Jeff Schwartz

So businesses have...

cannot have more than a certain number of employees, depending upon the SIC code, get your initial license and join the SBIC program.

And then you age out of it in a few years if you're successful.

I don't think the SBIC program or managers have done a great job marketing the opportunity to smaller institutions, to family offices, to individual investors.

They've done a great job marketing to banks.

So banks, a number of banks are investors in SBIC programs and they receive CRE credit for investing in SBIC funds.

So that's been a very significant portion of the LP base historically.

More and more GPs are trying to expand that LP base and go out to non-lending institutions as LPs, the way a regular way non-SPSC private equity firm would.

And I think that the program needs to do a better job on a collective basis to access some of these investors.

But these are small funds and institutions.

have become, traditional institutional investors have become larger and larger, and their alternative asset allocation has become larger and larger, and they're really restricted from investing in small funds.

So that's a limitation as well.

The special situations part of the market is really, really interesting right now.

Well, I think the overall lower middle market continues to be much, and it's a self-serving comment, but continues to be much more interesting from an investor standpoint than the middle market or a larger cap private equity or the public markets.

The inefficiency continues to be an important driver of value and the ability to

in an old school private equity way, help make the businesses that you invest in better and more profitable should drive outsized returns.

Within the lower middle market, I think the special opportunity space is really ripe.

If we think about what happened during the pandemic, the government infused a lot of capital into small businesses through the PPP program, as well as the Main Street lending program.

Both of those were artificial orders of small businesses

some of whom have grown well out of the pandemic and have benefited from the PPP loans that have not been required to repay and are well positioned to repay those Main Street loans, which are required to be repaid.