Investing in All of America Act increases SBIC leverage and institutional capital availability

Key Changes

• Higher Leverage Caps. Currently, individual standard debenture SBICs are generally permitted to borrow up to two times the amount of their regulatory capital, with an overall leverage cap of $175.0 million. The Act increases the leverage cap available to a single standard debenture SBIC from $175.0 million to $250.0 million. Similarly, for a family of funds (i.e., two or more SBICs under common control), the Act increases the leverage cap from $350.0 million to $475.0 million. These higher limits are intended to better match the current capital needs of SBICs and enhance their ability to lend to small businesses.
• Expanded Bonus Leverage Incentives. Prior to the passage of the Act, SBICs could exclude the cost basis of equity investments in smaller enterprises located in low-income geographic areas from the calculation of their outstanding leverage, subject to a cap. The Act expands the scope of investments eligible for this favorable bonus leverage treatment to include any form of investment or financing (not just equity investments) in small businesses (not just smaller enterprises) that (1) operate in low-income areas, (2) are located in rural areas, (3) operate primarily in covered critical technology areas or (4) are manufacturers. It also amends the maximum excludable amount for leverage cap calculations to the lesser of 50% of private capital or $125.0 million. This exclusion also now applies to both individual and family of funds leverage caps. These incentives are designed to direct capital toward priority sectors, while increasing leverage capacity above the base limits.
• Broader Access to Institutional Capital. The Act expands the definition of qualifying private capital to include university-affiliated foundations, endowments and trusts, which have historically been unable to invest in SBICs. Previously, investments from such institutions were subject to a cap that limits the amount of government funds that an SBIC can accept. This change will make it easier for SBICs to raise capital from a wider range of institutional investors with fewer limitations. 

Practical Considerations for SBIC Licensees and Applicants

This access to more leverage is not automatic. Licensees must take proactive steps to benefit from the new framework, and should consider whether the SBIC could benefit from additional access to leverage for its investment operations. 

• Current SBIC Licensees. Current licensees seeking to increase their leverage capacity under the Act should confirm that they have sufficient regulatory capital and submit a request for an increased or new total intended leverage commitment, with an updated business plan, to the SBA by August 15, 2026. The SBA has indicated that they will not process these requests on a rolling basis, and instead have set one deadline for all existing licensees. Current licensees also should evaluate aligning their investment portfolio, as needed, to take advantage of the expanded bonus leverage incentives. 
• SBIC Applicants. SBIC applicants who are currently going through the Management Assessment Questionnaire process (phase 1 of the application) should consider updating their initial submission to reflect the increased leverage limit. SBIC applicants who have received a “green light” letter to submit their license application (phase 2) should consider updating their total intended leverage commitment requests to reflect the higher leverage limits and submitting an updated business plan.

Licensees and SBIC applicants also should note that the SBA has recently transitioned from a semi-annual to quarterly standard debenture pooling process, and as a result, any drawdowns from existing or new leverage commitments will be priced on a quarterly basis.¹ In connection with the adoption of the Act, the SBA also published a notice covering the key changes described above, noting that Licensees or SBIC applicants should contact their investment analyst with questions about the new leverage framework.

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.

_{1 For more information on the accelerated debenture pooling process and other recent changes to the SBIC program, see the Eversheds Sutherland legal briefing linked here.}