SBA New Markets Venture Capital Program




SBA New Markets Venture Capital Program
Updated March 11, 2021
Congressional Research Service
https://crsreports.congress.gov
R42565




SBA New Markets Venture Capital Program

Summary
Authorized by P.L. 106-554, the Consolidated Appropriations Act, 2001 (Appendix H: the New
Markets Venture Capital Program Act of 2000), the New Markets Venture Capital (NMVC)
program, which is no longer active, is designed to promote economic development and the
creation of wealth and job opportunities in low-income geographic areas by addressing the unmet
equity investments needs of small businesses located in those areas. Modeled on the Small
Business Association’s (SBA’s) Small Business Investment Company (SBIC) program, SBA-
selected, privately owned and managed NMVC companies provide funding and operational
assistance to small businesses. To do so, they use private capital the NMVC company has raised
(called regulatory capital) and up to 150% of that amount (called leverage) from the sale of SBA-
guaranteed 10-year debentures, or loan obligations, to third parties, subject to the availability of
funds. Because the SBA guarantees the debenture, the SBA is able to obtain favorable interest
rates. NMVC companies are responsible for meeting the terms and conditions set forth in the
debenture. At least 80% of the investments must be in small businesses located in a low-income
area.
Specialized Small Business Investment Companies (SSBICs) established under the SBIC
program are also eligible for NMVC operational assistance grants, which are awarded on a dollar-
to-dollar matching basis. Six companies participated in the NMVC program.
The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million
in SBA-guaranteed debentures and $30 million to fund operational assistance grants for FY2001
through FY2006. The funds were provided in a lump sum in FY2001 and were to remain
available until expended. In 2003, the unobligated balances of $10.5 million for the NMVC
debenture subsidies and $13.75 million for operational assistance grants were rescinded. The
program continued to operate, with the number and amount of financing declining in recent years
as the program’s initial investments expired and NMVC companies increasingly engaged only in
additional follow-on financings with the small businesses in their portfolios. The NMVC
program’s active unpaid principal balance peaked at $68.1 million in FY2008, and then fell each
year thereafter until reaching $0 in FY2018.
Over the years, legislation has been introduced to reauthorize the program. For example, during
the 116th Congress, H.R. 6342, the SBIC Capital Infusion Act of 2020, would have reauthorized
the NMVC program from FY2021 through FY2026, provided credit subsidy necessary to fund up
to $10 billion in SBA-guaranteed debentures, and appropriated $2 billion for NMVC operational
assistance grants.
This report examines the NMVC program’s legislative origins and describes the program’s
eligibility and performance requirements for NMVC companies, eligibility requirements for small
businesses seeking financing, and definition of low-income areas. It also reviews regulations
governing the SBA’s financial assistance to NMVC companies and provides program statistics.
The report concludes with an examination of (1) efforts to eliminate the program based on
concerns that it duplicated other SBA programs and is relatively expensive, (2) the rescission of
the program’s unobligated funding in 2003, and (3) congressional efforts to provide the program
additional funds.
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Contents
New Markets Venture Capital Program Overview .......................................................................... 1
Legislative Origins .......................................................................................................................... 2
105th Congress ........................................................................................................................... 2
The Community Development Venture Capital Demonstration Program .......................... 3
106th Congress ........................................................................................................................... 3
SBA’s Low- or Moderate-Income Initiative ....................................................................... 4
The Community Development and Venture Capital Act of 2000 ....................................... 5
The New Markets Venture Capital Program Act of 2000 ................................................... 6
NMVC Company Eligibility and Performance Requirements ........................................................ 6
Eligibility of Small Businesses and Low-Income Geographic Areas .............................................. 9
NMVC Leverage ........................................................................................................................... 10
Operational Assistance Grants ........................................................................................................ 11
Program Statistics .......................................................................................................................... 12
Congressional Issues ..................................................................................................................... 13
Legislative Efforts to Provide Additional NMVC Funding ........................................................... 14
Related SBIC Program Developments .......................................................................................... 16
Concluding Observations .............................................................................................................. 18

Tables
Table 1. New Markets Venture Capital Program Statistics, FY2002-FY2020 .............................. 12

Table A-1. Legislative Efforts to Provide Additional NMVC Funding ......................................... 20

Appendixes
Appendix. Legislative Efforts to Provide Additional Funding for the NMVC Program ............... 20

Contacts
Author Information ........................................................................................................................ 23

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SBA New Markets Venture Capital Program

New Markets Venture Capital Program Overview
The Small Business Administration (SBA) administers several programs to support small
businesses, including loan guaranty programs to enhance small business access to capital; venture
capital programs, including the now inactive New Markets Venture Capital (NMVC) program, to
foster small business expansion; programs to increase small business opportunities in federal
contracting; direct loans for businesses, homeowners, and renters to assist their recovery from
natural disasters; and access to entrepreneurial education to assist with business formation and
expansion.1
Authorized by P.L. 106-554, the Consolidated Appropriations Act, 2001 (Appendix H: the New
Markets Venture Capital Program Act of 2000), the NMVC program is designed to
 promote economic development and the creation of wealth and job opportunities
in low-income geographic areas and among individuals living in such areas by
encouraging developmental venture capital investments in smaller enterprises
primarily located in such areas; and
 address the unmet equity investment needs of small enterprises located in low-
income geographic areas.2
Modeled on the SBA’s Small Business Investment Company (SBIC) program, SBA-selected,
privately owned and managed NMVC companies provide funding and operational assistance to
small businesses. To do so, they use private capital the NMVC company has raised (called
regulatory capital) and up to 150% of that amount (called leverage) from the sale of SBA-
guaranteed 10-year debentures, or loan obligations, to third parties, subject to the availability of
funds.3 Because the SBA guarantees the debenture, the SBA is able to obtain favorable interest
rates. NMVC companies are responsible for meeting the terms and conditions set forth in the
debenture. At least 80% of the investments must be in small businesses located in a low-income
area, as defined in the statute.
Specialized Small Business Investment Companies (SSBICs) established under the SBIC
program are also eligible for NMVC operational assistance grants, which are awarded on a dollar-
to-dollar matching basis. Six NMVC companies participated in the program.
The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million
in SBA-guaranteed debentures and up to $30 million for operational assistance grants for FY2001
through FY2006.4 The funds were provided in a lump sum in FY2001 and were to remain
available until expended. The SBA subsequently provided $72.0 million in leverage to NMVC
companies in FY2002 and FY2003 ($12.5 million in FY2002 and $59.5 million in FY2003) and

1 U.S. Small Business Administration (SBA), Fiscal Year 2018 Congressional Budget Justification and FY2016 Annual
Performance Report
, p. 1, at https://www.sba.gov/sites/default/files/aboutsbaarticle/
FINAL_SBA_FY_2018_CBJ_May_22_2017c.pdf.
2 15 U.S.C. §689(a).
3 For further information and analysis concerning the SBA’s Small Business Investment Company program, see CRS
Report R41456, SBA Small Business Investment Company Program, by Robert Jay Dilger. The SBA is authorized to
issue debentures with a term of up to 15 years. The SBA has opted to limit the term for New Markets Venture Capital
(NMVC) debentures to 10 years.
4 Because the SBA’s New Market Venture Capital (NMVC) debentures are discounted to guarantee the payment of
interest during the first five years of the debenture, the funding provided was estimated to be sufficient to raise about
$100 million in available capital for investment. Also, the appropriation was for FY2001 through FY2006, but was
provided as a lump sum payment in FY2001.
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$14.4 million for operational assistance grants ($3.75 million in FY2002 and $10.65 million in
FY2003).5 In 2003, the unobligated balances of $10.5 million for NMVC debenture subsidies and
$13.75 million for operational assistance grants were rescinded.6 The program continued to
operate, with the number and amount of financing declining in recent years as the program’s
initial investments expired and NMVC companies increasingly engaged only in additional
follow-on financings with the small businesses in their portfolios.
The NMVC program’s active unpaid principal balance (which is comprised of the SBA
guaranteed portion and the unguaranteed portion of the NMVC companies’ unpaid principal
balance) peaked at $68.1 million in FY2008, and then fell each year thereafter until reaching $0
in FY2018.7
Over the years, legislation has been introduced to reauthorize the NMVC. For example, during
the 116th Congress, H.R. 6342, the SBIC Capital Infusion Act of 2020, would have reauthorized
the NMVC program from FY2021 through FY2026, provided credit subsidy necessary to fund up
to $10 billion in SBA-guaranteed debentures, and appropriated $2 billion for NMVC operational
assistance grants.8
This report examines the NMVC program’s legislative origins and describes the program’s
eligibility and performance requirements for NMVC companies, eligibility requirements for small
businesses seeking financing, and definition of low-income areas. It also reviews regulations
governing the SBA’s financial assistance to NMVC companies and provides program statistics.
This report concludes with an examination of (1) efforts to eliminate the program based on
concerns that it duplicated other SBA programs and is relatively expensive, (2) the rescission of
the program’s unobligated funding in 2003, and (3) congressional efforts to provide the program
additional funds.
Legislative Origins
105th Congress
On September 15, 1998, the Senate Committee on Small Business conducted a markup of several
bills pending before the committee, including H.R. 3412, the Small Business Investment
Company Technical Corrections Act of 1998, which the House had passed.9 Senator Christopher

