FOREWORD With the passage of the Small Business Investment Act on August 7, 1958, a serious gap in the financing facilities available to small firms was bridged. By encouraging the establishment of privately owned and operated investment companies and fostering State and local development corporations, this legislation should greatly increase the flow of long-term debt and equity capital to many small companies which have desperately needed this form of financial assistance in order to grow and prosper. Since 1950, when the first bill to provide small business with sources of long-term debt and equity capital was introduced, there has been virtually unanimous accord among public and private financial experts that something should be done to counteract the extreme difficulty small companies have in obtaining financing on other than a short-term basis. As chairman of the Senate Committee on Small Business, I am gratified that this objective now has been enacted as the Small Business Investment Act of 1958. The purpose of this legislation is stated in the act as follows: It is declared to be the policy of the Congress and the purpose of this Act to improve and stimulate the national economy in general and the small-business segment thereof in particular by establishing a program to stimulate and supplement the flow of private equity capital and long-term loan funds which small business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply * * *. The act provides for the creation of a Small Business Investment Division within the Small Business Administration. This Division is delegated responsibility and authority to (a) charter (in States where investment companies cannot be chartered under State law), regulate, and examine small business investment companies, (b) lend funds to such investment companies, and (c) lend funds to State and local development corporations. The newly created small business investment companies are authorized, in turn, to make long-term loans and purchase convertible debentures from small business concerns. The Small Business Investment Division will have no direct contact with small business concerns which are provided funds by the private investment companies. The funds lent by the Small Business Investment Division to State and local development corporations are to be used by such corporations to make loans to small business concerns in their respective areas. The Small Business Investment Act of 1958, as contained herein along with a detailed explanation of its provisions and a sectional analysis, should serve as a positive and meaningful step toward making more readily available to small business the long-term financing which it needs for adequate growth and development and to keep our economic system truly free and competitive. JOHN SPARKMAN, Chairman, Select Committee on Small Business, United States Senate. SEPTEMBER 5, 1958. III |