SBIC Associate Job - All Feedback appreciated
I am in the running for a job with an SBIC fund (1 fund total ~$250m). Can anyone give me any experience, day to day knowledge, or just feedback on this industry, market, job, salary, etc? I currently do deals consulting (mostly PE) for big 4 advisory and want to make the jump to PE/mezz investing. Thanks in advance
Funds have been doing well of late. Lower MM deals is becoming a crowded space IMO, so expect lots of competition for deals. Definitely good experience.
I'm curious, what's the comp looking like?
I'm curious, what's the comp looking like?
Decent experience, depending on what you want to do. Limited number of buyout SBIC funds. Most are mezz/co-invest shops. Comp is going to be reflective of strategy and fund size.
Sounds like Patriot Capital.
I don't want to sound like an expert here, but I am currently at an SBIC fund and I feel like I can provide some color. I recommend avoiding this space if possible. One of the problems with SBIC is that the firm is required to structure a certain (substantial) percentage of the investment as debt, whether thats warrants or mezzanine etc.
Because of new, post 2008 regulations, it is harder for SBIC funds to get senior debt as a result of new Highly leveraged transactions regulation (HLT) limiting commercial lenders in the amount of leverage they cant take on these deals.
As a result, my SBIC fund, which is a few times the size of the 250mm fund you speak of, is having trouble getting senior debt and has been forced to work with business development companies and other high interest lenders, instead of typical senior debt lenders. It has made things really difficult, leading to a self fulfilling prophesy of struggling to meet covenants and interest payments.
I hope this is helpful and anyone is free to challenge me on this, but this is just my view
SouthernAlpha,
I disagree with your recommendation for the OP to avoid an opportunity at an SBIC fund. I'll comment on some of your points (in no particular order).
1) You're correct regarding current senior lending constraints. Traditional banks can no longer participate in transactions with leverage north of 4x (pretty much). However, I don't quite understand why you frame this to be an issue for SBICs specifically. This is an issue for any private equity fund (SBIC or non-SBIC).
2) It appears your SBIC fund takes controlling positions (so the responsibility to source senior financing is yours). Most SBIC funds do not make controlling positions, but instead focus on making sub debt investments with a small equity co-investment. As such, the responsibility to source senior financing generally falls on the sponsor the SBIC fund is backing in the deal (most pursue sponsor-backed deals).
3) The limitations of traditional banks right now are forcing sponsors to seek debt from other sources, as you state. Most SBIC funds (like the ones I describe above) are negatively impacted, because the case for unitranche just got much stronger. This would be a legitimate reason for avoiding a position at a typical SBIC fund. However, this market dynamic may be temporary, and SBIC mezz funds are still getting deals done (just at a slower pace).
4) Why is it a problem that SBIC funds are required to structure some amount of each investment in the form of debt? Many LPs actually enjoy some current return. And it's nice to lock-in (assuming shit doesn't go bad) a portion of the investment at a mezz rate. Hell, some traditional non-SBIC buyout funds are doing their own mezz now: 1) Because their LPs seem to like it, and 2) it allows them to deploy more capital in each deal in a market with rich valuations (the idea being it's better to risk more capital in fewer but higher quality deals than to spread your capital across a bunch of 10x+ entry-multiple deals auctioned by Baird).
SBIC - Small Business Investment Companies (Originally Posted: 11/16/2006)
I'm curious if anyone has experience working for or with SBIC's? I think they might be a much more desirable alternative to get into VC/PE arena than via the I-Banks, but I can't be sure. I've done some research on them, and it's a pretty interesting way to participate in the industry. I'm also wondering if anyone has insights into the "debenture" SBIC's, and how they work.
The SBA's participating securities program is not going to be extended - which means that a lot of SBIC's that have functioned as VCs will be pushed out of the market unless they can raise their own fund w/out the SBA leverage.
So, the leverage that's been created through the SBA's loans to these SBIC's won't be possible in the future? So this means that the advantage of an SBIC status is no longer going to be there? Is this internal to the SBA or is there a larger piece of legislation that's affecting it?
.
Any update on this post?
sba dot gov
SBIC = lower MM mezz shops
could use as a debt side car on a main fund as a yield enhancer or a like a side letter for a LP you like. but ya small stuff.
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