Mississippi is set to see a new wave of investment aimed at boosting small businesses.
Entrepreneurs who have steady cash flow but lack the assets to secure traditional bank loans will benefit from the arrival of a new Small Business Investment Company (SBIC) license in the state.
This SBIC license will bring much-needed capital to Mississippi’s small business community, offering new funding options and fostering growth and innovation in the local economy.
The Lending Angle
Twain Private Credit’s Truman Fund is changing the game for small businesses in the southeast.
It’s designed to offer flexible, uncollateralized loans, addressing a crucial gap where traditional banks might not be able to step in.
This fund is approved by the U.S. Small Business Administration (SBA), giving it both credibility and the power to lend to a variety of sectors.
Types of Loans:
- Uncollateralized mezzanine loans: These loans don’t require businesses to put up assets as collateral, making them accessible to more entrepreneurs.
- Full loan funding: In some cases, the Truman Fund can finance the entire loan, providing the needed boost for businesses to grow.
Wade Smith, the managing partner and general counsel for Twain Private Credit, highlights the importance of this fund. He mentions that many small businesses in the southeast lack the capital they need.
Traditional banks might not always be in a position to lend due to various reasons, leaving a gap that the Truman Fund aims to fill.
The fund’s structure emphasizes more patient capital, longer repayment terms, and customized solutions, allowing businesses to concentrate on their growth rather than immediate financial pressures.
With the SBA’s backing, the Truman Fund can draw from a substantial pool of capital to invest in local ventures.
The areas they are focusing on include logistics and distribution, manufacturing, energy, infrastructure, industrial equipment, and new technologies.
Key Sectors:
| Sector | Description |
|---|---|
| Logistics and Distribution | Transportation and warehousing business opportunities |
| Manufacturing | Production of goods from raw materials |
| Energy | Businesses in renewable and traditional energy |
| Infrastructure | Development of physical structures and facilities |
| Industrial Equipment | Machines and tools used in various industries |
| Emerging Technologies | Innovative tech-driven business ventures |
The SBIC program, a competitive initiative run by the SBA since 1958, was created to provide small businesses with long-term financial resources.
Each year, the SBA offers up to $5 billion in low-cost loans to private equity and private credit funds.
These funds then invest in U.S. small businesses and startups, enhancing their growth potential.
The approval process for obtaining an SBIC license is rigorous, underscoring the Truman Fund’s credibility and Twain Private Credit’s capability to manage investments effectively.
This milestone reflects a strong belief in Mississippi’s economic stability and its entrepreneurial potential.
Governor Tate Reeves praised the fund, noting that the state’s strong economy is attracting significant private investment.
He emphasized that Mississippi’s small businesses are deserving of this capital infusion, which will fuel further economic growth.
Expansion is also on the horizon.
The Truman Fund plans to extend its reach to nearby states like Oklahoma, Arkansas, Alabama, and Georgia, which currently don’t have an actively investing SBIC.
This broader scope will help fill a critical need for capital in these regions.
For entrepreneurs looking to tap into these funds, Twain Private Credit has a straightforward approach.
They begin with a due diligence process, reviewing each company’s needs and tailoring funding options such as debt, equity, or other financial solutions to meet those needs.
In essence, the Truman Fund, through its flexible lending options and SBA support, is set to be a significant catalyst for small business growth in the southeast.
The Investment Angle
Investing in the SBIC fund offers several advantages. Banks and family offices are attracted to this opportunity due to the high return on investment.
This is partly because of the low cost of capital and the benefits under the Community Reinvestment Act (CRA). Investors can also enjoy non-dilutive capital and certain privileges that are not available to hedge or private equity funds.
Smith mentioned that for every dollar raised from private investors, the SBA will add two dollars in the form of debt. The only requirement is that this loan be repaid with low interest.
Unlike other types of funds, the SBA does not take a share of the profits. This means investors can fully benefit from the investment gains.
Here’s a basic example of how it works:
- An investor contributes a sum of money to the fund.
- The SBA then provides twice that amount in debt.
- The total amount (investor’s money plus SBA funds) is invested in small businesses either as debt or equity.
- As these investments generate returns, the SBA debt is repaid first.
- The remaining returns go to the fund and its investors.
Twain Private Credit Fund operates similarly to a private equity fund. Investors join as limited partners and aim for a specified minimum return.
Smith encouraged any accredited investors interested in this high-return opportunity to reach out for more information. This setup allows for maximizing returns because the SBA’s leverage greatly enhances the investment potential.
