Hercules Capital Receives SBA Approval for Its Fourth SBIC License

Rhea-AI Summary

Hercules Capital (NYSE: HTGC) has received approval from the U.S. Small Business Administration (SBA) for its fourth Small Business Investment Company (SBIC) license. This approval grants Hercules access to an additional $175.0 million in long-term debentures, increasing its total borrowing capacity through the SBIC program to $350.0 million.

The SBIC program has been a important component of Hercules' funding strategy since 2006. This new license will enable the company to continue supporting innovative technology and life sciences companies seeking growth capital while maintaining a diversified balance sheet and favorable cost of capital. Hercules has also received exemptive relief from the SEC, allowing it to exclude SBIC leverage from applicable asset coverage limits.

Positive

• Approval of fourth SBIC license, increasing borrowing capacity by $175.0 million
• Total SBIC program borrowing capacity increased to $350.0 million
• Exemptive relief from SEC to exclude SBIC leverage from asset coverage limits
• Enhanced ability to support innovative technology and life sciences companies

Negative

• None.

Insights

Financial Analyst

Hercules Capital's receipt of its fourth SBA-approved SBIC license is a notable event for several reasons. Firstly, this allows Hercules to access an additional $175 million in long-term debentures, doubling their total SBIC borrowing capacity to $350 million. This influx of capital can help Hercules support its portfolio of small and growth-oriented businesses more effectively. What makes this interesting from a financial perspective is how this will likely lower Hercules' cost of capital. Access to favorable long-term financing through the SBA program can reduce reliance on more expensive funding sources.

In the short term, investors should expect this news to be positively received by the market. Increased liquidity and a diversified balance sheet will likely strengthen Hercules' financial position. Longer-term, the lower cost of capital could translate to better profit margins as the company can leverage these funds for higher returns. However, investors should also note that leveraging more debt may come with increased financial risk, especially if the funded ventures do not perform as expected.

This move is aligned with industry norms where financial institutions seek diversified and lower-cost funding sources to enhance their operations. For retail investors, it's important to monitor how effectively Hercules deploys this capital and manages the associated risks.

Market Research Analyst

The approval of Hercules Capital's fourth SBIC license is significant in the broader context of market trends. The SBIC program supports innovative technology and life sciences companies, sectors with high growth potential. By obtaining this license, Hercules is effectively positioning itself to capitalize on these high-growth industries. This could enhance Hercules' competitive edge, as it can now provide more robust funding solutions to its target market, attracting top-tier ventures and private equity-backed firms.

This development could have broader implications for the venture capital ecosystem. As Hercules deploys this new capital, it may lead to increased funding availability for startups and growth companies, potentially accelerating innovation and market expansions in technology and life sciences sectors. For investors, this means there could be secondary benefits like increased valuations and exit opportunities in the portfolios of venture capital firms supported by Hercules.

It's worth noting that while the immediate impact is positive, the efficacy of this capital deployment will depend on market conditions and the performance of the funded companies. Therefore, investors should keep an eye on industry trends and economic indicators that might affect these sectors.

SAN MATEO, Calif.--(BUSINESS WIRE)-- Hercules Capital, Inc. (NYSE: HTGC) (“Hercules” or the “Company”), the largest and leading specialty financing provider to innovative venture, growth and established stage companies backed by some of the leading and top-tier venture capital and select private equity firms, today announced that the U.S. Small Business Administration (“SBA”) has approved its fourth Small Business Investment Company (“SBIC”) subsidiary, following the Company’s prior receipt of its “green light” letter to submit an application to obtain a fourth license to the SBA committee.

“We are extremely pleased to receive approval from the SBA. Our long-standing partnership with the SBIC program remains an important and strategic component to maintaining a highly liquid and diversified balance sheet and it provides us with further flexibility to be able to continue to support small and growth-oriented businesses,” said Scott Bluestein, chief executive officer and chief investment officer of Hercules Capital. “Our fourth SBIC license enables us to continue to fund the needs of many innovative technology and life sciences companies seeking growth capital while helping to maintain our overall blended cost of capital by accessing favorable long-term financing.”

Hercules’ fourth SBIC license is held by a subsidiary of the Company and provides access to additional growth capital of $175.0 million of long-term debentures, bringing Hercules’ combined borrowing capacity through the SBIC program to a total of $350.0 million of capital.

The SBA program has played an important role within Hercules’ funding strategy since receiving its first SBIC license in September 2006. Hercules received exemptive relief from the Securities and Exchange Commission that allows Hercules to exclude SBIC leverage from applicable asset coverage limits.

About Hercules Capital, Inc.

Hercules Capital, Inc. (NYSE: HTGC) is the leading and largest specialty finance company focused on providing senior secured venture growth loans to high-growth, innovative venture capital-backed companies in a broad variety of technology, life sciences and sustainable and renewable technology industries. Since inception (December 2003), Hercules has committed more than $20 billion to over 650 companies and is the lender of choice for entrepreneurs and venture capital firms seeking growth capital financing. Companies interested in learning more about financing opportunities should contact info@htgc.com, or call 650.289.3060.

Hercules, through its wholly owned subsidiary business, Hercules Adviser LLC (“Hercules Adviser”), also maintains an asset management business through which it manages investments for external parties (“Adviser Funds”). Hercules Adviser is registered as an investment adviser under the Investment Advisers Act of 1940.

Hercules’ common stock trades on the New York Stock Exchange (NYSE) under the ticker symbol “HTGC.” In addition, Hercules has one retail bond issuance of 6.25% Notes due 2033 (NYSE: HCXY).

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We may use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and should not be relied upon in making any investment decision. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations. While we cannot identify all such risks and uncertainties, we urge you to read the risks discussed in our Annual Report on Form 10-K and other materials that we publicly file with the Securities and Exchange Commission. Any forward-looking statements made in this press release are made only as of the date hereof. Hercules assumes no obligation to update any such statements in the future.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240711868347/en/

Michael Hara

Investor Relations and Corporate Communications

Hercules Capital, Inc.

650-433-5578

mhara@htgc.com

Source: Hercules Capital, Inc.

FAQ

What is the significance of Hercules Capital receiving its fourth SBIC license?

The fourth SBIC license provides Hercules Capital (HTGC) with access to an additional $175.0 million in long-term debentures, increasing its total SBIC program borrowing capacity to $350.0 million. This enhances the company's ability to support innovative technology and life sciences companies while maintaining a diversified balance sheet.

How does the SBIC program benefit Hercules Capital's funding strategy?

The SBIC program has been a important component of Hercules Capital's (HTGC) funding strategy since 2006. It provides access to favorable long-term financing, helps maintain a diversified balance sheet, and allows the company to support small and growth-oriented businesses while managing its overall cost of capital.

What exemptive relief has Hercules Capital received from the SEC regarding SBIC leverage?

Hercules Capital (HTGC) has received exemptive relief from the Securities and Exchange Commission (SEC) that allows the company to exclude SBIC leverage from applicable asset coverage limits. This provides greater flexibility in managing its capital structure.