Scale-Up Manufacturing Investment Act

Summary#

The bill would add a new program to the Small Business Investment Act to help private investment funds finance the first commercial production of new or advanced manufacturing in the United States. The Small Business Administration (SBA) would license private "participating investment funds." The SBA may provide up to $1 of government leverage for every $1 of private capital a licensed fund raises. Limits include a minimum of $250,000,000 private capital per fund, a maximum of $500,000,000 leverage available to any one fund in a fiscal year, and $1,000,000,000 aggregate leverage across all funds in a fiscal year. The SBA would charge a leverage fee between 3 percent and 5.5 percent of the face amount of leverage issued.

The bill sets rules for how funds can borrow and issue securities, including that at least 70 percent of SBA leverage must be issued as debentures and no more than 30 percent as preferred securities. The Federal Financing Bank may buy debentures, and the SBA may purchase or guarantee timely payment of debentures or preferred securities (the bill pledges the full faith and credit of the United States for guarantees). Participating funds must use leverage to make debt and equity investments in small and emerging manufacturers building first commercial facilities or introducing emerging manufacturing technologies. No more than 50 percent of the money a fund gives a manufacturer for a qualifying project may be SBA-provided leverage, and a single investment may not exceed 10 percent of a fund's total capital (private plus projected leverage).

The bill requires application, licensing, examinations, audits, and regular valuations and reports (semiannual reporting and valuations, with annual audits). The SBA must respond with application status within 90 days and approve or deny within 180 days. The bill also directs outreach to increase investments in businesses owned by socially and economically disadvantaged individuals, women, veterans, and people with disabilities. It allows the SBA to establish an advisory council of up to 5 private-sector members. The bill makes related technical changes to the Bank Holding Company Act, the bankruptcy code, and the Community Reinvestment Act to account for these participating funds.

What it means for you#

• If you are a small or emerging advanced manufacturer: the bill would create a new route for private funds licensed by the SBA to get government leverage to help finance building first commercial production facilities or new manufacturing capabilities. It sets limits on how much of a project can be funded by government-provided leverage.
• If you manage or invest in private funds: a fund would need at least $250 million in private capital to apply for a license, meet selection criteria, and follow valuation, reporting, and examination rules. Funds approved could receive matching leverage up to the program limits and would pay a leverage fee.
• If you are a bank or financial institution: the bill permits certain bank investments in participating funds (subject to a 5 percent of capital-and-surplus limit) and directs regulators to consider these investments under Community Reinvestment Act assessments.
• If you are a taxpayer or oversight official: the bill authorizes SBA guarantees and pledges full faith and credit for those guarantees; the bill also requires fees, audits, and reporting but provides no Congressional cost estimate in the text.

Expenses#

• Program leverage rules specified in the bill: up to $1 of government leverage per $1 of private capital raised.
• Per-fund leverage cap: $500,000,000 in any fiscal year.
• Aggregate leverage cap for all funds: $1,000,000,000 in any fiscal year.
• Minimum private capital to qualify a fund: $250,000,000.
• Leverage fee: not less than 3 percent and not more than 5.5 percent of the face amount of leverage issued.
• Application and examination fees may be charged and deposited into the SBA salaries and expenses account to cover licensing and oversight costs. Fees, interest, and profits received by the SBA under the program are to be included in OMB calculations for subsidy rates.

No publicly available information in the bill text provides an overall cost estimate or a Congressional Budget Office score of the program's net fiscal impact.

Proponents' View#

The bill's findings state why sponsors support the program: the United States manufacturing sector is important to the economy and global competitiveness; manufacturers support many jobs and most private-sector R&D; small, technology-intensive manufacturers face a capital gap when scaling to commercial production; other countries offer incentives that attract U.S. startups to locate production overseas; and keeping first commercial production in the United States preserves manufacturing know-how and future competitiveness. The program is presented as a way to address those capital access problems and help more U.S. manufacturing scale up here.

Opponents' View#

No publicly available information.