Small Business Investment Company (SBIC) Practice

LEADERSHIP: Christopher A. Rossi

Pepper Hamilton has the country’s largest and most active Small Business Investment Company (SBIC) practice.

Pepper serves the SBIC industry in the following ways:

  • fund formation
  • assistance in licensing – more than 280 since 1994
  • regulatory advice to licensed Small Business Investment Companies
  • fund investment activities
  • serving as counsel to portfolio companies
  • advice concerning systematic improvements to the SBIC Program.

Pepper also represents a wide range of alternative capital sources (such as private equity and venture capital funds, and mezzanine and private debt funds) licensed as SBICs, in their debt and equity investment transactions.

Fund Formation

Pepper assists prospective SBICs in structuring their funds and raising private capital. The firm has a national perspective and extensive experience in negotiating relationships between principal fund managers and between fund sponsors and limited partners.

The firm regularly advises clients concerning all aspects of fund formation, management, including domestic and foreign tax structuring, ERISA and compliance with federal and state securities laws.


Pepper has represented many clients in obtaining licenses as SBICs or Specialized Small Business Investment Companies (SSBICs). Of these, more than 280 have received their licenses since August 1, 1994. In addition, the firm represents numerous management teams in the process of fund raising or obtaining a license. These firms are located throughout the United States, are structured as limited partnerships, corporations and limited liability companies, and have investors that include large public and private pension funds, state and local governmental agencies, banks and bank holding companies, tax-exempt entities, individuals and foreign individuals and entities.

Regulatory Advice

The firm provides ongoing regulatory advice to licensed SBICs covering the full range of SBA regulatory compliance.

Fund Investment Activities

Pepper regularly handles investments for SBICs located throughout the United States. Our clients have invested at all stages of development of portfolio companies, including seed- and early-stage, growth, mezzanine and buyouts. Clients have invested across all industry sectors, including e-commerce, biotechnology, health, telecommunications, information technology, manufacturing, distribution, outsourcing, publishing and retail. Portfolio companies are both privately held and publicly traded. Several of our clients sponsor or have relationships with incubators/accelerators. Pepper has an extensive merger and acquisition practice and is accustomed to regularly representing buyout, growth equity, debt and venture capital investors.

Counsel to Portfolio Companies

We are experienced in all aspects of representing portfolio companies. We have helped companies grow from their initial incorporation and negotiation of their initial small contracts into large multi-national businesses. We advise growing businesses with respect to strategic alliances, technology licenses, incentive compensation plans, protection of intellectual property, personnel matters, securities compliance, relationships with suppliers and customers, banking and other financial relationships, and creditor rights matters. We have a large securities practice that handles public offerings on behalf of issuers and underwriters.

Debt Origination and Debt Investments

We structure, negotiate and document various multi-tranche debt positions. Pepper attorneys are well versed in the following products:

  • first and second lien loans
  • stretch first lien debt
  • unsecured and secured mezzanine loans
  • cross lien financings
  • synthetic mezzanine positions such as unitranche and last-out positions
  • holdco financings, and
  • equity kickers associated with the aforementioned debt instruments, such as warrants and co-investment rights

By their nature, such transactions include the negotiation and documentation of complex arrangements for the distribution of repayment risk, including subordination and intercreditor agreements and agreements among lenders (AALs).

Equity Investments

We have extensive experience in the structure, documentation and negotiation of equity investments in, and sales of, portfolio companies. We advise our clients throughout the lifecycle of an investment, including:

  • the formation of investment vehicles and in structuring the inter-relationships among the investment vehicles, investor partners and portfolio companies
  • all aspects of the acquisition process including due diligence, regulatory compliance, financing and negotiation of the acquisition agreement
  • outside general counsel services for portfolio companies, including, financing, securities and governance matters, and
  • exiting investments in privately held companies to both strategic and private equity buyers

During the diligence process and in structuring and documenting such debt and equity transactions, our lawyers work to ensure such debt and equity investments are in compliance with applicable SBIC rules and regulations. Our lawyers work closely with the firm’s Tax, Corporate Restructuring and Bankruptcy, Employee Benefits and Environmental Law groups, to minimize investment risk and optimize the client’s position.

Support of the SBIC Industry

Pepper has been a member of the Small Business Investor Alliance (SBIA) since 1981, and has provided extensive support and counsel to the industry. Our lawyers have worked closely with SBIA and the SBA to assist in developing regulations and SBA policies implementing the “new” SBIC program in 1992 and to constantly improve the program. The firm has helped SBA develop several of its form documents and has helped SBIA prepare a number of its legislative and regulatory initiatives. The firm continues to provide advice and counsel to industry leaders as changes to the SBIC Program are discussed.

Pepper has sponsored and helped organize numerous seminars on the formation and operation of SBICs. Members of the firm are frequent speakers concerning the SBIC program at industry meetings, as well as at gatherings of prospective investors, accountants, lawyers, development officials, venture capitalists and businesspeople. Our lawyers regularly meet with SBIA and SBA officials concerning industry policies and practices.

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