The U.S. Small Business Administration issued a “green light” letter inviting Capital Southwest to file its application to obtain a license to operate a small business investment company (SBIC) subsidiary.
“We are extremely pleased to receive a ‘green light’ letter from the SBA. Operating an SBIC subsidiary has been a strategic priority for Capital Southwest since our transformation to a traditional middle-market lender in 2015,” Bowen Diehl, president and CEO of Capital Southwest, said. “Access to SBA debentures will continue to diversify our sources of attractive balance sheet capital, while also allowing us to focus on our core lower middle market investment strategy. Our lower middle market strategy is a natural fit with the SBA’s mission of funding underserved markets, including businesses based in low to moderate income areas and business[es] owned by minorities, women or veterans. We look forward to continuing to work with the SBA to complete this process.”
An SBIC license would provide Capital Southwest an incremental source of long-term capital by permitting it to issue up to $175 million of SBA-guaranteed debentures. These debentures have maturities of 10 years and have fixed interest rates tied to the U.S. 10 Year Treasury rate, which are generally lower than comparable bank and other forms of debt.
Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license, and Capital Southwest has received no assurance or indication from the SBA that it will receive an SBIC license, or of the timeframe in which it would receive a license, should one be granted.
Capital Southwest Corporation is a Dallas-based business development company with approximately $272 million in net assets as of March 31, 2020.