oh, nice again.

[sisyphusshrugged]

Remember during the debates, when Our Fearless Leader defended his tax breaks for the wealthy by claiming (falsely, as it turned out) that they were helping small business?

Well, as it turns out, small business isn't such a great concern of his as all that.

The White House is expected this year to try to end the Small Business Investment Company program, a decades-old federal initiative to bolster venture capital funding for new businesses. The Bush administration objects to government investment in private business and to helping the SBIC cover losses incurred when the technology bubble collapsed in the late-1990s.

Opposing the president is a well-known nemesis. Sen. John F. Kerry, the ranking member of the Senate Small Business Committee, advocates saving the SBIC program, which he credits with creating new jobs and economic growth.

"The SBIC program fills the gap between the availability of venture capital and the needs of small businesses in startup and growth situations," the Massachusetts Democrat and Bush's recent presidential election opponent said in a policy statement on his Web site.

How the fight plays out could have a major impact on venture capitalists and startups. Although Bush signed a stop-gap measure in October to keep the SBIC program running; it expires in mid-November.

The SBIC program, which the Small Business Administration administers, dates to 1958 and has 190 participants ranging from behemoths such as J.P. Morgan Chase & Co. and Bank of America Corp. to minnows such as Monmouth Community Bank NA of Long Branch, N.J., and Heritage Community Bank of Danville, Ky.

While the SBIC initiative is little known outside the venture capital esatablishment, its supporters say it has been a major boon for the U.S. economy. Getting off the ground with SBIC funding have been such corporate household names as Apple Computer Inc., FedEx Corp. and Staples Inc. The program provides venture capitalists with up to $2 in public funds for every $1 raised in private funds. In exchange, the government gets repayment priority if the business succeeds and earns an annual return on its investment.

The catch is that the venture fund must invest only in startups or similar early-stage enterprises. Eligible companies must have a tangible net worth of less than $18 million and average net income of less than $6 million for the preceding two years.

Yet the capital these venture funds obtain from the government can be crucial, enabling larger and more numerous investments, supporters say.

...

SBA spokesman Evan Keefer said there are no plans to scuttle the SBIC program. The agency is working with participants to devise a reasonable alternative to the current repayment formula. Keefer, however, emphasized that the SBIC needs to fund itself, so something has to give. "The program is losing $1.8 billion to $2.4 billion," he said. "To keep it we have to increase fees."

But Lee Mercer, president of the Washington-based National Association of Small Business Investment Companies, said the SBA has rejected its plan because they claim it would result in an average loss of 30 cents to 35 cents for every dollar investment. That prediction is absurd on its face, he said, noting that pension funds and others would not invest in funds that lost a third of their investment.

"When they have that view of the world, no one could have a structure that will work for them," Mercer said.

One source said the SBA is rejecting the plan because it might actually save the SBIC program rather than end it, which is what the Bush administration favors.

Comments

[tully-monster.livejournal.com]

Oh, good. I'm so glad to see Kerry taking up a role as an opposition leader. We need him--he's our most visible advocate.

[jmhm.livejournal.com]

*bangs head*

[tully-monster.livejournal.com]

I missed a point or something, didn't I? I'm apparently not too bright.

[jmhm.livejournal.com]

No, it's good if he can get people to listen to him. It's just that we could have used an opposition leader last week.

[jmhm.livejournal.com]

and why would you say such a thing? Honestly, the world is far too full of people who want to tell us how dumb we are. We should at least make them do the work.