SBA Issues Policy Update On Warehousing Investments For SBIC Applicants

Overview

On June 25, 2026, the U.S. Small Business Administration (SBA), through its Office of Investment and Innovation (OII), issued a Policy Notice updating and clarifying its policies relating to warehousing investments by small business investment company (SBIC) applicants. The Notice revises and replaces the relevant section of the SBIC Standard Operating Procedures (SOP 10 10 1, dated January 10, 2025), specifically Chapter 2, Section 12(h)(3) (Warehousing Investments Post MAQ Submission and Pre-Licensure).

This update is significant for SBIC applicants and their affiliated fund managers, as it formalizes the conditions under which SBA will approve an SBIC’s purchase of investments warehoused by an Affiliate or Associate prior to licensure—providing greater certainty and predictability in the licensing process and ability to make pre-licensure investments.

Background: What Is Warehousing?

A “warehoused investment” is an investment made by an Affiliate or Associate of an SBIC applicant for the purpose of selling that asset to the applicant upon the applicant’s licensure as an SBIC. In practice, this allows emerging fund managers to pursue and close investment opportunities during the often-lengthy SBIC licensing process, rather than losing deals to timing constraints.

Historically, SBA has generally limited the ability of applicants to make pre-licensing investments, and the purchase of assets from an Associate is typically subject to SBA’s conflict of interest rules under 13 CFR § 107.730. However, recognizing that applicants need the flexibility to remain competitive in the marketplace and to close on deals consistent with the SBIC program’s mission, SBA has developed a framework permitting warehousing subject to specified conditions.

Conditions for SBA Approval of Warehoused Investments

SBA will evaluate a proposed purchase of warehoused investments on a case-by-case basis, but will generally approve such a purchase if all five of the following conditions are satisfied:

1. Timing of Investment. The warehoused investment must be made after the date of the applicant’s Management Assessment Questionnaire (MAQ) submission to OII.
2. Written Notice to OII. The applicant must provide written notice to OII via email to warehousinginvestmentrequests@sba.gov within thirty (30) days of the Affiliate/Associate’s investment. The notice must state that: (x) an Affiliate/Associate has purchased the warehoused investment, and (y) the purchase is intended to operate as a warehousing investment for the SBIC. The subject line of the email must read: “Warehousing Investment Request” followed by the name of the SBIC license applicant.
3. Reasonable Sale Price. The sale price of the investment to the SBIC must be reasonable and may not exceed the Affiliate/Associate’s original cost basis.
4. No Material Adverse Events. The SBIC must certify, and be able to demonstrate upon SBA request, that at the time of transfer to the SBIC, no material adverse events have occurred since the Affiliate/Associate’s purchase of the warehoused investment.
5. Eligibility Requirements. The SBIC must certify that the investment meets the SBIC program’s portfolio company eligibility requirements under 13 CFR Part 107.

Key Timing Requirement: Three-Month Transfer Window

If the above conditions are met, SBA will generally approve the transfer so long as the transfer of the warehoused investment to the SBIC takes place within three (3) months of the SBIC’s receipt of its license. Applicants should plan accordingly to ensure that all documentation and approvals are in order to close the transfer promptly following licensure.

What This Means for You: Key Takeaways

• Greater certainty for deal execution. The formalized policy gives SBIC applicants and their affiliates a clearer roadmap for warehousing investments during the licensing process, reducing the risk of lost deal flow.
• Strict compliance is essential. All five conditions must be satisfied, and the 30-day notice requirement is particularly time-sensitive. Applicants should build warehousing notification procedures into their deal closing workflows.
• Cost basis cap limits pricing flexibility. The sale price to the SBIC cannot exceed the Affiliate/Associate’s original cost basis. Applicants should structure warehousing arrangements with this limitation in mind and document cost basis thoroughly.
• Act quickly post-licensure. The three-month window for completing the transfer begins upon receipt of the SBIC license. Fund counsel should prepare transfer documentation in advance so closings can occur expeditiously.
• Risk of Adverse Events. Despite an investment being acquired with a view towards transferring it to the SBIC upon licensure, condition four above does place the Affiliate/Associate initially acquiring the investment at risk of being forced to keep the investment should material adverse changes occur. Coupled with the condition on the purchase price not exceeding cost basis, a warehousing Affiliate/Associate will be assuming downside risk with no upside potential with respect to a warehoused investment.
• Case-by-case review remains. While SBA has established these general conditions for approval, each request will still be evaluated individually. Applicants should maintain thorough documentation and be prepared to respond to SBA inquiries.