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WASHINGTON — U.S. Senators Jim Risch (R-Idaho) and Marco Rubio (R-Fla.), both former chairmen of the Senate Small Business Committee, introduced the American Innovation and Manufacturing Act. The bill would create a new facility in the Small Business Investment Company (SBIC) program to provide preferential and patient capital to America’s small manufacturers. The new facility would provide long-term debt with equity features to SBICs that invest in small manufacturing firms. U.S. Representative Claudia Tenney (R-N.Y.) will introduce companion legislation in the U.S. House of Representatives.

“To fully recover from the pandemic, we must shift from short-term fixes to developing long-term solutions that support job creation and promote American ingenuity,” said Risch. “The American Innovation and Manufacturing Act will provide the resources to help us create well-paying jobs and remain competitive in the global marketplace.”

“The secret to America’s long economic success has been our ability to make things and our capacity to innovate for the future,” said Rubio. “When we do both, we create stable, well-paying jobs that power a strong, dynamic country with safe communities and bright futures. Unfortunately, we have all too often learned the hard way what the loss of productive capacity does to our national stability and economic dynamism. Our challenges were clear even before the pandemic upended global supply chains and highlighted our inability to make even the most basic necessities.” 

“As we move to the rebuilding phase, we must help small manufacturing firms that face a debilitating lack of access to critical finance,” Rubio continued. “My American Innovation and Manufacturing Act will help innovative firms engaged in manufacturing production secure the capital they need without the demand for immediate, outsized returns. The success of these companies is critical to confronting the threat posed by the Chinese Communist Party’s economic ambitions and to bringing good jobs back to America.”  

Specifically, the American Innovation and Manufacturing Act provides $10 billion in long-term debt with equity features to registered SBA Small Business Investment Companies (SBICs) that invest in small businesses in manufacturing industries. To accomplish this, the Administrator is authorized to make commitments to a participating SBIC and purchase equity-like bonds from a participating SBIC, defined by the following terms:

  • A term of at least 15 years with an interest rate of up to two percent; interest shall accrue on the bond rather than require cash interest payments.

  • The Administrator will participate in the SBICs’ profits at a rate of 1/3 of the commitment that is approved, divided by the commitment approved plus regulatory capital.
  • The Administrator will receive up to two percent interest from the SBIC’s commitment, while the managers of the SBIC will receive a maximum interest of 25 percent minus the interest paid to the Administrator.
  • The Administrator must receive all interest payments on bonds committed before an SBIC may distribute capital (including profits) to investors or fund managers.
  • If a participating SBIC defaults, the Administrator will receive any unpaid returns or interest prior to the company’s investors or managers.
  • The Administrator may directly commit or commit to purchase bonds from an SBIC up to a maximum that is the lesser of 2x the SBIC’s regulatory capital and $200 million.

  •  Any commitment by the Administrator to purchase bonds will remain available to be sold by an SBIC for four years.

  •  50 percent of dollars invested by SBICs under this program must be invested in manufacturing businesses. 

To read the bill text, click here.

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