SBA's Practice of Matching Investments of Federal Agencies in Minority Enterprise

The Small Business Administration (SBA) partially matches investments of other federal agencies in minority enterprise small business investment companies (MESBIC's) through leveraging. Leveraging is investing in MESBIC's or other small business investment companies, through the purchase or guarantee of deventures or through the purchase of preferred securities. Sometimes, SBA leverages against investments made by other federal agencies. It has agreed to leverage against the investments made by the Minority Resource Center within the Federal Railroad Administration which also invests in MESBIC's. The question was whether SBA has the authority to leverage against investments by federal agencies. The law authorizing SBA to leverage investments in MESBIC's only authorizes leveraging against private money. Since the Minority Business Resource Center is a federal entity, its contributions to MESBIC's are not private capital or surplus; the law does not authorize SBA to leverage against them. Specific authority included in the Commumity Services Act of 1974 confirms that federal funds cannot be generally considered to be private for the purposes of SBA leveraging. Therefore, there is no legal basis for SBA to leverage against federal funds invested in MESBIC's.