Small Business Administration's Local Development Company Loans Are Making Capital Available--But Other Aims Are Often Subverted

The purpose of the Small Business Investment Act of 1958 is to improve the national economy in general and, in particular, the small business segment by establishing a program to stimulate and supplement the flow of private equity capital and long-term loan funds which small businesses need for soundly financing their business operations and for their growth, expansion, and modernization. Under this act the Small Business Administration (SBA) was authorized to make loans to local development companies (LDCs) for constructing, expanding, or converting plants for use by specific small businesses. By regulation, SBA includes the purchase of machinery and equipment as plant construction. A unique feature of this program, as it relates to other SBA loan programs, is that it makes loans to the LDC rather than directly to the small business.