Overview
Title
To amend the Small Business Investment Act of 1958 to exclude from the limit on leverage certain amounts invested in smaller enterprises located in rural or low-income areas and small businesses in critical technology areas, and for other purposes.
ELI5 AI
Imagine a story where some special helpers want to give more money to small businesses that live in faraway places or work on very important technology for our future. A new rule, called H. R. 5333, tries to make it easier for these helpers to give money by changing some rules, like not counting some of their gifts against how much they're allowed to give.
Summary AI
H. R. 5333, titled the “Investing in All of America Act of 2023,” proposes changes to the Small Business Investment Act of 1958. This bill aims to allow more flexibility in investments by excluding certain amounts invested in smaller businesses located in rural or low-income areas and businesses in critical technology areas from the leverage limits. It introduces adjustments in the definitions and calculations related to leverage, ensuring specific exceptions and compliance with national security needs. The bill also requires annual reports on the economic impact of these changes to support small businesses.
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AnalysisAI
The proposed legislation, H.R. 5333, aims to amend the Small Business Investment Act of 1958 to facilitate greater investment in small businesses located in rural or low-income areas and those involved in critical technology sectors. The bill introduces mechanisms to exclude certain investments from the cap on leveraged funding available to Small Business Investment Companies (SBICs). This change seeks to stimulate economic activity in underrepresented regions and strategic industries by easing financial constraints imposed by current leveraging limits.
General Summary of the Bill
H.R. 5333 proposes several amendments targeting funding restrictions and investments by SBICs. Notably, it offers an exclusion from leveraged funding limits for investments in small businesses within rural or economically disadvantaged areas and those active in critical technology fields. By doing so, the bill intends to drive growth in sectors and locations that might otherwise face challenges securing necessary capital. It also introduces specific exclusions for funds sourced from educational institutions' foundations, adjusting leverage calculations, and mandates further annual evaluations of the bill's economic impact, ensuring its efficacy and adaptability over time, especially in light of changing economic conditions.
Significant Issues
The bill has raised several pertinent issues. One of the main concerns is the introduction of the term "critical technology areas," which is not precisely defined within the text. The ambiguity could lead to inconsistent interpretation and application. This lack of clarity could potentially skew investments toward certain industries or areas that do not align with national security or economic objectives. Additionally, the provision allowing funds from college or university-affiliated entities could create perceived biases toward these institutions, raising ethical issues about fairness in funding distribution.
Another issue arises from the complexity of the changes in leverage calculations, which may present challenges for small businesses trying to determine their eligibility and compliance. This financial and regulatory complexity could deter small enterprises, which typically lack resources to navigate intricate legislative requirements. Furthermore, the bill's reliance on the Consumer Price Index (CPI) for annual adjustments may introduce unpredictability into financial planning, as economic conditions are often in flux.
Impact on the Public and Stakeholders
Broadly, the bill might significantly impact the public by driving investment into areas that have historically struggled to attract financial backing. This could lead to enhanced economic development and job creation in rural and low-income communities, directly benefiting residents by boosting local economies and indirectly benefiting the broader economy by fostering diverse technological advancements essential to national growth and security.
However, specific stakeholders could experience varying impacts. Small businesses stand to gain from increased access to capital if located within the targeted areas or sectors. Conversely, those outside these parameters might find themselves at a relative disadvantage, as new capital flows could potentially shift away from them to businesses within the prioritized categories. Additionally, educational institutions may face scrutiny over their role in funding distribution, given the potential bias introduced by the bill’s provisions for foundations, endowments, and trusts.
In summary, while H.R. 5333 seeks to enhance small business investments in key areas, its success will largely depend on addressing the issues related to clarity, implementation, and equitable distribution of benefits. The legislation's ultimate impact will rest on how effectively it translates its intentions into tangible economic opportunities across the targeted areas, fostering an equitable environment for all stakeholders involved.
