While traditional credit outlets continue to shut out small businesses looking for an injection of capital to grow, a partnership between the U.S. Small Business Administration and private investors has channeled millions of dollars into the hands of small firms in New Jersey, creating hundreds of jobs in the state this year.
According to an annual report on the public-private partnership program, privately owned investment firms licensed and regulated by the SBA, known as small business investment companies, made 120 investments totaling approximately $150 million in New Jersey small businesses between October 2011 and September 2012. Nationwide, the SBA estimates SBICs provided $3 billion in growth capital to more than 1,000 small businesses, which created or sustained more than 65,000 jobs in fiscal 2012.
Jason D. Drattell, founder and managing partner of New York-based Praesidian Capital Investors L.P., which launched in 2004 with an SBIC-licensed venture fund, said "combining money from the SBA and private investors enables us to do more transactions and allocate more money into the small-business private sector — an underserved sector, given the dysfunction of today's traditional capital markets."
"Our focus as investors is to provide capital to small companies that need financing to expand, so our goals are very much in line with the SBA's," Drattell said. "After we repay the government and provide a return to the other private investors, we usually reinvest the capital in another transaction, which grows our business and helps us grow others."
While Praesidian has made long-term investments in six New Jersey companies in the past two years — including Edison-based Fusion Technologies in 2012 and Millburn-based CB Restaurants Inc. in 2011 — Drattell said "there have been and will continue to be good opportunities in New Jersey. It's a good active market for us, so we'll continue to invest in small business there."
Since it launched in 1958 to stimulate small-business growth, the SBIC program has invested approximately $63 billion in more than 110,000 U.S. small businesses. In fiscal 2012, the program licensed 30 new SBIC funds and increased total investment by 17 percent from fiscal 2011 — and 83 percent from fiscal 2010 — reporting its third consecutive record-breaking year.