Experts from the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Bank of Richmond, the U.S. Department of Agriculture (USDA) and the Small Business Administration (SBA) met with bankers and investors to shed light on the unique challenges and advantages of investing in two federal government programs designed to infuse capital into small and rural businesses at the Community Development Investment Workshop on Wednesday, Oct. 17, at the Kenan Center in Chapel Hill.
The workshop, hosted by the Frank Hawkins Kenan Institute of Private Enterprise’s North Carolina Investment Forum, explored the workings of the Rural Business Investment Companies (RBIC) and Small Business Investment Companies (SBIC) programs, providing an overview of how those programs dovetail with the provisions of the Community Reinvestment Act.
The event’s organizer, Jeanne Milliken Bonds of the Federal Reserve Bank of Richmond, said there are 304 SBICs across the country. But there are fewer investment companies working specifically in rural America.
Workshop presenter Joe Shephard of the SBA said that an estimated $5.5 billion in capital was provided to approximately 1,100 small businesses in the U.S. in the past fiscal year as part of the SBIC program. But over the past four years, only about $700 million went directly to rural investment.
There is a pressing need for capital to be invested in the rural economy, said Bette Brand of the U.S. Department of Agriculture. The USDA’s Rural Business Investment Program is interested in programs like SBICs and RBICs to expand the public-private collaboration in rural areas.
Karin Gregory of Blue Highway Capital and Ronda Penn of Plexus Capital discussed why their firms invest in RBICs and SBICs, citing outsize returns and the ability to make an impact as two reasons. According to Gregory, RBICs provide “a continuum of capital into rural America,” fostering shared prosperity for investors and program recipients alike.
Several panelists noted that a major challenge of getting banks and others to invest in SBICs and RBICs is that they are unaware that the programs even exist. Another issue is that Community Reinvestment Act credits, which can be earned as part of both programs, are frequently misunderstood, with investors unsure of what types of projects qualify for those credits.
Participating via phone, panelist Genny Chow of the OCC provided many specifics of investing in SBICs and RBICs, including information on geographic requirements, Volker Rule exemptions, and CRA credit qualification. Rob Courter of the Federal Reserve Bank of Richmond and Victor Galloway from the FDIC also provided details about documenting and managing SBIC and RBIC investment projects to comply with federal guidelines.
One potential incentive for investors to increase their participation in the SBIC and RBIC programs is the OCC’s current review of the Community Reinvestment Act. Upcoming changes may ease the path for investors to qualify for CRA credits, which could foster greater interest in SBICs and RBICs.
For more information, watch the streaming video version of the event here.