Capital Southwest Announces Receipt of Second SBIC License

Rhea-AI Summary

Capital Southwest (Nasdaq: CSWC) announced that its subsidiary, Capital Southwest SBIC II, LP, has received a Small Business Investment Company (SBIC) license from the U.S. Small Business Administration. This marks the company's second SBIC license, following its first in April 2021.

The new license enables SBIC II to issue SBA-guaranteed debentures up to $175 million, bringing Capital Southwest's total SBIC program borrowing capacity to $350 million. These debentures feature semi-annual interest payments and ten-year maturity, with interest rates fixed at a spread over ten-year U.S. Treasury Notes.

The company received exemptive relief from the SEC, allowing the exclusion of SBA-guaranteed debentures from senior securities in asset coverage requirements.

Positive

• Secured second SBIC license, doubling potential borrowing capacity
• Additional $175 million in potential SBA-guaranteed debentures
• SEC exemptive relief obtained for favorable asset coverage treatment
• Access to favorable government-backed financing terms

Negative

• Subject to SBA regulations and oversight limiting investment flexibility
• Investment restrictions on size and nature of portfolio companies

DALLAS, April 21, 2025 (GLOBE NEWSWIRE) -- Capital Southwest Corporation (“Capital Southwest”) (Nasdaq: CSWC), an internally managed business development company focused on providing flexible financing solutions to support the acquisition and growth of middle market businesses, today announced its wholly owned subsidiary, Capital Southwest SBIC II, LP (“SBIC II”), has received a license from the U.S. Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”).

As an SBIC, SBIC II will be subject to a variety of regulations and oversight by the SBA concerning, among other things, the size and nature of the companies in which it may invest as well as the structure of those investments. The SBIC license will allow SBIC II to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a leverage commitment by the SBA. SBA debentures are loans issued to an SBIC which have interest payable semi-annually and a ten-year maturity. The interest rate is fixed shortly after issuance at a market-driven spread over U.S. Treasury Notes with ten-year maturities. Current SBA regulations permit SBIC II to borrow up to $175 million in SBA-guaranteed debentures, bringing Capital Southwest’s aggregate borrowing capacity through the SBIC program to a total of up to $350 million of capital.

The SBA program has played a pivotal role within Capital Southwest’s lower middle market investment strategy since receiving its first SBIC license in April 2021. Capital Southwest received exemptive relief from the Securities and Exchange Commission that allows for the exclusion of SBA-guaranteed debentures from the definition of senior securities in the asset coverage requirement applicable to the Company.

About Capital Southwest

Capital Southwest Corporation (Nasdaq: CSWC) is a Dallas, Texas-based, internally managed business development company with approximately $1.7 billion in investments at fair value as of December 31, 2024. Capital Southwest is a middle market lending firm focused on supporting the acquisition and growth of middle market businesses with $5 million to $50 million investments across the capital structure, including first lien, second lien and non-control equity co-investments. As a public company with a permanent capital base, Capital Southwest has the flexibility to be creative in its financing solutions and to invest to support the growth of its portfolio companies over long periods of time.

Investor Relations Contact:

Michael S. Sarner, President and Chief Executive Officer
214-884-3829

FAQ

What is the maximum borrowing capacity for Capital Southwest's SBIC II under the new license?

Capital Southwest SBIC II can borrow up to $175 million in SBA-guaranteed debentures under the new license.

What is Capital Southwest's (CSWC) total SBIC program borrowing capacity after receiving the second license?

With two SBIC licenses, Capital Southwest's total borrowing capacity through the SBIC program is up to $350 million.

When did Capital Southwest receive its first SBIC license?

Capital Southwest received its first SBIC license in April 2021.

What are the terms of the SBA debentures available to Capital Southwest SBIC II?

The SBA debentures have semi-annual interest payments, ten-year maturity, and interest rates fixed at a market-driven spread over U.S. Treasury Notes.