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
The bill wants to help small businesses in countryside and high-tech areas by allowing them to borrow more money than usual, making it easier for them to grow and create jobs. It also suggests getting money from universities and needs reports to see how well it's working.
Summary AI
The bill S. 4759, titled the "Investing in All of America Act of 2024," seeks to modify the Small Business Investment Act of 1958. It aims to exclude certain investments in smaller enterprises located in rural or low-income areas, as well as small businesses in critical technology areas, from the federal limit on leverage. By making these exclusions, the bill intends to support economic growth and job creation in underrepresented regions and technologically important sectors. Additionally, it requires annual reports on the impact of these changes to be submitted to Congress.
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AnalysisAI
Summary of the Bill
The proposed legislation, titled the "Investing in All of America Act of 2024," seeks to amend the Small Business Investment Act of 1958 by making significant changes to how investments in small businesses are leveraged. The bill aims to exclude certain investments from leverage limits, particularly those directed to smaller enterprises situated in rural or low-income areas and businesses in critical technology sectors. This change intends to encourage further investment in these areas by altering the current financial limitations on investments.
Significant Issues
One primary issue with this bill is the amendment that reduces the leverage ratio from 300% to 200%. This reduction can potentially limit the amount of money small businesses can receive for expansion and growth, as it decreases their capacity to access higher funds through leverage. While this aims to increase fiscal responsibility, it might inadvertently stifle growth for businesses that rely on higher leverage.
Additionally, the bill's inclusion of funding from educational institutions, specifically from foundations, endowments, or trusts of colleges or universities, raises concerns about favoritism. By potentially prioritizing educational institutions, other non-educational organizations might feel disadvantaged or excluded from being recognized as valid funding sources.
Moreover, the language regarding critical technology areas contains ambiguities. Without a precise definition of what constitutes a "critical technology area" vital to national security, there could be inconsistent applications of benefits. This lack of clarity might lead to legal challenges and confusion among businesses and regulators about eligibility.
Another complexity within the bill is the annual adjustments outlined based on the Consumer Price Index. This could be difficult for stakeholders to track and fully understand, complicating financial forecasting and strategic planning without clear information.
Furthermore, while the bill mandates an annual report on the economic and job creation impact, it lacks specifics on how these activities will be quantified and reported. This absence of detail can lead to inconsistent or unreliable reports, hindering accurate assessments and policy decisions.
Impact on the Public
Broadly, the bill strives to stimulate growth in sectors deemed critical and areas that historically receive less investment. By encouraging investments in rural and low-income areas, it may lead to increased economic activities and job creation in these locations, potentially reducing regional disparities and enhancing community development.
However, the reduced leverage could pose a challenge for many small businesses, particularly those that have relied on higher leverage to fuel growth. This change may lead to slower expansion rates or difficulties in accessing necessary capital, affecting the competitiveness of these businesses.
Impact on Specific Stakeholders
For small businesses in rural or low-income areas, this bill presents an opportunity to attract more investment, potentially paving the way for growth and sustainability. However, the complexity of the amended financial rules might require these businesses to seek professional advice to navigate the new environment, which could increase operational costs.
Educational institutions might benefit from this legislation as it explicitly recognizes their associated funding bodies as valid funding sources under the amended Act. This might encourage these institutions to invest in or partner with small businesses, fostering innovation and research opportunities.
On the other hand, without clear definitions and guidelines, businesses operating within or aspiring to enter critical technology sectors might face uncertainty. The lack of consensus on what qualifies as "critical technology" could result in uneven access to benefits, creating an environment of unpredictability for such stakeholders.
Overall, while the bill targets key areas for enhanced funding, the issues identified pose potential hurdles that require attention to ensure equitable and effective implementation.
Financial Assessment
This bill, titled the "Investing in All of America Act of 2024," focuses on financially empowering small enterprises in rural or low-income areas, as well as businesses in critical technology sectors, by amending how their funding is treated under federal regulations. Specifically, the bill makes changes to the Small Business Investment Act of 1958 concerning leverage limits or the total amount of borrowed funds a business can use relative to its equity.
Reduction of Leverage Limit
The bill reduces the leverage limit for investments from 300% to 200%. This means that the maximum allowed borrowing relative to the company's equity is now down to two times its equity from three times. Such a ceiling on leverage might restrict the scale at which small businesses can secure funding for expansion and could result in smaller enterprises needing to rely more on equity financing rather than debt. This reduction could potentially limit growth opportunities for small businesses that require larger leverage to fuel significant growth efforts, a key issue indicated in the list above.
