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SBA Licenses First Impact Investment Fund

Tuesday, July 26, 2011  
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The U.S. Small Business Administration announced that InvestMichigan! Mezzanine Fund will be the first licensed Impact Investment Fund in the SBA’s new Impact Investment Initiative. The fund will focus exclusively on providing capital to businesses that are headquartered in Michigan, have a significant presence in Michigan or are in the process of expanding their operations in Michigan so they can grow and create jobs.

The Impact Investment Initiative is part of Startup America, a White House initiative to bring together public and private organizations to accelerate the growth of America’s entrepreneurs. It will use the infrastructure of the SBA’s Small Business Investment Company Program (SBIC), an established and successful program that operates at no cost to taxpayers. The SBIC program began in 1958 with the mission to improve and stimulate the national economy and small businesses by supplementing the flow of private equity capital and long term loan funds for the sound financing, growth and expansion of small businesses. In FY 2010, the SBIC program provided $1.59 billion of financing to nearly 900 U.S. small businesses.

The Impact Investment Initiative will drive up to $1.5 billion into the hands of small businesses over the next five years. It will combine public and private funding for high growth companies that will generate not only a financial but also a "social” return by focusing on businesses located in underserved communities or communities facing barriers to capital.

Through the Impact Investment Initiative, SBA will commit $1 billion to investment funds focused on investing in underserved markets or in sectors that have been defined as national priorities. Impact investments can be:

  • Place-based, targeting small businesses located in or employing residents of low or moderate income areas or economically distressed areas; or
  • Sector-based, targeting industry sectors that the Administration has identified as national priorities. Currently only clean energy and education have been identified as priority sectors.

To serve these markets SBA will collaborate with private, institutional investors to identify impact investments and provide expedited licensing and capital to fund managers who qualify to organize and operate an Impact Investment SBIC.

High-growth firms are a small part of the small business community, but they create a large number of net new jobs each year. The Impact Investment Initiative will help high-growth companies receive the funding they need to continue to expand and create jobs in America’s underserved communities and priority sectors.

SBA will partner with Michigan Growth Capital Partners, L.P., an investment partnership whose anchor investor is the State of Michigan Retirement Systems, and The Dow Chemical Company to provide up to $130 million of investment capital over the next five years to high-growth businesses throughout Michigan. Credit Suisse’s Customized Fund Investment Group structured the InvestMichigan! Mezzanine Fund and will manage the fund in partnership with Beringea, a Michigan-based investment manager. Of the total funding, Dow will provide $15 million; Michigan Growth Capital Partners will provide $35 million; and SBA will provide $80 million, which must be repaid.

For more information on the Impact Investment Initiative please click here.

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