5 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” June 5, 2012.
6 P.L. 108-7, the Consolidated Appropriations Resolution, 2003; and U.S. Congress, Committee of Conference, Making
Further Continuing Appropriations for the Fiscal Year 2003, and for Other Purposes
, report to accompany H.J.Res. 2,
108th Cong., 1st sess., February 13, 2003, H.Rept. 108-10 (Washington: GPO, 2003), p. 787.
7 SBA, Office of Congressional and Legislative Affairs, “WDS files: Table 1.1.b – Active UPB by Program,” October
18, 2019. The NMVC program’s inventory unpaid principal balance (the unpaid principal balance of purchased loans
and loans with a legal judgment against the borrower (i.e., a bankruptcy judgment)) was $20.8 million in FY2019.
8 Also, H.R. 6312, the COVID-19 Relief for Small Businesses Act of 2020, would have reauthorized the NMVC
program from FY2020 through FY2025, provided credit subsidy necessary to fund up to $10 billion in SBA-guaranteed
debentures, and authorized to be appropriated $2 billion for NMVC operational assistance grants.
A list of bills introduced in previous Congresses to either expand or amend the NMVC program is provided in the
Appendix.
9 H.R. 3412, the Small Business Investment Company Technical Corrections Act of 1998, was introduced by Rep.
(later Sen.) Jim Talent, chair of the House Committee on Small Business, on March 10, 1998. The bill would have
authorized several technical corrections to the SBA’s Small Business Investment Company (SBIC) program. The
House Committee on Small Business reported the bill on March 17, 1998, and the House passed it (on motion to
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Bond, then-chair of the Senate Committee on Small Business, proposed an amendment in the
nature of a substitute to H.R. 3412 incorporating the full texts of S. 2372, the Year 2000
Readiness Act, and S. 2407, the Small Business Programs Restructuring and Reform Act of 1998,
as well as provisions from S. 2448, the Small Business Loan Enhancement Act.10 The committee
also debated and approved by unanimous voice votes seven amendments to the substitute
amendment. One of the seven approved amendments was a precursor of the NMVC program.
The Community Development Venture Capital Demonstration Program
The amendment, offered by Senator Paul Wellstone, would have authorized a $20 million, four-
year technical assistance program—the Community Development Venture Capital Demonstration
Program—to provide grants, on a matching dollar-to-dollar basis, to experienced community
development venture capital (CDVC) firms that invest in small businesses located in
economically distressed areas, such as inner cities and poor rural counties. The grants would be
used to provide technical expertise and operating assistance to new, emerging, less experienced
CDVC organizations.11 The program’s stated purpose was “to develop and expand a new but
growing field of organizations that use the tools of venture capital to create good jobs, productive
wealth, and entrepreneurial capacity that benefit disadvantaged people and economically
distressed communities.”12 The program’s advocates argued that despite difficulties associated
with making investments in economically distressed areas, some successful CDVCs had produced
“a ‘double bottom line’ of not only financial returns, but also social benefits in the form of good
jobs and healthier communities.”13
On September 15, 1998, the committee reported H.R. 3412, as amended, by a vote of 18-0. On
September 30, 1998, the Senate passed the bill, with an amendment, by unanimous consent. The
House did not act on the bill.
106th Congress
On January 19, 1999, President Bill Clinton announced during his State of the Union Address
support for what was later called the “New Markets Investment Initiative.”14 The proposed
initiative was comprised of several programs, including a New Markets Tax Credit program and a
New Markets Venture Capital program, to encourage economic development in economically
distressed areas.15 President Clinton subsequently drew attention to the initiative by taking three

suspend the rules and pass the bill, as amended), 407-0, on March 24, 1998.
10 U.S. Congress, Senate Committee on Small Business, Year 2000 Readiness and Small Business Programs
Restructuring and Reform Act of 1998
, 105th Cong., 2nd sess., September 25, 1998, S.Rept. 105-347 (Washington:
GPO, 1998).
11 U.S. Congress, Senate Committee on Small Business, Year 2000 Readiness and Small Business Programs
Restructuring and Reform Act of 1998
, pp. 18, 23; and Pherabe Kolb, “Senate Small Business Markup: Year 2000
Assistance, Drug-Free Workplace,” CQ Markup and Vote Coverage, Washington, DC, September 15, 1998, at
http://www.cq.com/doc/committees-COMM159517?print=true.
12 U.S. Congress, Senate Committee on Small Business, Year 2000 Readiness and Small Business Programs
Restructuring and Reform Act of 1998
, 105th Cong., 2nd sess., September 25, 1998, S.Rept. 105-347 (Washington:
GPO, 1998), p. 18.
13 I U.S. Congress, Senate Committee on Small Business, Year 2000 Readiness and Small Business Programs
Restructuring and Reform Act of 1998
, p. 18.
14 U.S. President (Clinton), “Address Before a Joint Session of the Congress on the State of the Union,” Weekly
Compilation of Presidential Documents
, vol. 35 (January 19, 1999), p. 83.
15 U.S. President (Clinton), “Remarks on the New Markets Initiative,” Weekly Compilation of Presidential Documents,
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separate trips to underserved inner city and rural communities, visiting Phoenix, Arizona, and the
Pine Ridge Indian Reservation in South Dakota on July 7, 1999, and Los Angeles, California, and
Anaheim, California, on July 8, 1999 (trip 1); Newark, New Jersey, and Hartford, Connecticut, on
November 4, 1999 (trip 2); and Hermitage, Arkansas, and Chicago, Illinois, on November 5, 1999
(trip 3).16 During his remarks in Chicago, President Clinton announced that he had reached an
agreement with House Speaker Dennis Hastert (who was present) to develop a bipartisan
legislative initiative on developing new market investments as a means to revitalize impoverished
communities.17
SBA’s Low- or Moderate-Income Initiative
In a related development, on February 9, 1999, the SBA proposed several incentives to encourage
companies participating in its SBIC program to “expand their investment activity into
economically distressed inner cities and rural areas.”18 After receiving public comments on
several proposed incentives, the SBA issued a final rule on September 30, 1999, implementing
the SBIC low- or moderate-income (LMI) initiative.19
The ongoing LMI initiative is designed to encourage SBICs to invest in small businesses located
in inner cities and rural areas “that have severe shortages of equity capital” because investments
in those areas “often are of a type that will not have the potential for yielding returns that are high
enough to justify the use of participating securities.”20 SBICs that invest in small businesses with
at least 50% of their employees or tangible assets located in a low- or moderate-income area
(LMI zone) or at least 35% of their full-time employees with their primary residence in an LMI
zone are eligible for the incentives.21 For example, unlike regular SBIC debentures that typically
have a 10-year maturity, LMI debentures are available in two maturities, 5 years and 10 years,

