual Insurance Company, Columbus, OH
• Old Republic Insurance Company, Greensburg, PA
• Old Republic Surety Company, Milwaukee, WI
• Service Insurance Company, West Orange, NJ
• SureTec Insurance Company (Markel Surety), Austin, TX
• United Casualty & Surety Insurance Company, Quincy, MA
• United States Surety Company (Tokio Marine/HCC), Timonium, MD
• United Surety & Indemnity Company, San Juan, PR
• West Bend Insurance Company, West Bend, WI
• Westchester Fire Insurance Company, Philadelphia, PA
• Western National Mutual Insurance Company, Phoenix, AZ

Preferred surety bond companies

• CNA/Western Surety Company, Chicago, IL
• Developers Surety & Indemnity Co (Amtrust), Irvine, CA
• Endurance American Insurance Company (Sompo), Purchase, NY
• Endurance Assurance Corporation (Sompo), Purchase, NY
• Markel Insurance Company (Markel Surety), Austin, TX
• Merchants Bonding Company (Merchants Bonding), West Des Moines, IA
• Ohio Casualty Insurance Company (Liberty Mutual Surety), King of Prussia, PA
• Travelers Casualty & Surety Company of America, Hartford, CT
• U S Specialty Insurance Company (Tokio Marine/HCC), Los Angeles, CA

Access SBA forms and SOPs using the search function at the top of this page.

If you need help email SuretyBonds@sba.gov.