by Anne Anquillare, PEF Services LLC
As Yogi Berra said, “It’s like deja-vu, all over again” when it comes to SBA’s release of their new web reporting application. It reminds me of last July when they “released” the requirements for Schedules 8 and 9. However, let’s get past how SBA has communicated the new requirements, and focus on the new system.
I know I’m going out on a limb, but a year from now, SBA (directly) and the industry (indirectly) will see the benefits of the SBIC-WEB application. The old PC based reporting system was a dinosaur in many ways:
- Software and database structure made changes very difficult (e.g. SBA couldn’t add fields
to collect information on class of appreciation but yet they desperately needed that information for
an accurate calculation of capital impairment);
- Redundant data input by users;
- Unreliable and unsecure transmission methods (how many times were you asked to resend a file?); and
- Very inefficient/ total lack of workflow (e.g. most of the data was not accessible to an SBIC’s own analyst at
SBA, much to the shock of the SBIC fund manager).
The new system solves many of these issues while bringing in some new challenges (just ask Microsoft). But, SBIC-WEB can be easily updated and fixed (over time and as SBA’s budget allows).
So, let’s talk about the benefits for both SBA and the industry:
- Ability to integrate the new Schedules 8 and 9 into Form 468 sent to SBA (yes, it is still a lot of data,
and we aren’t sure what SBA or LPs actually do with all this portfolio company data, but funds are required to
supply it and we might as well do that in a more efficient manner than excel workbooks);
- More efficient communication and workflow within SBA (leverage draws won’t be held up because SBA can’t
find the economic data filing for your SBIC);
- Increased efficiencies and transparency by SBA for oversight of SBICs (double edged sword, but in the long
run it strengthens the program);
- PEF’s web applications have embedded efficiencies and quality controls that aren’t as apparent to our clients
but benefit them just the same, hopefully SBA will also achieve these benefits which will help the
SBIC program in the long run; and
- If/when SBA releases performance data, it will be comprehensive including sanitized information at the
portfolio company level.
But, certain things need to happen for these benefits to be realized. The two most important are continued support by SBA and feedback from the industry.
For those SBICs who use PEF for their fund administration, you know how we have used our unique combination of experienced people and great technology to master reporting and compliance challenges in our industry. Similar to how we handled the new Schedule 8 and 9 requirements last year, PEF is enhancing its technology to interface with SBIC-WEB. It took us a long time at PEF to get this good at web application design, development and deployment in the fund administration sector. It will take a while for SBA to work out the kinks in this system (which only covers SBA required reporting). We know it because we have done it. It is not easy. It will take time. But, we believe that the new SBIC-WEB application will not only provide efficiencies for SBA, but will also result in better data collection and analysis to assist all the participants in the program.
Last but not least, a few helpful hints in using the system:
1) Before entering any 2012 data, check your beginning balances for:
- partners’ capital, and
- retained earnings
2) For all existing debt and equity investments, capital type (aka equity capital investments) and type of shares have not been migrated, you will also need to backfill that information
3) For best results in backfilling investment information, the order to enter information should be:
- 2012 investment activity (and resubmit 2012 Form 1031s)
- 2012 non-cash activity (aside – there is an open issue with historical non-cash and the Schedule of Non-cash Gains/Income which SBA should resolve in a future release)
- 2012 realizations and conversions
- 9/30/12 valuations
4) Try to limit printing and save a few trees
Bottom line: the long term benefits of SBA’s new web-based reporting application for SBIC funds will eventually outweigh the short term pain. PEF Services will continue to monitor and report on the progress of SBA’s SBIC-WEB application while making the transition for our clients as seamless and painless as possible.