vol. 35 (May 11, 1999), pp. 860-861.
16 U.S. President (Clinton), “Remarks to the Community at Pine Ridge Indian Reservation, South Dakota,” Weekly
Compilation of Presidential Documents
, vol. 35 (July 7, 1999), pp. 1298-1302; U.S. President (Clinton), “Remarks in a
Roundtable Discussion on Small Business Development in Phoenix, Arizona,” Weekly Compilation of Presidential
Documents
, vol. 35 (July 7, 1999), pp. 1303-1308; U.S. President (Clinton), “Remarks in a Discussion on Youth
Opportunities in Los Angeles, California,” Weekly Compilation of Presidential Documents, vol. 35 (July 8, 1999), pp.
1318-1321; U.S. President (Clinton), “Remarks to the National Academy Foundation Conference in Anaheim,
California,” Weekly Compilation of Presidential Documents, vol. 35 (July 8, 1999), pp. 1322-1327; U.S. President
(Clinton), “Remarks to the Community in Newark,” Weekly Compilation of Presidential Documents, vol. 35
(November 4, 1999), pp. 2246-2249; U.S. President (Clinton), “Remarks to the North End Community in Hartford,
Connecticut,” Weekly Compilation of Presidential Documents, vol. 35 (November 4, 1999), pp. 2257-2259; The White
House, Office of the Press Secretary, “Remarks by the President to the people of Bradley County: Hermitage Tomato
Cooperative, Hermitage, Arkansas,” November 5, 1999, at https://clintonwhitehouse3.archives.gov/WH/New/html/
19991105.html; and U.S. President (Clinton),” Remarks to the Englewood Community in Chicago, Illinois,” Weekly
Compilation of Presidential Documents
, vol. 35 (November 4, 1999), pp. 2271-2275.
17 U.S. President (Clinton),” Remarks to the Englewood Community in Chicago, Illinois,” Weekly Compilation of
Presidential Documents
, vol. 35 (November 4, 1999), p. 2273.
18 SBA, “Small Business Investment Companies,” 64 Federal Register 6256, February 9, 1999.
19 SBA, “Small Business Investment Companies,” 64 Federal Register 52641-52646, September 30, 1999.
20 SBA, “Small Business Investment Companies,” 64 Federal Register 52645, September 30, 1999.
21 SBA, “Small Business Investment Companies,” 64 Federal Register 52641-52646, September 30, 1999. Low- or
moderate-income areas (LMI zones) are areas located in a historically underutilized business zone (HUBZone); an
urban empowerment zone or urban enterprise community designated by the Secretary of the U.S. Department of
Housing and Urban Development; a rural empowerment zone or rural enterprise community as designated by the
Secretary of the U.S. Department of Agriculture; an area of low income or moderate income as recognized by the
Federal Financial Institutions Examination Council; or a county with persistent poverty as classified by the U.S.
Department of Agriculture’s Economic Research Service. See 13 C.F.R. §107.50.
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plus the stub period. The stub period is the time between the debenture’s issuance date and the
next March 1 or September 1. The stub period allows all LMI debentures to have common March
1 or September 1 maturity dates to simplify administration of the program.
In addition, LMI debentures are issued at a discount so that the proceeds an SBIC receives for the
sale of a debenture are reduced by (1) the debenture’s interest costs for the first five years, plus
the stub period; (2) the SBA’s annual fee for the debenture’s first five years, plus the stub period;
and (3) the SBA’s 2% leverage fee. As a result, these interest costs and fees are effectively
deferred, freeing SBICs from the requirement to make interest payments on LMI debentures or to
pay the SBA’s annual fees on LMI debentures for the first five years of a debenture, plus the stub
period.22
Since FY2015, LMIs have received from 17.6% to 24.1% of total SBIC financings each fiscal
year.23 In FY2020, SBICs made 492 investments in small businesses located in an LMI zone,
totaling $862 million—17.6% of the total amount invested.
The Community Development and Venture Capital Act of 2000
On September 16, 1999, Senator John Kerry introduced S. 1594, the Community Development
and Venture Capital Act of 2000.24 The bill included several provisions in President Clinton’s
New Markets Investment Initiative. The bill had three main parts: a New Markets Venture Capital
Program, very similar to the present program, to encourage investment in economically distressed
communities; a Community Development Venture Capital Assistance Program to expand the
number of community development venture capital firms and professionals devoted to investing
in economically distressed communities; and BusinessLINC, a mentoring program to link
established, successful businesses with small business owners in economically stagnant or
deteriorating communities to facilitate the development of small businesses in those areas.25
After conducting two hearings and sponsoring a roundtable discussion on the Community
Development and Venture Capital Act of 2000, the Senate Committee on Small Business reported
the bill, as amended, by a vote of 16-1, on July 26, 2000. In the report accompanying the bill,
Senator Christopher Bond, chair of the Senate Committee on Small Business, argued that the
SBIC program had “proven to be an extremely successful public-private sector partnership with
the government” and mentioned the SBA’s LMI initiative as a new means to encourage SBICs to
make investments in LMI zones.26 However, he argued that “as successful as the SBIC program
is, it does not sufficiently reach areas of our country that need economic development the most.”27
He added that although SBICs invested $771 million in LMI zones in 1999, “the vast majority of
those investments were very large and not at all comparable to the type of investments [NMVC]

22 SBA, “For SBICs: Background Information on Low or Moderate Income (LMI) Debentures,” at
https://www.sba.gov/content/low-or-moderate-income-lmi-debentures.
23 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” March 11, 2016,
December 1, 2016, August 24, 2018, December 20, 2018, and February 18, 2021.
24 The bill’s five original cosponsors were Sens. Jeff Bingaman, Max Cleland, Carl Levin, Paul Sarbanes, and Paul
Wellstone.
25 U.S. Congress, Senate Committee on Small Business, Community Development and Venture Capital Act of 1999,
report to accompany S. 1594, 106th Cong., 2nd sess., August 25, 2000, S.Rept. 106-383 (Washington: GPO, 2000), p. 4.
26 U.S. Congress, Senate Committee on Small Business, Community Development and Venture Capital Act of 1999, p.
3.
27 U.S. Congress, Senate Committee on Small Business, Community Development and Venture Capital Act of 1999, p.
3.
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funds would make.”28 Senator Bond argued that the committee was approving the bill because it
was necessary
to expand the number of smaller investments being made to small businesses in the poorest
areas, low-income geographic areas, and to fill another gap in access to capital that small
businesses face. Investments for NMVC funds typically will range from $50,000 to
$300,000 versus the $300,000 to $5 million range found in the Agency’s SBIC program.”29
The Senate did not take further action on the bill.
The New Markets Venture Capital Program Act of 2000
On December 14, 2000, Representative (later Senator) Jim Talent, chair of the House Committee
on Small Business, introduced H.R. 5663, the New Markets Venture Capital Program Act of
2000.30 The bill had two parts: the current New Markets Venture Capital Program and
BusinessLINC. The next day, the bill was incorporated by reference in the conference report
accompanying H.R. 4577, the Consolidated Appropriations Act, 2001, which became law (P.L.
106-554) on December 21, 2000.31
On January 22, 2001, the SBA published an interim final rule in the Federal Register indicating
its intention to establish the NMVC program. The SBA’s final rule, which formally established
the NMVC program, was published in the Federal Register on May 23, 2001.32
NMVC Company Eligibility and
Performance Requirements
P.L. 106-554 specified that venture capital companies interested in participating in the program
must submit
 a detailed application to the SBA that includes, among other items, a business
plan describing how the company intends to make successful developmental
venture capital investments in identified low-income geographic areas, and
 information regarding the community development finance or relevant venture
capital qualifications and general reputation of the company’s management.33

28 U.S. Congress, Senate Committee on Small Business, Community Development and Venture Capital Act of 1999, p.
3.
29 U.S. Congress, Senate Committee on Small Business, Community Development and Venture Capital Act of 1999, p.
3.
30 The bill was cosponsored by Rep. Nydia Velázquez.
31 U.S. Congress, Committee of Conference, Making Omnibus Consolidated and Emergency Supplemental
Appropriations for Fiscal Year 2001
, report to accompany H.R. 4577, 106th Cong., 2nd sess., December 15, 2000,
H.Rept. 106-1033 (Washington: GPO, 2000), pp. 1041-1054.
32 SBA, “13 CFR Part 108: New Markets Venture Capital Program, Interim Final Rule” 66 Federal Register 7218-
7246, January 22, 2001; and SBA, “New Markets Venture Capital Program: Final Rule,” 66 Federal Register 28601-
28632, May 23, 2001.
33 In addition to these two items, a NMVC applicant must also submit a description of how the company intends to
work with community organizations and seek to address the unmet capital needs of the communities served; a proposal
describing how the company intends to use the grant funds provided under this part to give operational assistance to
smaller enterprises financed by the company, including information regarding whether the company intends to use
licensed professionals, when necessary, on the company’s staff or from an outside entity; with respect to binding
commitments to be made to the company under this part, an estimate of the ratio of cash to in-kind contributions; a
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In addition, an NMVC company must
 be a newly formed for-profit entity or a newly formed for-profit subsidiary of an
existing entity;
 be organized under state law solely for the purpose of performing the functions
and conducting the activities contemplated under the act;
 be organized either as a corporation, a limited partnership, or a limited liability
company;
 show, to the SBA’s satisfaction, that its current or proposed management team is
qualified and has the knowledge, experience, and capability in community
development finance or relevant venture capital finance necessary for investing
in the types of businesses contemplated by the act; and
 have a primary objective of economic development of low-income areas.34
On January 22, 2001, the SBA solicited applications from venture capital companies and SSBICs
to participate in the NMVC program. The SBA had planned to offer another round of applications
for the program during the first quarter of 2003. However, the second round of applications was
canceled because, as mentioned previously, P.L. 108-7, the Consolidated Appropriations
Resolution, 2003, which became law on February 20, 2003, rescinded the program’s unobligated
funding.35
The SBA received 23 applicants from companies interested in participating in the NMVC
program, and conditionally approved 7 of them.36 Final approval is subject to the applicant
meeting several conditions. For example, applicants are required to raise, within 18 months of
being conditionally approved, at least $5 million in private capital or in binding capital
commitments from one or more investors (other than federal agencies or departments) that meet
criteria established by the administrator (the private funds are called regulatory capital).
Applicants also must have in place binding commitments from sources other than the SBA that
are payable or available over a multiyear period not to exceed 10 years that amount to not less
than 30% of the total amount of regulatory capital and commitments raised (30% of $5 million =

