Authorized by P.L. 106-554 , the Consolidated Appropriations Act, 2001 (Appendix H: the New Markets Venture Capital Program Act of 2000), the NMVC program is designed to
promote economic development and the creation of wealth and job opportunities in low-income geographic areas and among individuals living in such areas by encouraging developmental venture capital investments in smaller enterprises primarily located in such areas; and address the unmet equity investment needs of small enterprises located in low-income geographic areas. Modeled on the SBA's Small Business Investment Company (SBIC) program, SBA-selected, privately owned and managed NMVC companies provide funding and operational assistance to small businesses. To do so, they use private capital the NMVC company has raised (called regulatory capital ) and up to 150% of that amount (called leverage ) from the sale of SBA-guaranteed 10-year debentures, or loan obligations , to third parties, subject to the availability of funds. Because the SBA guarantees the debenture, the SBA is able to obtain favorable interest rates. At least 80% of the investments must be in small businesses located in a low-income area, as defined in the statute. Specialized Small Business Investment Companies (SSBICs) established under the SBIC program are also eligible for NMVC operational assistance grants, which are awarded on a dollar-to-dollar matching basis. The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and up to $30 million for operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. In 2003, the unobligated balances of $10.5 million for NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining in recent years as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance (which is comprised of the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. This report examines the NMVC program's legislative origins and describes the program's eligibility and performance requirements for NMVC companies, eligibility requirements for small businesses seeking financing, and definition of low-income areas. It also reviews regulations governing the SBA's financial assistance to NMVC companies and provides program statistics. This report concludes with an examination of (1) efforts to eliminate the program based on concerns that it duplicated other SBA programs and is relatively expensive, (2) the rescission of the program's unobligated funding in 2003, and (3) congressional efforts to provide the program additional funds. NMVC companies are responsible for meeting the terms and conditions set forth in the debenture.
Authorized by P.L. 106-554, the Consolidated Appropriations Act, 2001 (Appendix H: the New Markets Venture Capital Program Act of 2000), the New Markets Venture Capital (NMVC) program, which is no longer active, is designed to promote economic development and the creation of wealth and job opportunities in low-income geographic areas by addressing the unmet equity investments needs of small businesses located in those areas. Modeled on the Small Business Association's (SBA's) Small Business Investment Company (SBIC) program, SBA-selected, privately owned and managed NMVC companies provide funding and operational assistance to small businesses. To do so, they use private capital the NMVC company has raised (called regulatory capital) and up to 150% of that amount (called leverage) from the sale of SBA-guaranteed 10-year debentures, or loan obligations, to third parties, subject to the availability of funds. Because the SBA guarantees the debenture, the SBA is able to obtain favorable interest rates. NMVC companies are responsible for meeting the terms and conditions set forth in the debenture. At least 80% of the investments must be in small businesses located in a low-income area.
Specialized Small Business Investment Companies (SSBICs) established under the SBIC program are also eligible for NMVC operational assistance grants, which are awarded on a dollar-to-dollar matching basis. Six companies participated in the NMVC program.
The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and $30 million to fund operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. In 2003, the unobligated balances of $10.5 million for the NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining in recent years as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018.
This report examines the NMVC program's legislative origins and describes the program's eligibility and performance requirements for NMVC companies, eligibility requirements for small businesses seeking financing, and definition of low-income areas. It also reviews regulations governing the SBA's financial assistance to NMVC companies and provides program statistics.
The report concludes with an examination of (1) efforts to eliminate the program based on concerns that it duplicated other SBA programs and is relatively expensive, (2) the rescission of the program's unobligated funding in 2003, and (3) congressional efforts to provide the program additional funds.