The SBIC program remains one of the most underappreciated engines of U.S. private capital, a proven public-private model that has fueled small-business growth for decades. SBICs are privately managed investment funds licensed by the SBA to invest in U.S. small businesses using both private capital and SBA-guaranteed leverage, typically at a 2:1 ratio. Structured as pass-through entities, they offer distinct advantages including capital gains deferral, CRA credit eligibility, and fewer regulatory hurdles compared to traditional private investment vehicles.
By combining government-backed leverage with private discipline, SBICs inject capital into the lower middle market, the backbone of the American economy. These funds specialize in flexible financing for founder-led, family-owned, and underserved companies often overlooked by traditional PE and credit markets. Strategies span mezzanine, hybrid equity, and control buyouts, balancing downside protection with meaningful upside potential.
With long horizons, regional expertise, and relationship-driven models, SBICs act as growth partners as much as capital providers. As LPs look beyond mega-funds in search of resilient, high-value opportunities, SBICs continue to deliver consistent returns, local impact, and sustainable growth. Today, we highlight the SBIC funds launched in 2025, the trends shaping the space, and the key takeaways for GPs seeking to capture this overlooked segment of private markets.
1. Avante Capital Partners SBIC IV, L.P.
Overview: Los Angeles-based Avante Capital Partners launched its fourth SBIC fund in 2025, totaling $41.85 million, to continue its direct lending strategy. The firm brings deep experience in underwriting, structuring, and supporting debt-based growth capital for underserved markets.
Focus: Provides senior and unitranche direct lending to sponsorless or diverse-led businesses with stable cash flows in need of flexible financing for growth or recapitalization.
2. Holleway IPA Fund II, LP
Overview: Headquartered in St. Louis, Holleway Capital Partners raised $154.3 million for its second SBIC fund. The firm targets lower middle market buyouts, focusing on value-oriented acquisitions and operational transformation.
Focus: Executes control buyouts of founder-owned and established businesses, particularly in business services, manufacturing, and traditional industrial sectors.
3. GP Capital Partners II, LP
Overview: Houston-based Genesis Park launched this $125 million hybrid capital fund to support family-owned businesses through flexible financing and strategic partnerships.
Focus: Invests subordinated debt and structured equity in growth-stage or transitioning companies across business services, manufacturing, and infrastructure-adjacent sectors in the Southern U.S.
4. LNC Partners III-SBIC, L.P.
Overview: Based in Reston, Virginia, LNC raised $94.6 million for its third SBIC fund. The firm offers hybrid capital to companies with strong recurring revenues and growth ambitions.
Focus: Targets subordinated debt and minority equity investments in healthcare, education, and software-driven businesses seeking management-led buyouts or expansion capital.
5. LongWater SBIC Fund I LP
Overview: Fargo-based LongWater Opportunities launched a $262.5 million fund with a focus on value-aligned partnerships in underserved Midwestern and Southern markets.
Focus: Uses hybrid structures to support stable, EBITDA-generating companies in industrials, agtech, and niche manufacturing with conservative capital needs and deep regional roots.
6. Five Points Credit SBIC V LP
Overview: A veteran in lower middle market credit, Five Points Capital raised $269 million for its fifth mezzanine SBIC fund. Based in Winston-Salem, NC, the firm brings decades of experience in non-control junior capital.
Focus: Provides subordinated debt and preferred equity to companies with $3–$15 million in EBITDA, often backing sponsor-led growth, recapitalizations, and M&A.
7. Reynolda Equity Partners V, L.P.
Overview: Managed by Five Points Capital, this $59.7 million fund continues Reynolda’s hands-on, operationally engaged private equity strategy for small business buyouts.
Focus: Seeks control investments in founder- or family-owned businesses undergoing ownership transitions, with a focus on light manufacturing, services, and regional operators.
8. CCP VI-SBIC, L.P.
Overview: Indianapolis-based Centerfield Management launched this $257 million mezzanine fund in 2025 to expand its flexible junior capital offering.
Focus: Invests mezzanine debt and preferred equity in companies with $3–$20 million EBITDA across sectors such as healthcare services, distribution, and industrials.
9. Tecum Capital Partners IV, L.P.
Overview: Wexford, PA-based Tecum Capital raised $234.6 million in its fourth mezzanine SBIC fund. The firm is a seasoned credit investor with a collaborative approach to fostering long-term growth.
Focus: Provides mezzanine and hybrid capital for buyouts, recapitalizations, and growth initiatives. This is often done in tandem with PE sponsors across food, industrial, and service sectors.
10. Southfield Mezzanine Capital III LP
Overview: Southfield Capital in Greenwich, CT closed its third mezzanine fund at $241.7 million. The fund supports fast-growing, entrepreneur-led companies.
Focus: Targets recurring revenue businesses in healthcare, consumer services, and tech-enabled sectors, using structured equity and mezzanine debt to fund growth and acquisitions.
11. Balance Point Capital Partners VII, L.P.
Overview: Westport, CT-based Balance Point Capital raised $226.3 million for its seventh mezzanine fund. The firm focuses on structured credit solutions for growth-oriented businesses.
Focus: Provides subordinated debt and preferred equity in sponsor-backed companies with $2–$20 million in EBITDA across software, healthcare, and tech-enabled services.
2025 SBIC Fund Sizes by Strategy
Below is a visualization of the 2025 SBIC funds by fund size and primary strategy.
Common Themes Across 2025 SBIC Funds
1. Flexible Capital Structures
Hybrid and mezzanine capital dominate these funds offering downside protection with equity upside, which caters to owner-operators seeking growth without dilution.
2. Lower Middle Market Focus
Nearly all funds target businesses with $2–$20 million in EBITDA, a zone underpenetrated by large-cap private equity and underserved by banks.
3. Support for Founder and Sponsorless Deals
The funds prioritize:
- First-time institutional capital seekers
- Founder transitions and generational handoffs
- Non-auction, proprietary deal sourcing
This trend enhances GP differentiation and origination edge.
4. Regional Anchors + Sector Breadth
While generally sector-agnostic, several funds cluster regionally (Midwest, South, Northeast), with preferences for industrials, business services, and healthcare.
Actionable Insights for GPs
1. Emphasize Mezzanine and Hybrid Flexibility
Non-control capital is a key differentiator. Use your flexibility to solve for recapitalizations, add-ons, and founder liquidity events without forcing change of control.
2. Play in the $10M–$100M EV Zone
This deal size remains a white space between VC and large-cap PE. Build your pipeline and LP pitch around repeatability in this overlooked tier.
3. Refine Your Operational Playbook
Gaining LP confidence means showcasing structured value-creation strategies like KPI frameworks, add-on execution, or post-close integrations.
4. Partner With Independent Sponsors & Family Offices
Your capital structure is ideal for bridging equity gaps or serving as a flexible partner to smaller GPs needing execution support.
Strategic Takeaways for GPs
A Granular Playbook that GPs Can Leverage
The 2025 SBIC ecosystem is primed for partnership-driven capital deployment, especially in underserved and transition-intensive segments of the lower middle market.
General partners with differentiated sourcing, operational value-add, or flexible capital structures are well-positioned to raise capital, lead co-investments, and generate resilient returns.