description of the criteria to be used to evaluate whether and to what extent the company meets the objectives of the
program established under this part; information regarding the management and financial strength of any parent firm,
affiliated firm, or any other firm essential to the success of the company’s business plan; and such other information as
the administrator may require. See U.S. Congress, Committee of Conference, Making Omnibus Consolidated and
Emergency Supplemental Appropriations for Fiscal Year 2001
, report to accompany H.R. 4577, 106th Cong., 2nd sess.,
December 15, 2000, H.Rept. 106-1033 (Washington: GPO, 2000), p. 1044.
34 13 C.F.R. §108.100; 13 C.F.R. §108.110; and 13 C.F.R. §108.120.
35 P.L. 108-7, the Consolidated Appropriations Resolution, 2003; and U.S. Congress, Committee of Conference,
Making Further Continuing Appropriations for the Fiscal Year 2003, and for Other Purposes, report to accompany
H.J.Res. 2, 108th Cong., 1st sess., February 13, 2003, H.Rept. 108-10 (Washington: GPO, 2003), p.787.
36 The initial application deadline was April 19, 2001, and was later extended twice—first, to May 21, 2001; and
second, to May 29, 2001. See SBA, “New Markets Venture Capital Program; Extension of Application Deadline,” 66
Federal Register
18993, April 12, 2001; and SBA, “New Markets Venture Capital Program; Extension of Application
Deadline,” 66 Federal Register 27721, May 18, 2001.
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$1.5 million).37 This additional funding is necessary to guarantee the applicant’s ability to meet
the required dollar-to-dollar matching contribution for operational assistance grants.38
Six of the seven companies granted conditional approval subsequently met all of the program
requirements (one in April 2002, three in March 2003, one in April 2003, and one in August
2003) and were accepted into the program after signing a formal participation agreement with the
SBA.39 The six NMVC companies initially raised $48 million in private capital and were
subsequently provided $72 million in leverage.40 The companies are
 Adena Ventures, L.P., Athens, Ohio, approved on April 24, 2002, with targeted
low-income areas in Ohio, West Virginia, and Maryland;
 New Markets Venture Partners, College Park, Maryland, approved on March 5,
2003, with targeted low-income areas in Maryland, Virginia, and the District of
Columbia;
 CEI Community Ventures Fund, LLC, Portland, Maine, approved on March 21,
2003, with targeted low-income areas in Maine, New Hampshire, and Vermont;
 Murex Investments I, L.P., Philadelphia, Pennsylvania, approved on March 31,
2003, with targeted low-income areas in Pennsylvania, New Jersey, and
Delaware;
 Penn Venture Partners, LP, Harrisburg, Pennsylvania, approved on April 23,
2003, with targeted low-income areas in Pennsylvania;
 Southern Appalachian Fund, L.P., London, Kentucky, approved on August 8,
2003, with targeted low-income areas in Kentucky, Tennessee, Georgia,
Alabama, and Mississippi.41
NMVC companies are subject to various reporting requirements. For example, for each fiscal
year, NMVC companies must file an annual financial statement with the SBA that has been
audited by an independent public accountant acceptable to the SBA.42 The statement must include
an assessment of the social, economic, or community development impact of each financing; the
number of full-time equivalent jobs created as a result of the financing; the impact on the
revenues and profits of the business being financed; and the impact on the taxes paid by the
business being financed and by its employees. The statement must also include a listing of the

37 The SBA may accept binding commitments for operational assistance matching resources equal to at least 20% of the
required minimum if the company has a viable plan to raise the balance. In no case, however, will the SBA disburse
grant funds for operational assistance in excess of the amount actually raised, including in-kind contributions. See 13
C.F.R. §108.380.
38 P.L. 106-554 authorized the SBA to provide conditionally approved applicants a period of time, not to exceed two
years, to satisfy all program requirements necessary to participate in the program. The SBA provided applicants 18
months. See SBA, Office of New Markets Venture Capital, “New Markets Venture Capital (MNVC) Program, FAQs:
How much time does a conditionally approved NMVCC have to raise its capital and grant matching resources?” (no
longer available online).
39 SBA, Office of New Markets Venture Capital, “New Markets Venture Capital (MNVC) Program,” June 2010, p. 13
(no longer available online).
40 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” June 5, 2012.
41 SBA, “NMVC Companies,” (no longer available online); and Community Development Venture Capital Alliance,
“The New Markets Venture Capital Program,” July 2006, at https://community-wealth.org/sites/clone.community-
wealth.org/files/downloads/paper-cdvca.pdf.
42 13 C.F.R. §108.630.
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number and percentage of the business’s employees that reside in a low-income area.43 In
addition, NMVC companies are required to submit to the SBA a portfolio financing report for
each financing made within 30 days of the closing date.44
Eligibility of Small Businesses and Low-Income
Geographic Areas
NMVC companies are required to provide financial assistance and operational assistance only to
small businesses as defined under the SBA’s SBIC program. The business must either meet the
SBA’s size standard for the industry in which it is primarily engaged or have a maximum net
worth of no more than $19.5 million and average after-tax net income for the preceding two years
of not more than $6.5 million.45 All of the company’s subsidiaries, parent companies, and
affiliates are considered in the size standard determination.46
In addition, at the close of each NMVC company’s fiscal year, at least 80% of the company’s
total financings (in total dollars) and 80% of the total number of concerns in that company’s
portfolio must be small businesses that, at the time of the financing, had their principal offices
located in a low-income area (low-income enterprises).47 NMVC companies that fail to reach
these required percentages at the end of any fiscal year must be in compliance by the end of the
following fiscal year. They are not eligible for additional leverage from the SBA until they reach
the required percentages.48
The act defines a low-income area as any census tract, or equivalent county division as defined by
the Bureau of the Census, that meets any of the following criteria:
 a poverty rate of 20% or more;
 if located in a metropolitan area, at least 50% of its households have an income
that is below 60% of the area median gross income;
 if not located in a metropolitan area, has a median household income that does
not exceed 80% of the statewide median household income;
 is located within a historically underutilized business zone (HUBZone);
 is located in an urban empowerment zone or urban enterprise community as
designated by the Department of Housing and Urban Development; or

43 13 C.F.R. §108.630.
44 13 C.F.R. §108.640.
45 SBA, “Small Business Size Standards: Inflation Adjustment to Monetary Based Size Standards,” 79 Federal Register
33647-33669, June 12, 2014. The previous SBIC alternative size standard, which was established in 1994 and in place
when the New Markets Venture Capital Program began, was tangible net worth not in excess of $18 million and
average net income after federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal
years not in excess of $6 million. See SBA, “Small Business Size Standards: Increase Size Standard of Small Business
Concerns Eligible for Assistance by Small Business Investment Companies,” 59 Federal Register 16953-16956, April
8, 1994.
46 13 C.F.R. §121.301(c)(1) and 13 C.F.R. §121.301(c)(2). NMVC companies are not permitted to invest in passive
businesses, real estate businesses, project financings, farm land purchases, the financing of NMVC companies or
SBICs, or projects that will be used substantially for a foreign operation or when more than 49% of the employees or
tangible assets of the small business are located outside of the United States. See 13 C.F.R. §108.720.
47 13 C.F.R. §108.710.
48 13 C.F.R. §108.710.
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 is located in a rural empowerment zone or rural enterprise community as
designated by the Department of Agriculture.
NMVC Leverage
NMVC companies invest funds they have raised themselves, their regulatory capital, in small
businesses. In addition, they can receive up to 150% of that amount from the SBA, subject to the
availability of funds. NMVC companies follow essentially the same process for obtaining SBA
funding as prescribed under the SBIC program. The SBA’s funding, or leverage, comes from the
sale to third parties of 10-year securities (or debentures), which are backed by the full faith and
credit of the United States.49 Because the SBA guarantees the timely payment of the principal and
interest due on the securities, the SBA is able to obtain favorable interest rates. NMVC
companies are responsible for meeting the terms and conditions set forth in the debenture.
NMVC debentures are deferred-interest debentures issued at a discount (less than face value)
equal to the first five years’ interest to eliminate the need for NMVC companies to make interest
payments during that period. As a result, NMVC companies make no payments on the debenture
for five years from the date of issuance, plus the stub period, which ensures that all NMVC
debentures have common prepayment and maturity dates of either March 1 or September 1.50
NMVC companies make semiannual interest payments on the face amount of the debenture
during years 6 to 10, and they are responsible for paying the debenture’s principal amount when
the debenture reaches its maturity date.
NMVC companies receive leverage from the SBA in a two-step process. First, they submit a
request to the SBA for a conditional commitment to reserve a specific amount of leverage for
future use.51 This request authorizes the SBA to sell the requested debenture amount to a third
party at an interest rate approved by the SBA or to pool the requested debenture amount with
other requests, providing each request with the same maturity date, interest rates, and conditions.
The NMVC companies then apply to the SBA to draw against the SBA’s leverage commitment.
These requests may come at any time during the term of the SBA’s leverage commitment.52
Although authorized to do so, the SBA did not pool NMVC debentures. Through an agreement
with the SBA, the Federal Home Loan Bank of Chicago (FHLB) purchased and held all
outstanding NMVC debentures since issuance. The FHLB determined the interest rate on each
NMVC debenture using a spread over FHLB’s cost of funds as of the date of each issuance.53
The SBA did not allow NMVC companies to prepay their draws for a period of 12 months (plus
the stub period) after issuance. Prepayments were permitted after that waiting period, but only on

