The U.S. Small Business Administration issued a “green light” or “go forth” letter inviting Hercules Capital to finalize its application process to obtain a license to form and operate a third small business investment company subsidiary.
“We are extremely pleased to receive the ‘green light’ approval from the SBA. Our long-standing partnership with the SBIC program remains an important and strategic component to maintaining a highly liquid and diversified balance sheet and it provides us with further flexibility to be able to continue to support small and growth oriented businesses including those that are minority, women or veteran owned or managed,” Scott Bluestein, CEO and chief investment officer of Hercules Capital, said. “A third SBIC license will enable us to continue to fund the needs of many innovative technology and life sciences companies seeking growth capital financing, which is particularly important in the current economic environment. This third license will also provide us with favorable long-term financing, further enhancing our already strong liquidity position in a cost-effective manner.”
Upon approval, Hercules will obtain a third SBIC license held by subsidiaries of the company and continue to access additional growth capital of $175 million of long-term debentures, bringing Hercules’ combined borrowing capacity through the SBIC program to a total of $285.3 million of capital. However, receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license, and Hercules has received no assurance or indication from the SBA that it will ultimately receive an SBIC license, or of the timeframe in which it would receive a license, should one ultimately be granted. Final approval for the additional $175 million is anticipated to occur by Q4/20.
The SBA program has played a role within Hercules’ funding strategy since the company received its first SBIC license in September 2006. Hercules received an exemption from the Securities and Exchange Commission that allows for the exclusion of SBIC leverage from BDC regulatory debt to equity limitations.
Hercules Capital is a specialty finance company focused on providing senior secured venture growth loans to venture capital-backed companies.