Inclusion of Additional Investment Sources
Significant changes are made to the sources of investments considered allowable. By allowing funds from "a foundation, endowment, or trust of a college or university," the bill broadens potential financial sources. However, this inclusion might be viewed as prioritizing educational institutions over other organizations like private companies or community groups that might also wish to support small enterprises. The potential drawback here is that it might unintentionally narrow the diversity of investment sources in ways not beneficial to all small businesses.
Exclusions Pertaining to Critical Technology Areas
The concept of a "critical technology area" is another focal point. Investments in these areas qualify for special leverage exclusions aimed at aiding critical tech sectors important to national security. However, the bill doesn't clearly define what falls under this category, leading to possible ambiguities and uneven application. This lack of specificity might create inconsistencies in which businesses can take advantage of the leverage exclusions, potentially causing disparities and legal challenges as businesses seek clarity on their eligibility.
Impact of Consumer Price Index Adjustments
Another financial aspect is the annual adjustment of specified dollar amounts based on the Consumer Price Index (CPI). While this adjustment ensures that financial limits keep pace with inflation, stakeholders might find it complex to fully understand and predict financial implications without additional guidance and explanation. These adjustments aim to maintain the real value of the financial figures set in the bill, but without clear procedural guidance, businesses may struggle to align their strategies accordingly.
Annual Report Requirements
The bill mandates an annual report from the Small Business Administration on the economic impact of these leverage exclusions. However, it lacks rigorous criteria defining how economic activity and job creation should be measured and reported. This shortcoming could lead to inconsistent reporting outcomes, affecting the ability of policymakers and stakeholders to accurately assess the financial implications of the bill's provisions and make informed decisions for future amendments or legislation.
In summary, the bill's revisions to leverage limits and funding sources are poised to reshape how small enterprises, especially in rural and critical tech areas, access financial resources. While it aims to foster growth in these sectors, its success could be mitigated by the identified issues concerning reduced financial flexibility, the exclusive nature of allowable investment sources, and potential ambiguities surrounding critical technology definitions. The annual adjustment mechanism and reporting requirements need careful execution to effectively serve their intended purposes.
Issues
The amendment in Section 2 reduces the leverage from 300% to 200%. This change may limit the capacity for investment and funding expansion, potentially affecting small businesses that rely on larger leverage for growth.
The bill, in Section 2, includes funding from 'a foundation, endowment, or trust of a college or university' as permissible sources for investment. This could be seen as favoring educational institutions over other types of organizations, potentially excluding other non-educational sources that also support small enterprises.
The exclusion clause in Section 2 and its reference to critical technology areas can be ambiguous. The potential for varying interpretations of what qualifies as 'critical technology' linked to national security might result in inconsistent application, possibly leading to legal challenges or disparities in which businesses benefit.
There is a lack of clear definition and criteria for what constitutes a 'critical technology area' related to national security in Section 2. This ambiguity may cause confusion for businesses and regulators, potentially resulting in legal disputes or uneven application of benefits.
Section 2's language on annual adjustments of certain dollar amounts based on the Consumer Price Index might be complex for stakeholders to follow, causing potential difficulties in understanding financial implications without further clarification.
The report requirement in Section 2 lacks specificity about how economic activity and job creation, resulting from the leverage exclusion, will be measured and reported. This lack of clarity might lead to inconsistent, unreliable, or difficult-to-compare reporting outcomes, potentially affecting policy assessment and decision-making.
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 first section of this bill states its official name, which is the "Investing in All of America Act of 2024".
2. SBIC maximum leverage exclusion Read Opens in new tab
Summary AI
The section of the bill amends the Small Business Investment Act of 1958 by changing the definition of funds excluded from leverage approval, lowering the maximum leverage ratio for small businesses, and expanding support to businesses in rural and critical technology areas. It also mandates regular adjustments based on inflation and requires an annual report on the economic impact and job creation resulting from 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 “, a”; 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: “(C) for the purpose of approval by the Administrator of any request for leverage, 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 subclause (I), (II), or (III) of subparagraph (B)(iii).”. (b) Maximum leverage.—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 351) 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 2024.”; 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 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 (b), including the economic activity generated and jobs directly and indirectly created by the exclusion. ---