49 P.L. 106-554 authorizes the SBA to sell debentures with a maturity of up to 15 years. The SBA has opted to sell
debentures with a maturity of up to 10 years.
50 The SBA does not charge a fee for the issuance of debentures by a NMVC company. See 13 C.F.R. §108.1130. In
contrast, the SBA is authorized to charge SBICs a 3% origination fee for each debenture and participating security
issued (1% at commitment and 2% at draw); an annual fee (not to exceed 1.38% for debentures and 1.46% for
participating securities) on the leverage drawn, which is fixed at the time of the leverage commitment; and other
administrative and underwriting fees, which are adjusted annually. See 13 C.F.R. §107.1130; and 13 C.F.R. §107.1210.
51 13 C.F.R. §108.1230; and 13 C.F.R. §108.1240.
52 13 C.F.R. §108.1230.
53 The last NMVC debenture was issued on June 27, 2008, at an interest rate of 5.494%.
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March 1 or September 1 of each year. The cost of prepayment is the present value of the NMVC
debenture on the semiannual date chosen for prepayment.54
After receiving funds, NMVC companies made equity investments in small businesses of their
choice. Equity investments were typically in the form of common or preferred stock and
sometimes in the form of subordinated debt with equity features (as long as the debt is not
amortized and provides for interest payments contingent upon and limited to the extent of
earnings) or limited partnership interests, options, warrants, and similar equity investment
instruments.55
Operational Assistance Grants
The SBA is authorized to award grants to NMVC companies and SSBICs to provide free
operational assistance to small businesses financed, or expected to be financed, under the
program.56 The grants must be used to provide management, marketing, and other technical
assistance to help a small business with its business development.57 The grants have a dollar-to-
dollar matching requirement and cannot be used for general and administrative expenses,
including overhead.58 Matching resources may be in the form of (1) cash; (2) in-kind
contributions; (3) binding commitments for cash or in-kind contributions that are payable or
available over a multiyear period acceptable to the SBA but not to exceed 10 years; or (4) an
annuity, purchased with funds other than regulatory capital, from an insurance company
acceptable to the SBA that may be payable over a multiyear period acceptable to the SBA but not
to exceed 10 years.59
NMVC companies and SSBICs are eligible for an operational assistance grant award equal to the
amount of matching resources the company has raised, subject to the availability of funds.60
NMVC companies must use at least 80% of both the grant funds and their matching resources to
provide free operational assistance to small businesses located in a low-income area. SSBICs
must use both the grant funds awarded by the SBA and their matching resources to provide free
operational assistance to small businesses “in connection with a low-income investment made by
the SSBIC with regulatory capital raised after September 21, 2000.”61

54 13 C.F.R. §108.1610.
55 Subordinated debt (also known as subordinated debenture or junior debt) ranks after other debts should a company
fall into liquidation or bankruptcy. Because subordinated debt is repayable after other debts have been paid, it is
considered to carry a higher level of risk to the lender.
56 The SBA disbursed operational assistance grants over a 4.5 year period. See SBA, Office of New Markets Venture
Capital, “New Markets Venture Capital (MNVC) Program,” June 2010, p. 7 (no longer available online).
57 13 C.F.R. §108.10. Some examples of operational assistance include writing or assisting in the preparation of a
business plan; legal assistance relating to business formation or reorganization (but not litigation); recruitment of
executives, creation of Internet capability, engineering, or other technical services to create or enhance production or
distribution of products or services; creation of marketing materials; creation of customized accounting or information
systems; and active participation in negotiation with financial institutions (debt). See Adena Ventures, L.P.,
“Operational Assistance,” Athens, Ohio, at http://www.adenaventures.com/serviceprograms/opsassist.aspx.
58 13 C.F.R. §108.2010; and 13 C.F.R. §108.2030.
59 13 C.F.R. §108.2040.
60 13 C.F.R. §108.2030.
61 13 C.F.R. §108.2010.
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Program Statistics
As shown in Table 1, NMVC companies received operational assistance grants in FY2002 and
FY2003 and started making equity investments in small businesses in FY2002.
Table 1. New Markets Venture Capital Program Statistics, FY2002-FY2020
Operational
Assistance Grant
Amount of
Number of Small
Awards
NMVC Financings
Number of
Businesses
Fiscal Year
($ in mil ions)
($ in mil ions)
NMVC Financings
Financed
2002
$3.75
$0.50
1
1
2003
$10.65
$2.69
6
6
2004
$0.00
$9.67
22
19
2005
$0.00
$8.60
29
22
2006
$0.00
$16.28
56
35
2007
$0.00
$14.02
59
32
2008
$0.00
$13.35
55
36
2009
$0.00
$4.24
37
24
2010
$0.00
$3.42
30
16
2011
$0.00
$2.51
30
18
2012
$0.00
$0.54
12
6
2013
$0.00
$1.89
17
10
2014
$0.00
$2.08
5
4
2015
$0.00
$1.65
5
4
2016
$0.00
$0.00
0
0
2017
$0.00
$0.00
0
0
2018
$0.00
$0.00
0
0
2019
$0.00
$0.00
0
0
2020
$0.00
$0.00
0
0
Total
$14.40
$81.45
364
71a
Source: U.S. Small Business Administration (SBA), Congressional Budget Justification, various years; SBA,
Performance and Accountability Report, various years; SBA, Office of Congressional and Legislative Affairs,
“Correspondence with the author,” on November 21, 2013, December 8, 2014, January 29, 2016, December 16,
2016, August 24, 2018, December 18, 2018, and October 18, 2019.
a. The total number of small businesses financed is less than the sum of small businesses financed each year
because NMVC companies may make multiple financings into any one of their “portfolio companies” over
the life of the fund.
Since the program’s inception, NMVC companies invested more than $81.4 million in 71
different small businesses. The program reached its peak, in terms of the amount of financings, in
FY2007, investing nearly $16.3 million in 35 different small businesses that year. Since then, the
amount of financings each year generally declined—falling to no new financings in FY2016 as
the program’s initial investments expired and NMVC companies engaged only in additional
follow-on financings with the small businesses in their portfolios.
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As mentioned, the NMVC program’s active unpaid principal balance (including both the SBA
guaranteed portion and the unguaranteed portion of the NMVC companies’ unpaid principal
balance) peaked at $68.1 million in FY2008, and then fell each year thereafter until reaching $0
in FY2018.62
Congressional Issues
The NMVC program has not received any additional funding since 2001. Opposition to the
program within Congress began to gain momentum when President George W. Bush
recommended in his FY2002 budget request that the NMVC program be eliminated, arguing that
the program is relatively expensive and duplicative of other federal programs:63
The Administration supports the objectives of the New Markets Venture Capital (NMVC)
program but believes those objectives can be achieved more efficiently and at a lower cost
through other existing programs. Several vehicles and incentives to direct investment into
economically distressed communities already exist. Communities targeted by NMVC have
access to a wide range of private for-profit and economic development programs, including
the federally supported community development financial institutions administered
through the Department of Treasury. In addition, SBA’s SBIC program, which has 412
licensed venture capital companies with total capital resources amounting to $17.7 billion,
is implementing incentives to encourage investment in economically distressed areas.
The NMVC program is also expensive relative to the impact that it is expected to have.
The total cost of the program in FY2001 is $52 million, not including administrative cost
of running the program. Since the program is expected to generate $150-$200 million of
investment activity, it will yield only $3.00-$4.00 of investment for every taxpayer dollar
spent. In comparison, under the Small Business Investment Company (SBIC) program,
there is no cost associated with the debenture portion of the program.64
Others argued that the NMVC program’s targeted clientele of small businesses located in
economically distressed areas is inherently too risky for government involvement. In their view,
NMVC companies are “designed and chartered to operate (as profit-making firms) in a market
niche that mainstream venture capital firms will not touch.”65
The program’s advocates contended that the NMVC program is necessary precisely because
mainstream venture capital firms generally avoided investments in small businesses located in
economically distressed areas. In their view, the NMVC program is an essential part of a larger
federal effort, which includes tax incentives, to fill a market niche in private-sector venture
capital investments and, in the process, help to revitalize areas experiencing long-term economic
difficulties. They also objected to the Bush Administration’s argument that the program is
duplicative of other federal programs. In their view, the NMVC program is targeted at a clientele
that is not being adequately served by other federal programs.66

