Beth Manzi, COO of PEF Services LLC, organized and moderated a panel discussion on SBIC private capital funds at the New York State Society of CPAs annual conference on Foundation for Accounting Education’s (FAE) Private Equity and Venture Capital Conference. Her panelists included Anne Anquillare of PEF Services LLC, Richard Petrocelli, CFO of Saratoga Investment Corp. (a Business Development Company with an SBIC dropdown), and Maureen Blair of EisnerAmper LLP.
SBICs are specialized private capital funds where the SBA generally matches private capital up to a 2:1 ratio. The program was established in 1958 by Congress for the purpose of providing capital to small businesses located in the United States. As an investor in the fund, the SBA requires compliance with program rules, including specific reporting requirements.
While many of the accountants in attendance at the conference were from private capital funds, advisory firms, accounting firms, and even other fund administrators, they found the discussion to be enlightening. “For some, it was like entering a whole new dimension,” said Anquillare. “While similar to traditional private equity and debt funds, SBICs have their own rules and terminology.” PEF Services, which has over 40 SBIC funds under administration helps funds navigate their way through the program and avoid pitfalls. “We have a depth of knowledge regarding SBICs unparalleled in the industry. All of our staff professionals know the SBIC regulations and have experience working with these funds,” said Manzi.
The discussion touched on many key topics including: the advantages and disadvantages of an SBIC, licensing process, reporting, examinations, leverage draws, distributions, SBIC accounting and valuations. Specifically, the panel delved into the differences in valuation methods between GAAP and OCBOA (SBA standards), READ (Retained Earnings Available for Distribution), Capital Impairment, and preparation for SBA examinations.
Fund managers who are considering formation of an SBIC should reach out to David Gerogosian of PEF Services.