Legislation
Various legislative acts expanded the SBIA, such as the 1980 Small Business Investment Incentives Act and the 1991 Veterans Entrepreneurship Promotion Act. In 1992, landmark revision to the SBIA allowed a new method for SBICs to raise funds for investment in capital markets. It allowed the SBIC itself to make long-term equity investments by putting its own funds at risk, then investing money from the sale of government-guaranteed securities. As a result, both the government and the SBIC received returns when a business made a profit. The Entrepreneurial Investment Act of 1996 allows companies that have holdings in smaller banks to make equity investments. Bank holding companies with less than $1 billion in assets can provide limited equity capital to the customers of their subsidiary banks. With the bill, however, the subsidiary banks cannot hold any of the stocks and the holding company cannot have a hand in the management activities of the firm. This act is an attempt to protect the small banking system, which is the chief supplier of loans to small businesses, from the wave of bank mergers.
The 1992 Reform of Unemployment Insurance System to Promote Entrepreneurship created new programs to increase entrepreneurial activity. It allowed unemployment insurance to be used experimentally as seed capital for small business. The Unemployment Insurance Self-Employment Demonstration Project, called the Enterprise Project in Massachusetts and SEED in Washington state allowed people receiving unemployment to use their unemployment checks to start a microenterprise.
Last modified by Crystal Lovett on April 13, 1998
cgl2@acpub.duke.edu