Bill Summary
The "Investments in Innovation Act of 2025" seeks to amend the Small Business Investment Act of 1958 by modifying how small business investment companies (SBICs) calculate their leverage limits. Specifically, the legislation allows SBICs to exclude certain investments made in socially and economically disadvantaged small business concerns from their leverage limit calculations, provided these investments do not exceed 50% of the company's private capital.
Key provisions of the Act include:
1. **Leverage Calculation Exemption**: SBICs can exclude the cost of equity investments made in qualifying disadvantaged businesses from their outstanding leverage when calculating their financial limits, encouraging more investment in these enterprises.
2. **Investment Commitment Requirement**: To qualify for this exclusion, an SBIC must certify that at least 50% of its investments are directed towards socially and economically disadvantaged small businesses.
3. **Leverage Cap**: The Act establishes a cap on the maximum leverage available, which is set at either 300% of the company’s private capital or $175 million for individual companies, and $250 million for companies under common control.
Overall, this legislation aims to promote investment in underserved communities by reducing the financial restrictions on investment companies that support disadvantaged businesses.
Possible Impacts
Here are three examples of how the "Investments in Innovation Act of 2025" could affect people:
1. **Increased Capital for Disadvantaged Entrepreneurs**: By allowing small business investment companies (SBICs) to exclude certain investments in socially and economically disadvantaged small businesses from leverage calculations, the legislation encourages more investment in these businesses. This could lead to greater access to capital for entrepreneurs from disadvantaged backgrounds, enabling them to start or expand their businesses, create jobs, and contribute to their local economies.
2. **Enhanced Opportunities for Small Business Growth**: The provision that allows companies to invest up to 50% of their private capital in disadvantaged small businesses without it counting against their leverage limits may incentivize more SBICs to engage with and support these businesses. As a result, businesses owned by minorities and economically disadvantaged individuals may experience growth opportunities that were previously unavailable, ultimately fostering diversity and inclusivity in the business landscape.
3. **Potential Limitations on Funding for Non-Disadvantaged Businesses**: While the act aims to promote investments in disadvantaged businesses, it could also mean that funds and resources might be more heavily directed towards these entities at the expense of non-disadvantaged businesses. This could create a competitive disadvantage for small businesses that do not qualify under the socially and economically disadvantaged criteria, potentially limiting their access to investment and support from SBICs.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5559 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 5559
To amend the Small Business Investment Act of 1958 to exclude from the
leverage limit calculation for small business investment companies
certain amounts invested in socially and economically disadvantaged
small business concerns, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 23, 2025
Ms. Strickland (for herself and Mr. Smith of Washington) introduced the
following bill; which was referred to the Committee on Small Business
_______________________________________________________________________
A BILL
To amend the Small Business Investment Act of 1958 to exclude from the
leverage limit calculation for small business investment companies
certain amounts invested in socially and economically disadvantaged
small business concerns, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Investments in Innovation Act of
2025''.
SEC. 2. INVESTMENTS IN SOCIALLY AND ECONOMICALLY DISADVANTAGED SMALL
BUSINESSES.
Section 303(b)(2) of the Small Business Investment Act of 1958 (15
U.S.C. 683(b)(2)) is amended by adding at the end the following new
subparagraph:
``(E) Investments in socially and economically
disadvantaged small businesses.--
``(i) In general.--Subject to clause (ii),
in calculating the outstanding leverage of a
company for the purposes of subparagraph (A),
the Administrator shall exclude the amount of
the cost basis of any equity investment made by
the company in a smaller enterprise that is a
socially and economically disadvantaged small
business concern (as defined in section 8(a)(4)
of the Small Business Act (15 U.S.C.
637(a)(4))), to the extent that the total of
such amounts does not exceed 50 percent of the
company's private capital.
``(ii) Limitation.--The maximum amount of
outstanding leverage made available to--
``(I) any 1 company described in
clause (iii) may not exceed the lesser
of 300 percent of private capital of
the company, or $175,000,000; and
``(II) 2 or more companies
described in clause (iii) that are
under common control (as determined by
the Administrator) may not exceed
$250,000,000.
``(iii) Company described.--A company
described in this clause is a company licensed
under section 301(c) in the first fiscal year
after the date of enactment of this clause or
any fiscal year thereafter that certifies in
writing that not less than 50 percent of the
dollar amount of investments of that company
shall be made in entities that are socially and
economically disadvantaged small business
concerns (as defined in section 8(a)(4) of the
Small Business Act (15 U.S.C. 637(a)(4))).''.
<all>