62 SBA, Office of Congressional and Legislative Affairs, “WDS files: Table 1.1.b – Active UPB by Program,” October
18, 2019.
63 SBA, “FY 2002 Budget Request and Performance Plan,” p. 15.
64 U.S. Congress, Senate Committee on Small Business and Entrepreneurship, SBA’s Funding Priorities for Fiscal Year
2002
, 107th Cong., 1st sess., May 1, 2002, S.Hrg. 107-237 (Washington: GPO, 2002), p. 45.
65 Timothy Bates, “Government as Venture Capital Catalyst: Pitfalls and Promising Approaches,” Economic
Development Quarterly
, vol. 16, no. 49 (2002): 58, at https://journals.sagepub.com/doi/pdf/10.1177/
089124240201600106.
66 U.S. Congress, Senate Committee on Small Business, The President’s Fiscal Year 2000 Budget Request for the
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The Bush Administration continued to recommend the program’s elimination in each of its
subsequent budget requests. As mentioned, during congressional consideration of the FY2003
budget the unobligated balances of $10.5 million for NMVC debenture subsidies and $13.75
million for operational assistance grants were rescinded.67
Since then, legislation has been introduced to amend the NMVC program, including bills to
 reduce the amount of capital NMVC companies must raise to become eligible for
operational assistance grants,
 eliminate the matching requirement for operational assistance grants,
 create an Office of New Markets Venture Capital within the SBA,
 require the SBA to provide conditionally approved NMVC companies a full two
years to meet all program requirements,
 provide increased financing to small manufacturers, and
 amend the program’s definition for low-income area to correspond with the
definition used by the New Market Tax Credits program (Section 45D(e) of the
Internal Revenue Code of 1986) (26 U.S.C. 45D(e)).
Many of these bills also included provisions to provide the NMVC program additional funding.68
Legislative Efforts to Provide Additional
NMVC Funding
As shown in Table A-1 in the Appendix, during the 108th Congress, two bills were introduced,
one in the House and one in the Senate, to provide the NMVC program “such subsidy budget
authority as may be necessary to guarantee $75 million of debentures” and $15 million for
operational assistance grants over FY2004 and FY2005.69 Neither bill was enacted.70

Small Business Administration, 106th Cong., 1st sess., March 16, 1999, S.Hrg. 106-118 (Washington: GPO, 1999), pp.
125, 126; U.S. Congress, Senate Committee on Small Business and Entrepreneurship, SBA’s Funding Priorities for
Fiscal Year 2002
, 107th Cong., 1st sess., May 1, 2001, S.Hrg. 107-237 (Washington: GPO, 2002), pp. 14, 15, 20, 26,
91-93; U.S. Congress, House Committee on Small Business, Small Business Investment Expansion Act of 2007, report
to accompany H.R. 3567, 110th Cong., 1st sess., September 25, 2007, H.Rept. 110-110 (Washington: GPO, 2007), pp. 5,
6; and U.S. Congress, Senate Committee on Small Business and Entrepreneurship, Small Business Venture Capital Act
of 2007’
, 110th Cong., 1st sess., October 16, 2007, S.Rept. 110-199 (Washington: GPO, 2007), pp. 5, 6, 9-11.
67 P.L. 108-7, the Consolidated Appropriations Resolution, 2003; and U.S. Congress, Committee of Conference,
Making Further Continuing Appropriations for the Fiscal Year 2003, and for Other Purposes, report to accompany
H.J.Res. 2, 108th Cong., 1st sess., February 13, 2003, H.Rept. 108-10 (Washington: GPO, 2003), p. 787.
68 During the 111th Congress, P.L. 111-240, the Small Business Jobs Act of 2010, Section 1115, New Markets Venture
Capital Company Investment Limitations, included the following language: “Except to the extent approved by the
Administrator, a covered New Markets Venture Capital company may not acquire or issue commitments for securities
under this title for any single enterprise in an aggregate amount equal to more than 10 percent of the sum of—‘‘(A) the
regulatory capital of the covered New Markets Venture Capital company; and ‘‘(B) the total amount of leverage
projected in the participation agreement of the covered New Markets Venture Capital.’’
69 H.R. 2802, the Small Business Reauthorization and Manufacturing Revitalization Act of 2003, was introduced by
Rep. Donald Manzullo on July 21, 2003. It would have provided the NMVC program the additional funding over
FY2004 and FY2005. S. 1886, the MADE in America Act, was introduced by Sen. Tom Daschle on behalf of Sen.
John Kerry on November 18, 2003. It would have provided the NMVC program the additional funding over FY2005
and FY2006.
70 H.R. 2802 was reported by the House Committee on Small Business on October 21, 2003, and placed on the Union
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During the 109th Congress, an amendment was offered during the House during floor debate on
H.R. 2862, the Science, State, Justice, Commerce, and Related Agencies Appropriations Act,
2006, to provide “$30 million in debenture guarantees and $5 million for operational assistance
grants to fund the creation of a fresh round of New Market Venture Capital companies … paid for
by using funds from the Small Business Administration’s salary and expense account.”71 The
amendment failed by voice vote.72 A bill introduced in the House would have authorized an
expansion of the NMVC program to include the selection of an NMVC company whose primary
objective would be the economic development of small businesses located in Hurricane Katrina-
affected areas. The bill would have authorized “such subsidy budget authority as may be
necessary to guarantee … $50 million of debentures issued by the Gulf Region New Markets
Venture Capital Company … and $10 million for grants to the Gulf Region New Markets Venture
Capital Company.”73 Another House bill would have provided the NMVC program “such subsidy
budget authority as may be necessary to guarantee $100 million of debentures and $25 million for
operational assistance grants for FY2006 through FY2008.”74 Neither bill was enacted.75
During the 110th Congress, four bills were introduced, two in the House and two in the Senate, to
provide the NMVC program additional funding. One of the House bills would have provided the
NMVC program such subsidy budget authority as may be necessary to guarantee $100 million of
debentures and $25 million for operational assistance grants for FY2007 through FY2009.76 The
other House bill would have provided the NMVC program such subsidy budget authority as may
be necessary to guarantee $30 million of debentures and $5 million for operational assistance
grants for FY2008 through FY2010.77 The two Senate bills would have provided the NMVC
program $20 million for operational assistance grants.78 None of these bills was enacted.

Calendar on March 8, 2004. The House took no further action on the bill. S. 1886 was referred to the Senate Committee
on Small Business and Entrepreneurship. No further action took place on the bill.
71 Rep. Gwen Moore, “Consideration of H.R. 2862, the Science, State, Justice, Commerce, and Related Agencies
Appropriations Act, 2006,” House debate, Congressional Record, vol. 151, part 79 (June 15, 2005), p. H4511.
72 Rep. Gwen Moore, “Consideration of H.R. 2862, the Science, State, Justice, Commerce, and Related Agencies
Appropriations Act, 2006,” House debate, Congressional Record, vol. 151, part 79 (June 15, 2005), p. H4512.
73 H.R. 4234, the Small Business Gulf Coast Revitalization Act of 2005, Section 104. Gulf Region New Markets
Venture Capital Company. The bill was introduced by Rep. Nydia Velázquez on November 5, 2005.
74 H.R. 4303, the Securing Equity for the Economic Development of Low Income Areas Act of 2005, was introduced
by Rep. Gwen Moore on November 10, 2005.
75 H.R. 4303 was referred to the House Committee on Small Business. The House took no further action on the bill.
H.R. 4234 was referred to the House Committee on Small Business. The House took no further action on the bill.
76 H.R. 1719, the Securing Equity for the Economic Development of Low Income Areas Act of 2007, was introduced
by Rep. Gwen Moore on March 27, 2007. The bill was referred to the House Committee on Small Business. The House
took no further action on the bill.
77 H.R. 3567, the Small Business Investment Expansion Act of 2007, was introduced by Rep. Jason Altmire on
September 18, 2007. The bill was referred to the House Committee on Small Business and reported on September 25,
2007. The House passed it on September 27, 2007, by a vote of 325-72. The bill was received in the Senate on
September 28, 2007, and referred to the Senate Committee on Small Business and Entrepreneurship. The Senate took
no further action on the bill.
78 S. 1663, the Securing Equity for the Economic Development of Low Income Areas Act of 2007, was introduced by
Sen. John Kerry on June 19, 2007, and referred to the Senate Committee on Small Business and Entrepreneurship. The
additional funding for operational assistance grants would have been available from FY2007 through FY2010. The bill
was incorporated into S. 1662, the Small Business Venture Capital Act of 2007, which addressed the SBA’s SBIC
program. That bill, as amended, was reported by the Senate Committee on Small Business and Entrepreneurship on
October 16, 2007. The Senate took no further action on the bill. S. 2920, the SBA Reauthorization and Improvement
Act of 2008, was introduced by Sen. John Kerry on April 24, 2008. The additional funding for operational assistance
grants would have been available from FY2008 through FY2010. The bill was placed on the Senate Legislative
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During the 111th Congress, two bills were introduced in the House to provide the NMVC program
additional funding. One of the bills would have provided the NMVC program such subsidy
budget authority as may be necessary to guarantee $100 million of debentures and $25 million for
operational assistance grants for FY2009 through FY2011.79 The other bill would have provided
the NMVC program such subsidy budget authority as may be necessary to guarantee $100 million
of debentures and $20 million for operational assistance grants for FY2010 through FY2011.80
During the 112th Congress, one bill was introduced to provide additional funding for the NMVC
program. Representative Nydia Velázquez introduced H.R. 2872, the Job Creation and Urban
Revitalization Act of 2011, on September 8, 2011. The bill would have provided the NMVC
program such subsidy budget authority as may be necessary to guarantee $75 million of
debentures and $15 million for operational assistance grants for FY2012 through FY2013. The
bill was referred to the House Committee on Small Business on September 8, 2011. No further
action was taken on the bill.
No NMVC bills were introduced during the 113th through 115th Congresses. Two NMVC bills
were introduced during the 116th Congress: H.R. 6312, the COVID-19 Relief for Small
Businesses Act of 2020, and H.R. 6342, the SBIC Capital Infusion Act of 2020.
H.R. 6312 would have reauthorized the NMVC program from FY2020 through FY2025,
provided credit subsidy necessary to fund up to $10 billion in SBA-guaranteed debentures, and
appropriated $2 billion for NMVC operational assistance grants. H.R. 6342 would have
reauthorized the NMVC program from FY2021 through FY2026, provided credit subsidy
necessary to fund up to $10 billion in SBA-guaranteed debentures, and appropriated $2 billion for
NMVC operational assistance grants. Both bills were referred to the House Committee on Small
Business.
Related SBIC Program Developments
P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), included provisions
designed to encourage SBIC investments in low-income areas. The act allowed an SBIC licensed
on or after October 1, 2009, to elect to have a maximum leverage amount of $175 million instead
of $150 million (later increased to $175 million) if that SBIC has invested at least 50% of its
financings in low-income geographic areas, as defined under the NMVC program, and certified
that at least 50% of its future investments will be in low-income geographic areas.81 ARRA also