Financial Assessment
The "Investing in All of America Act of 2023," formally known as H. R. 5333, introduces several significant financial references and changes impacting small business investment, particularly in rural or low-income areas and critical technology sectors. These changes primarily focus on the calculation and limitations of leverage, which is pivotal for small business investment companies (SBICs). Here's a closer look at these financial aspects and their implications:
Leverage Limit Adjustments
The bill proposes amendments to the Small Business Investment Act of 1958 by excluding certain investments in smaller enterprises from the leverage limits, which include businesses located in rural or low-income areas and critical technology areas. These exclusions could potentially broaden the investment scope for SBICs, thus increasing financial opportunities for businesses that meet these new criteria.
Private Capital Requirement Alteration:
One of the key financial changes is the reduction of the private capital requirement from 300% to 200%. This adjustment may affect how mutual funds and other investment pools engage with small businesses. While aimed at increasing flexibility for SBICs, the reduced requirement also raises concerns about the potential impact on a small enterprise's access to these funds and its overall market participation.
Equity and Investment Calculations
The bill also amends how equity investments are calculated relative to the leverage limit. By striking certain terms like "equity," it specifically changes how company investments in rural, low-income, and critical technology areas are quantified. These modifications may introduce complexity in understanding compliance and eligibility, particularly for smaller enterprises with limited financial and legal expertise.
Funding Channels and Government Exclusions
The inclusion of funds from foundations, endowments, or trusts associated with colleges or universities is another financial nuance. While it opens potential funding sources for SBICs, it introduces concerns about possible bias towards educational institutions, impacting the equitable distribution of investment resources.
Moreover, the bill attempts to clarify the exclusion of funds obtained from government sources unless they fall under specific exceptions. While this aims to refine the leverage calculation, there remains ambiguity around indirect government funds, leading to possible misinterpretation or misuse, as identified in the issues.
Consumer Price Index Adjustments
The introduction of annual adjustments to financial thresholds based on the Consumer Price Index (CPI) could introduce uncertainty in budget planning for small businesses. As these adjustments are subject to fluctuations in economic conditions, they potentially create financial unpredictability, challenging the long-term financial stability of small businesses.
Reporting and Economic Impact
The requirement for annual reporting on the economic impact of these exclusions, including details on job creation and economic activity, suggests an intent to track and justify the financial implications of these leverage adjustments. However, there is concern that these reports may not fully capture indirect economic impacts, potentially providing lawmakers with an incomplete financial assessment.
In summary, while H. R. 5333 aims to adjust leverage limits and encourage investments in particular sectors, its changes to financial references—such as leverage calculation, funding sources, and index-linked adjustments—raise various issues concerning complexity, equity, and predictability. These financial elements are critical for stakeholders to consider in evaluating the bill's potential effects on small business investment and economic development.
Issues
The introduction of the term 'critical technology areas' in Section 2 without a precise definition creates ambiguity in interpretation, potentially leading to inconsistent application and favoritism. This is a significant legal and political issue as it affects national security and economic priorities.
The amendment to allow funds from foundations, endowments, or trusts of colleges or universities in Section 2 raises potential biases toward these educational institutions, leading to ethical concerns about equity and fairness in funding distribution.
Changes in the leverage calculation process in Section 2 involve complex adjustments, making it difficult for small businesses to understand their eligibility and compliance. This financial and legal complexity could disproportionately affect small enterprises.
The reliance on the Consumer Price Index for annual adjustments in Section 2 introduces unpredictability into budget planning for small businesses, creating a financial risk due to fluctuating economic conditions.
While Section 2 attempts to exclude certain funds from leverage calculations, there is ambiguity concerning indirect government funding channels, which could lead to misinterpretation or misuse, posing a political and financial issue.
The reduction of the private capital requirement from 300 to 200 in Section 2 lacks clarity regarding the impact on small business mutual fund access, potentially affecting their financial capabilities and market participation.
The requirement for an annual report in Section 2 may not adequately account for indirect economic impacts and job creation, potentially providing an incomplete assessment to lawmakers, which is a political and financial concern.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The section states that the official name of the Act is the “Investing in All of America Act of 2023.”
2. SBIC maximum leverage exclusion Read Opens in new tab
Summary AI
The bill amends the Small Business Investment Act of 1958 to change the rules regarding which funds can be used by Small Business Investment Companies (SBICs) for leverage purposes, excluding government-sourced funds except certain specified types. It also adjusts how leverage calculations are made for businesses in low-income, rural, or critical technology areas, sets limits on leverage exclusions, and mandates annual reports on the economic impact of these changes.
