MINORITY ENTERPRISE VENTURE CAPITAL ACT OF 1977 AND SMALL BUSINESS INVESTMENT COMPANY DEVELOPMENT ACT OF 1977 HEARING BEFORE THE SELECT COMMITTEE ON SMALL BUSINESS UNITED STATES SENATE NINETY-FIFTH CONGRESS FIRST SESSION ON S. 2156 and S. 2157 BILLS TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958 OCTOBER 3, 1977 LAW LIBRARY MAR 2 7 1978 UNIVERSITY OF CALIFORNIA Printed for the use of the Select Committee on Small Business 22-721 O U.S. GOVERNMENT PRINTING OFFICE WASHINGTON: 1978 SELECT COMMITTEE ON SMALL BUSINESS GAYLORD NELSON, Wisconsin, Chairman THOMAS J. MCINTYRE, New Hampshire SAM NUNN, Georgia WILLIAM D. HATHAWAY, Maine LOWELL P. WEICKER, JR., Connecticut WILLIAM B. CHERKASKY, Executive Director CONTENTS Culver, Hon. John C., a U.S. Senator from the State of Iowa Nelson, Hon. Gaylord, a U.S. Senator from the State of Wisconsin, and chairman, Senate Small Business Committee.. Nunn, Hon. Sam, a U.S. Senator from the State of Georgia.......... Allsop, Robert W., executive vice president, Mor America Capital Burns, Patrick, executive vice president, Minority Equity Capital Co- Gibbs, Nathaniel, president, Capital Marketing Corp. Hansley, James F., president, Vanguard Investment Co. Krasnow, Herbert, president, Intercoastal Capital Corp.. Little, Arthur D., president, Narragansett Capital Corp. - Weaver, Hon. A. Vernon, Administrator, Small Business Administra- tion, accompanied by Peter McNeish, Deputy Associate Adminis- trator of Investment, SBA; and Patricia Cloherty, Deputy Adminis- Statement of Hon. A. Vernon Weaver, Administrator, Small Business Administration, Oct. 17, 1977, re: S. 2156... Statement of Hon. A. Vernon Weaver, Administrator, Small Business Administration, before the Subcommittee on Minority Enterprise and General Oversight, House Small Business Committee, Sept. 27, 1977, re: Report of the SBA Task Force on "Venture and Equity Capital for Small Business," U.S. Small Business Administration, January 1977.. Letter dated Apr. 7, 1977, to Hon. Parren J. Mitchell, Representative, U.S. House of Representatives, from James F. Hansley, president, HEARING DATE October 3, 1977: Morning session.. 1 MINORITY ENTERPRISE VENTURE CAPITAL ACT OF 1977 SMALL BUSINESS INVESTMENT COMPANY MONDAY, OCTOBER 3, 1977 U.S. SENATE, SELECT COMMITTEE ON SMALL BUSINESS, Washington, D.C. The committee met pursuant to notice at 10 a.m., in room 424, Russell Senate Office Building, Hon. Sam Nunn, presiding. Present: Senators Nunn and Culver. Also present: Allen W. Neece, Jr., legislative counsel; and Larry M. Yuspeh, financial analyst. OPENING STATEMENT OF HON. SAM NUNN, A U.S. SENATOR FROM THE STATE OF GEORGIA Senator NUNN. The committee will come to order. This morning's hearing has been convened in order to determine what additional incentives might be enacted in order to increase the flow of venture capital into America's majority and minority owned independent small businesses. Finding sufficient equity and long-term debt capital is an acute problem that has plagued the small business owner for the last several decades. Almost 20 years ago the Congress enacted the Small Business Investment Act of 1958 which is an act creating a unique partnership between the public and private sectors. Private investors are afforded an opportunity to organize and privately capitalize small business investment companies for the express purpose of investing in small business concerns. The Small Business Administration in turn licenses and regulates the SBIC's and, in addition, provides long-term leverage to the licensees using a variety of instruments. It has been demonstrated in numerous congressional hearings over the last 19 years that the SBIC program has played a vital role in the growth and development of tens of thousands of small concerns as hundreds of millions of dollars have been invested in these businesses by SBIC's located throughout the United States. OMB-designed and SBA-directed surveys of these small companies have repeatedly shown that SBIC financing has been directly responsible for increasing the portfolio concerns' sales and profits. Thousands of new jobs were also created. According to one Government study, a new employee was hired for every $2,500 invested in a small business. |