Calendar under General Orders under Read the First Time on September 24, 2008, and it was placed on the Senate
Legislative Calendar under General Orders under Read the Second Time on September 28, 2008. The Senate took no
further action on the bill.
79 H.R. 1491, the Securing Equity for the Economic Development of Low Income Areas Act of 2009, was introduced
by Rep. Gwen Moore on March 12, 2009, and referred to the House Committee on Small Business. The House took no
further action on the bill.
80 H.R. 3722, the Enhanced New Markets and Expanded Investment in Renewable Energy for Small Manufacturers Act
of 2009, was introduced by Rep. Ann Kirkpatrick on October 6, 2009, and referred to the House Committee on Small
Business. The bill’s provisions were incorporated into H.R. 3854, the Small Business Financing and Investment Act of
2009, which was introduced by Rep. Kurt Schrader on October 20, 2009. That bill was reported by the House
Committee on Small Business on October 26, 2009, and passed by the House, by a vote of 389-32, on October 29,
2009. The bill was received in the Senate and referred to the Senate Committee on Small Business and
Entrepreneurship on November 2, 2009. The Senate took no further action on the bill.
81 13 C.F.R. §107.1150. P.L. 115-187, the Small Business Investment Opportunity Act of 2017, increased the amount
of outstanding leverage allowed for individual SBICs to $175 million from $150 million.
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increased the maximum amount of leverage available for two or more licenses under common
control to $250 million from $225 million if these requirements are met.82
In addition, on April 7, 2011, the SBA announced a $1 billion impact investment SBIC initiative
(providing up to $150 million in leverage in FY2012 and up to $200 million in leverage per fiscal
year thereafter until the limit is reached).
Under this initiative, SBA-licensed impact investment debenture SBICs are required to invest at
least 50% of their financings, “which target areas of critical national priority including
underserved markets and communities facing barriers to access to credit and capital.”83 To
receive an impact investment, a small business must meet at least one of the following criteria:
 be located in or, at the time of the initial investment, have at least 35% of its full-
time employees residing in an LMI zone as defined in 13 C.F.R. Section 107.5084
or be located in an economically distressed area as defined by Section 3011 of
the Public Works and Economic Development Act of 1965, as amended (an area
with per capita income of 80% or less of the national average or an
unemployment rate that is, for the most recent 24-month period for which data
are available, at least 1% greater than the national average unemployment rate);
or
 be in an industrial sector that the SBA has identified as a national priority
(currently clean energy, education, and advanced manufacturing).
Initially, an impact investment SBIC could receive up to $80 million in SBA leverage. On June 6,
2013, the SBA announced that it was increasing the maximum leverage available to impact
investment SBICs to $150 million.85
On September 25, 2014, the SBA announced several changes to the impact investment program
designed to “broaden access to the fund.”86 The agency announced that it was continuing the
program beyond FY2016. Additionally, effective October 1, 2014, among other changes, the SBA
eliminated the program’s $200 million collective, per-fiscal-year leverage cap; added advanced
manufacturing to the list of eligible sectors; provided eligibility to businesses that receive Small
Business Innovation Research or Small Business Technology Transfer grants; and permitted,
through December 1, 2014, existing debenture SBICs to apply to opt into the program if they
meet the program’s requirements.87 Subject to the SBA’s approval, impact investment SBICs may
devise a customized definition of an “impact investment” during the licensing process.

82 P.L. 114-113, the Consolidated Appropriations Act, 2016, increased the amount of outstanding leverage allowed for
two or more SBIC licenses under common control (the multiple licenses/family of funds limit) to $350 million from
$225 million. The act did not address the multiple licenses/family of funds limit for financings in low-income
geographic areas. Presumably, SBICs would apply the $350 million multiple licenses/family of funds limit for all of its
financings, including those in low-income geographic areas.
83 SBA, “Impact Investment Initiative,” at https://www.sba.gov/document/policy-guidance—start-america-impact-
investment-sbic-initiative-policy-update. For further analysis and information concerning the SBA’s impact investment
initiative see CRS Report R41456, SBA Small Business Investment Company Program, by Robert Jay Dilger.
84 For the definition of an LMI zone, see footnote 21.
85 SBA, “SBA Announces $50 Million Increase Match in its SBIC Early Stage Fund and $70 Million Bump in its
Impact Investment Fund,” June 6, 2013, at https://www.sba.gov/content/sba-announces-50-million-increase-match-its-
sbic-early-stage-fund-and-70-million-bump-its.
86 SBA, “SBA Expands Impact Investment Fund,” September 25, 2014, at https://www.sba.gov/content/sba-expands-
impact-investment-fund.
87 SBA, “SBA Expands Impact Investment Fund.”
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On February 3, 2016, the SBA published a proposed rule in the Federal Register to provide
regulations for impact investment SBICs regarding licensing, leverage eligibility, fees, and
reporting and compliance requirements. The proposed regulations were an indication of the
SBA’s intent at that time to continue the impact investment SBIC initiative indefinitely.88
Nine impact investment SBICs were licensed (two in 2011, one in 2012, two in 2014, two in
2015, and two in 2016).89 As of September 30, 2020, they managed more than $942 million in
assets and had investments in 119 small businesses. In FY2020, impact investment SBICs
invested $156.4 million in 32 small businesses.90
After reviewing the impact investment SBIC initiative’s performance, on September 28, 2017, the
SBA’s Office of Investment and Innovation (OII) published a letter addressed to SBIC
participants, applicants, and all other interested parties indicating that as of November 1, 2017, it
would no longer accept new management assessment questionnaires from applicants interested in
participating in the impact investment SBIC initiative. The letter indicated that the SBA was also
terminating the 2011/2012 Impact Investment Fund Policy letter that the SBA had used to form
the initiative’s impact investment fund.91 The OII’s letter indicated that the SBA was taking these
actions for several reasons, including that “few qualified funds applied to be licensed as Impact
SBICs,” that “many of these SBICs would have applied to the SBIC program regardless of the
existence of the Impact Policy,” and “the results produced were not commensurate with the time
and resources expended by SBA to maintain it.”92 In addition, on June 11, 2018, the SBA
published a notice in the Federal Register withdrawing the proposed rule published on February
3, 2016, that would have created regulations for the impact investment SBIC initiative because
the “SBA has determined that the cost is not commensurate with the benefits.”93
Concluding Observations
The SBA’s LMI and impact investment initiatives are designed to encourage SBIC investments in
LMI areas. As mentioned, in recent years, the amount of SBIC investments in LMI zones has
varied somewhat, ranging from 17.6% to 24.1% of total SBIC financings each fiscal year.
The NMVC program is no longer active (it does not have any active unpaid principal balance)
and the amount and number of its financings were lower than anticipated by its original sponsors
and below levels desired by its advocates. Some Members of Congress argue that SBIC
investments in LMI areas would increase if the NMVC were reauthorized. Others view the
program as having had a marginal impact on those investments.
In FY2020, SBICs provided 492 financings totaling $826 million to small businesses located in a
LMI income area, an average investment of $1.752 million.94 NMVC advocates argue, as Senator

