Small Business Administration: Status of Small Business Investment Companies

Pursuant to a congressional request, GAO discussed the Small Business Administration's (SBA) Small Business Investment Company (SBIC) and Specialized Small Business Investment Company (SSBIC) programs, focusing on: (1) SBA oversight and examinations, licensing, and liquidation; and (2) the Three Percent Preferred Stock Repurchase Program. GAO noted: (1) SBA identified 111 SBIC and SSBIC that have engaged in regulatory misconduct and at least 20 licensees that are currently under investigation for criminal misconduct; (2) SBA increased the frequency of examinations of SBIC and SSBIC from every 22 months to every 14 months; (3) although SBA cited 552 violations by 167 SBIC and SSBIC in 1994, these violations remained unresolved from one examination period to the next; (4) since 1994, SBA has licensed 37 new SBIC, but no new SSBIC; (5) the new SBIC are capitalized at an average of $16.1 million compared to an average of $4.8 million at the start of fiscal year 1994; (6) SBA expects to recover $443 million of the $790 million it is owed from the 192 SBIC and SSBIC that are currently in liquidation; and (7) under the Three Percent Preferred Stock Repurchase program, 15 SSBIC have repurchased $41 million in preferred stock from SBA for $14 million.