Bipartisan Legislation Introduced to Help Increase Equity Investment in Small Businesses Located in Low-Income Areas

BIPARTISAN LEGISLATION INTRODUCED TO HELP INCREASE EQUITY INVESTMENT IN SMALL BUSINESSES LOCATED IN LOW-INCOME AREAS -- (Extensions of Remarks - November 10, 2005)

SPEECH OF
HON. GWEN MOORE
OF WISCONSIN
IN THE HOUSE OF REPRESENTATIVES
THURSDAY, NOVEMBER 10, 2005

Ms. MOORE of Wisconsin. Mr. Speaker, I rise today to offer legislation along with my colleague from Kentucky, Congressman Harold ``Hal'' Rogers, which seeks to increase venture capital investment in small businesses located in low-income urban and rural communities nationwide. Our bill, the Securing Equity for the Economic Development of Low Income Areas--SEED--Act, would reauthorize and expand the New Markets Venture Capital (NMVC) program of the Small Business Administration (SBA).

The New Markets Venture Capital Program was established in 2000 for the purposes of making equity investments in small businesses located in economically distressed communities through the creation of NMVC companies. Many conventional venture capital firms have been unwilling to invest in economically disadvantaged areas. NMVC companies aim to help fill the access to capital gap that exists for many small firms in these communities.

New Market Venture Capital companies will leverage equity capital backed by SBA-guaranteed funds to invest in small businesses in depressed areas. NMVC companies can also apply for matching operational assistance grants to provide entrepreneurs with the services and technical support needed to help their businesses grow and succeed.

Through the program, 6 New Markets Venture Capital companies have been formed and are currently still operating and making quality investments in small businesses throughout the country. For example, the Southern Appalachian Fund located in Congressman Rogers' Congressional District was one of the original New Markets Venture Capital companies established during the initial round of funding. The Southern Appalachian Fund (SAF) is a $12.5 million venture capital fund offering equity capital and operational assistance to eligible small businesses located in the Appalachia regions of Kentucky, Tennessee, Georgia, Alabama, and Mississippi. In 2004 alone, SAF invested over $1 million in three companies, which helped attract an additional $1.7 million in venture capital funding for these firms. As a result, these investments assisted in the creation of over 50 new jobs in the region.

Unfortunately, though authorized, this worthy program has not received funding in each of the last 3 fiscal years. The SEED Act would reauthorize the New Markets Venture Capital program by providing $100 million in debenture guarantees and $25 million in operational assistance grants to fund the creation of a fresh round of NMVC companies. In addition, our legislation would incorporate small manufacturers into the mission of the program by encouraging the SBA to set up at least one company that is primarily involved in the investment and development of small manufacturing firms. The bill also seeks to diversify venture capital investments beyond the typical Silicon Valley and Northeastern corridors by encouraging the formation of NMVC companies in each of the ten geographic regions of the SBA.

Many of my constituents have fallen on hard times and are in need of help. A large portion of my district is in the midst of an economic crisis at this moment. In 2002, the Bureau of Labor Statistics found that 59 percent of working age African American males in Milwaukee were either unemployed or out of the workforce. In the past five 5, Milwaukee has lost 33,000 manufacturing jobs, an industry that was once the lifeblood of the local economy. And, according to a study conducted by the University of Kansas, Milwaukee ranks 49th out of the 50 largest U.S. cities in terms of per capita venture capital dollars.

Small businesses create nearly 75 percent of all new jobs and account for 99 percent of all employers. It is not a stretch to conclude that increased investment in small businesses leads to the creation of new jobs and sparks much needed economic development in areas that have experienced better days. And given the high levels of unemployment that exist in many distressed urban and rural communities throughout the country, the New Markets Venture Capital program would provide a crucial source of investment capital to small firms and help create new jobs.

I strongly urge my colleagues to support this very important bipartisan bill.

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