88 SBA, “Small Business Investment Company-Impact SBICs,” 81 Federal Register 5666-5676, February 3, 2016.
89 SBA, “Impact Investment Fund Grows Threefold,” January 27, 2015, at https://www.sba.gov/content/impact-
investment-fund-grows-threefold; and SBA, “SBIC Directory,” at https://www.sba.gov/funding-programs/investment-
capital#paragraph-11.
90 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” February 18, 2021.
91 SBA, Office of Investment and Innovation, “Termination of 2011/2012 SBIC Initiatives: Impact Investment Fund
Policy and Early Stage SBIC Program,” September 28, 2017, at https://www.sba.gov/sites/default/files/
SBA_Update_on_Impact_Policy_and_Early_Stage_SBIC_Program.pdf.
92 SBA, Office of Investment and Innovation, “Termination of 2011/2012 SBIC Initiatives: Impact Investment Fund
Policy and Early Stage SBIC Program.”
93 SBA, “Small Business Investment Company-Impact SBICs,” 83 Federal Register 26874-26875, June 11, 2018.
94 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” February 18, 2021.
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Bond did when the NMVC program was proposed, that the NMVC program targets small
businesses seeking much smaller investments.95
The debate over the NMVC program’s future, particularly whether the program should be
provided additional funding, is, in many ways, reflective of broader disagreements about the role
of government, and the SBA, in private enterprise. Some believe the federal government and the
SBA should take an active role in assisting small businesses to access capital—through the
provision of loan guarantees, equity financing, and management training—to further the
economic recovery. In their view, the SBA’s programs fill a market niche by providing loans to
small businesses unable to get credit elsewhere, equity financings to small businesses often
overlooked by private investors, and training for new and aspiring entrepreneurs unable to find
affordable training elsewhere. They assert that increasing funding for the NMVC program will
create jobs by making capital available to entrepreneurs unable to find it in the private
marketplace.
Others worry about the long-term adverse economic effects of the federal deficit. Instead of
supporting increased funding for federal spending programs, they advocate business tax
reduction, reform of financial credit market regulation, and federal fiscal restraint as the best
means to assist small businesses, generate economic growth, and create jobs. They are
particularly interested in achieving greater government efficiency by eliminating federal spending
programs, such as the NMVC program, that they perceive are duplicative of others.

95 U.S. Congress, Senate Committee on Small Business, Community Development and Venture Capital Act of 1999,
report to accompany S. 1594, 106th Cong., 2nd sess., August 25, 2000, S.Rept. 106-383 (Washington: GPO, 2000), p. 3.
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Appendix. Legislative Efforts to Provide Additional
Funding for the NMVC Program

Table A-1. Legislative Efforts to Provide Additional NMVC Funding
Funding
Necessary
to Support
NMVC
Funding for
Debenture
Operational
Guarantee
Assistance
Congress
Legislation and Sponsor
of
Grants
Legislative Action
108th
H.R. 2802, the Small Business
$75 mil ion
$15 mil ion
Introduced on July 21, 2003,
Reauthorization and
and referred to the House
Manufacturing Revitalization Act
Committee on Small Business;
of 2003 (Representative Donald
reported by the House
Manzul o)
Committee on Small Business
on October 21, 2003, and
placed on the Union Calendar
on March 8, 2004. No further
action.
S. 1886, the MADE in America
$75 mil ion
$15 mil ion
Introduced on November 18,
Act (by Senator Tom Daschle
2003, and referred to the
on behalf of Senator John
Senate Committee on Small
Kerry)
Business and Entrepreneurship.
No further action.
109th
H.Amdt. 268, to H.R. 2862, the
$30 mil ion
$5 mil ion
Offered on June 15, 2005.
Science, State, Justice,
Failed by voice vote.
Commerce, and Related
Agencies Appropriations Act,
2006, to provide the NMVC
program $30 mil ion in
debenture guarantees and $5
mil ion for operational
assistance (Representative
Gwen Moore)
H.R. 4234, the Small Business
$50 mil ion
$10 mil ion
Introduced on November 5,
Gulf Coast Revitalization Act of
2005, and referred to the
2005 (Representative Nydia
House Committee on Small
Velázquez)
Business. No further action.
H.R. 4303, the Securing Equity
$100 mil ion
$25 mil ion
Introduced on November 10,
for the Economic Development
2005, and referred to the
of Low Income Areas Act of
House Committee on Small
2005 (Representative Gwen
Business. No further action.
Moore)
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Funding
Necessary
to Support
NMVC
Funding for
Debenture
Operational
Guarantee
Assistance
Congress
Legislation and Sponsor
of
Grants
Legislative Action
110th
H.R. 1719, the Securing Equity
$100 mil ion $25 mil ion
Introduced on March 27, 2007,
for the Economic Development
and referred to the House
of Low Income Areas Act of
Committee on Small Business.
2007 (Representative Gwen
No further action.
Moore)
H.R. 3567, the Small Business
$30 mil ion
$5 mil ion
Introduced on September 18,
Investment Expansion Act of
2007, and referred to the
2007 (Representative Jason
House Committee on Small
Altmire)
Business; reported by the
House Committee on Small
Business on September 25,
2007; passed by the House on
September 27, 2007, by a vote
of 325-72; received in the
Senate on September 28, 2007,
and referred to the Senate
Committee on Small Business
and Entrepreneurship. No
further action.
S. 1663, the Securing Equity for
NA
$20 mil ion
Introduced on June 19, 2007,
the Economic Development of
and referred to the Senate
Low Income Areas Act of 2007
Committee on Small Business
(Senator John Kerry)
and Entrepreneurship;
incorporated into S. 1662, the
Small Business Venture Capital
Act of 2007, which addressed
the Small Business
Administration’s Small Business
Investment Company program;
that bil , as amended, was
reported by the Senate
Committee on Small Business
and Entrepreneurship on
October 16, 2007. No further
action.
S. 2920, the SBA
NA
$20 mil ion
Introduced on April 24, 2008,
Reauthorization and
and placed on the Senate
Improvement Act of 2008
Legislative Calendar under
(Senator John Kerry)
General Orders under Read the
First Time on September 24,
2008; placed on the Senate
Legislative Calendar under
General Orders under Read the
Second Time on September 28,
2008. No further action.
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Funding
Necessary
to Support
NMVC
Funding for
Debenture
Operational
Guarantee
Assistance
Congress
Legislation and Sponsor
of
Grants
Legislative Action
111th
H.R. 1491, the Securing Equity
$100 mil ion $25 mil ion
Introduced on March 12, 2009,
for the Economic Development
and referred to the House
of Low Income Areas Act of
Committee on Small Business.
2009 (Representative Gwen
No further action.
Moore)
H.R. 3722, the Enhanced New
$100 mil ion $20 mil ion
Introduced on October 6,
Markets and Expanded
2009, and referred to the
Investment in Renewable
House Committee on Small
Energy for Small Manufacturers
Business; incorporated into
Act of 2009 (Representative
H.R. 3854, the Small Business
Ann Kirkpatrick)
Financing and Investment Act of
2009, introduced by
Representative Kurt Schrader
on October 20, 2009; that bil
was reported by the House
Committee on Small Business
on October 26, 2009, and
passed by the House, by a vote
of 389-32, on October 29,
2009; received in the Senate
and referred to the Senate
Committee on Small Business
and Entrepreneurship on
November 2, 2009. No further
action.
112th
H.R. 2872, the Job Creation and $75 mil ion
$15 mil ion
Introduced on September 8,
Urban Revitalization Act of
2011, and referred to the
2011 (Representative Nydia
House Committee on Small
Velázquez)
Business. No further action.
113th
None



114th
None



115th
None



116th
H.R. 6312, the COVID-19
$10 bil ion
$2 bil ion
Introduced on March 19, 2020,
Relief for Small Businesses Act
and referred to the House
of 2020 (Representative Nydia
Committee on Small Business.
Velázquez)
No further action.

H.R. 6342, the SBIC Capital
$10 bil ion

Introduced on March 23, 2020,
Infusion Act of 2020
and referred to the House
(Representative Sharice Davids)
Committee on Small Business.
No further action.
Source: Legislative Information Service database, Congressional Research Service.
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Author Information

Robert Jay Dilger

Senior Specialist in American National Government



Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
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Congressional Research Service
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