Jeff Schwartz

So the average borrowing cost was

was probably sub 2% on that fund.

And as a result, that fund was able to generate mid-20s returns on both a gross and net basis.

So all of the fees and expenses associated with managing and running a private equity firm and paying promote to the GP was more than...

offset by the attractive leverage that individual investors in this SBIC fund were able to access because of this license.

From an investor standpoint or from a managed GP standpoint?

It's just a very, it's an onerous process.

It's a difficult process, the initial licensing process.

And we now are on our third SBIC fund.

So with each successive fund, it's gotten a little bit less painful, but it's a thorough process.

And there are a lot of GPs who don't have the right track record, the right team composition, the right background, the right strategy, and the patience to go through what is a difficult bureaucratic process.

And then once you're a part of the program, we're certainly advocates and think it's a really special community to be a part of that we benefit from in many ways.

But a lot of people outgrow the program.

So that's the other challenge is that we, as I mentioned earlier, have focused on growing our business horizontally rather than vertically and have stayed in the lower middle market with smaller funds.

But most GPs are constantly striving to raise larger and larger funds.

And the SBIC program, as you would imagine,

because of its mandate to support small businesses, is capped out at a certain level of leverage and restricts the size of the businesses that you invest in.

So it's somewhat impractical to raise a billion dollar fund or several billion dollar fund

because you're limited not only to $175 million of leverage currently, so $175 million of leverage, the benefit of that leverage is significantly muted if you're a billion-dollar fund.

And then, more importantly, the restrictions on the investments that you're able to make out of your licensed SBIC fund are limited in their size.