Money References
- (a) Definitions.—Section 103(9) of the Small Business Investment Act of 1958 (15 U.S.C. 662(9)) is amended— (1) in subparagraph (A)(ii), by striking “and” at the end; (2) in subparagraph (B)(iii)— (A) in subclause (I), by striking “established prior to October 1, 1987”; (B) in subclause (II)— (i) by striking “or” and inserting “,”; and (ii) by inserting “, or a foundation, endowment, or trust of a college or university” after “pension plan”; and (C) in subclause (III), by striking the semicolon at the end and inserting “; and”; and (3) by adding at the end the following new subparagraph: “(C) does not include any funds obtained directly or indirectly from any Federal, State or local government or any government agency or instrumentality, except for funds described in subclauses (I) through (III) of subparagraph (B)(iii), for the purpose of approval by the Administrator of any request for leverage.”. (b) In general.—Section 303(b)(2) of the Small Business Investment Act of 1958 (15 U.S.C. 683(b)(2)) is amended— (1) in subparagraph (A)(i), by striking “300” and inserting “200”; (2) in subparagraph (C)— (A) in the heading— (i) by inserting “or rural” after “low-income”; and (ii) by inserting “or critical technology areas” after “geographic areas”; (B) in clause (i)— (i) by striking “(i) In calculating” and inserting the following: “(i) IN GENERAL.—Except as provided in clause (iii), in calculating”; (ii) by inserting “or companies” after “of a company”; (iii) by striking “subparagraph (A)” and inserting “subparagraphs (A) and (B)”; (iv) by striking “equity”; (v) by striking “the company in a smaller enterprise” and all that follows and inserting the following: “the company or companies in— “(I) a smaller enterprise located in a low-income geographic area (as defined in section 689 of this title) or in a rural area; or”; and (vi) by adding at the end the following new subclause: “(II) a small business concern in an area of critical technology (as defined in section 4801 of title 10, United States Code) vital to maintaining the national security of the United States.”; (C) by amending clause (ii) to read as follows: “(ii) LIMITATION.—While maintaining the limitation of subparagraph (A)(i) and consistent with a leverage determination ratio issued pursuant to section 301(c), the aggregate amount excluded for a company or companies under clause (i) from the calculation of the outstanding leverage of such company or companies for the purposes of subparagraphs (A) and (B) may not exceed the lesser of 50 percent of the private capital of such company or companies or $125,000,000.”; and (D) by amending clause (iii) to read as follows: “(iii) PROSPECTIVE APPLICABILITY.—An investment by a licensee is eligible for exclusion from the calculation of outstanding leverage under clause (i) only if such investment is made by such licensee after the date of enactment of the Investing in All of America Act of 2023.”; and (3) by adding at the end the following new subparagraphs: “(E) ANNUAL ADJUSTMENT.—The Administrator shall adjust the dollar amounts described in subparagraphs (A) and (B)— “(i) on the date of the enactment of this subparagraph, by a percentage equal to the percentage (if any) by which the Consumer Price Index (all items; United States city average), as published by the Bureau of Labor Statistics, increased during the period— “(I) beginning on December 18, 2015, and ending on the date of the enactment of this subparagraph, for subparagraph (B); and “(II) beginning on June 21, 2018, and ending on the date of the enactment of this subparagraph, for subparagraph (A); and “(ii) on the date that is one year after the date of the enactment of this subparagraph, and annually thereafter, by a percentage equal to the percentage (if any) by which the Consumer Price Index (all items; United States city average), as published by the Bureau of Labor Statistics, increased during the one-year period preceding the date of the adjustment under this clause.”. (c) Report.—Not later than June 30 of the first year beginning after the date of the enactment of this Act, and annually thereafter, the Administrator of the Small Business Administration shall submit to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives a report on the results of the exclusion under subparagraph (C) of section 303(b)(2) of the Small Business Investment Act of 1958 (15 U.S.C. 683(b)(2)), as amended by subsection (a), including the economic activity generated and jobs directly and indirectly created by the exclusion. ---