The application deadline is March 1, the federal agency said in a news release.
The program is part of the SBA’s Small Business Investment Company, or SBIC, debentures program and is a new approach to the old SBIC participating securities program, which proved too costly and inefficient.
The SBA has committed up to $1 billion to the early-stage VC program over five years. Qualifying funds can get up to $50 million in funding, guaranteed by the SBA, to match money raised from private sources.
In its first year, the program drew 33 applications and the agency gave a green light to six funds to proceed in the licensing process by raising private capital. The SBA won’t disclose the funds while they are fundraising, a spokesman said.
The program aims to address a funding gap faced by companies looking to raise between $1 million and $4 million, especially ones outside of California, Massachusetts and New York. Qualifying funds must invest at least 50% of their capital in early-stage small businesses.
Under the old program, suspended in 2004, the SBA matched up to twice the amount of private capital raised for an investment fund. The dot-com bust hurt the participating securities program but it also was a victim of its complexity, the SBA concluded. The agency is still winding down the program, which it estimates will record losses of $2.4 billion. Still, the program generated $14.8 billion in financings for 4,062 small businesses, the SBA says in its 2012 annual report.
The new early-stage venture program taps the larger and successful debentures program used mainly by lower-midmarket buyout firms.