Star Mountain closes second SBIC fund at $286m

Star Mountain Capital has announced the final close of its second small business investment company (SBIC) fund above its target, at $286m (£212.3m).

Given its size, the fund will benefit from the full $175m of Small Business Administration (SBA) debentures per fund, under the SBIC programme.

The SBA’s programme lends government-backed capital to invest in small businesses in the US.

SBIC Fund II, like SBIC Fund I, will make strategic debt and equity investments in established, “recession-resilient” and low market-correlated service-oriented US small and medium-sized businesses, supported by strong legal agreements and maintenance covenants.

With several additional bank limited partners (LPs) coming into this fund, it has increased the number of strategic commercial bank partnerships Star Mountain has.

The firm said the strategy continued to be supported by positive market trends, including the aging demographic of business owners looking for strategic capital partners, valuation arbitrage between smaller and larger businesses, a fragmented market of approximately 200,000 established smaller US private businesses, and a lack of sophisticated strategic capital for smaller companies.

“We are grateful for the partnership with the SBA, our investors, our team and our portfolio companies, and we remain highly aligned and committed to continue to grow the value we can bring to all stakeholders,” said Brett Hickey, founder and chief executive of Star Mountain Capital.

“We are proud to work with the SBA in our aligned missions of supporting high quality small and medium-sized private businesses which are the backbone of the US economy.”

SBIC funds allow banks to invest as LPs where they may receive Community Reinvestment Act credits and additional opportunities to provide banking services to SBIC fund portfolio companies, according to Star Mountain.

The US lower middle-market investment firm has approximately $4.5bn in assets under management.