SBA will evaluate a license applicant based on the submitted application materials, any interviews with the applicant's management team, and the results of background investigations, public record searches, and other due diligence conducted by SBA and other Federal agencies. SBA's evaluation will consider factors including the following:

(a) Management qualifications. Management qualifications, including demonstrated investment skills and experience as a principal investor, or a combination of investment skill and relevant industry operational experience; business reputation; adherence to legal and ethical standards; record of active involvement in making and monitoring investments and assisting portfolio companies; managing a regulated business, if applicable; successful history of working as a team; and experience in developing appropriate processes for evaluating investments and implementing best practices for investment firms.

(b) Demonstrated investment acumen. Performance of proposed investment team's prior relevant industry investments as well as any supporting operating experience, including investment returns measured both in percentage terms and in comparison to appropriate industry benchmarks; the extent to which investments have been realized as a result of sales, repayments, or other exit mechanisms; evidence of previous investment or operational experience contributing to U.S. domestic job creation and, when applicable, demonstrated past adherence to statutory and regulatory SBIC program requirements. While a track record is required to apply for an SBIC license, a “certified” track record is not required.

(c) Strategy and fit. Applicant's proposed investment strategy as presented in its business plan, including adherence to the Statement of Policy as stated in section 102 of the Act, clarity of objectives; strength of management's rationale for pursuing the selected strategy; compliance with this part and applicable provisions of part 121 of this chapter; fit with management's skills and experience; and the availability of sufficient resources to carry out the proposed strategy. As determined by SBA, a Licensee may not materially deviate from the proposed investment strategy after three years of Licensure.

(d) Structure and economics. Applicant's proposed organizational structure and fund economics, including compliance with this part 107; soundness of financial projections and underlying assumptions; a compensation plan that provides managers with appropriate economic incentives; a reasonable basis for allocations of profits and fees to Persons not involved in management; and governance procedures that provide appropriate checks and balances.

(e) Subsequent fund applicants. Should an applicant fulfill and formally attest to meeting all of the following eligibility criteria as to its prior Licensee and proposed new Licensee, the applicant may apply for licensure under the “Expedited Subsequent Fund Evaluation Process”:

(1) Consistent Strategy and Fund Size. The applicant's targeted Regulatory Capital is less than or equal to 133 percent of the Prior Fund's Regulatory Capital of the most recently licensed Licensee managed by the applicant's management team (the “Prior Fund”), accounting for inflation adjustments from date of Prior Fund's licensure. The applicant's investment strategy and asset class will be substantially the same as the Prior Fund.

(2) Clean Regulatory History. There are no major findings, significant “other matters,” or unresolved “other matters” related to Licensees managed by the principals of the applicant in the prior three (3) years or three (3) SBIC examinations (whichever period is longer).

(3) Consistent Limited Partner-General Partner Dynamics. No limited partner will account for more than fifty percent (50%) of the Regulatory Capital of the SBIC applicant or otherwise exercise Control with respect to the applicant unless such limited partner was a Control Person of the Prior Fund.

(4) Investment Performance Stability. The Prior Fund's net distributions to paid-in capital (DPI) and net total value to paid-in capital (TVPI) are at or above median vintage year and strategy performance benchmarks for the prior three quarters. The principals of the applicant are not managing a Licensee in default or with a Capital Impairment Percentage (CIP) equal to or exceeding 75 percent of the maximum permitted for that Licensee under 13 CFR 107.1830(c).

(5) Firm Stability. Subject to SBA's confirmation, no material changes to the broader firm, including any resignations, terminations, or retirements by members of the general partner, investment committee, broader investment team, or key finance and operations personnel. SBA retains the discretion to allow changes that were part of a routine and customary firm succession plan previously communicated in writing to SBA.

(6) Federal Bureau of Investigation (FBI) Criminal and Internal Revenue Service (IRS) Background Check. Neither the applicant's sponsoring entity nor any of the principals of the applicant have an FBI criminal record that was not previously reviewed and cleared by SBA during the Prior Fund's licensing application, and none of the applicant's principals nor sponsoring entity have violated IRS or state tax regulations from the date of the Prior Fund's license issuance.

(7) No Outstanding or Unresolved Material Litigation Matters. No outstanding or unresolved litigation matters involving allegations of dishonesty, fraud, or breach of fiduciary duty or otherwise requiring a report under § 107.660(c) or (d) in connection with the Prior Fund, other Licensees managed by the applicant's principals, or any other person who was required by SBA to complete a personal history statement in connection with the license application.

(8) No Outstanding Tax Liens. There are no outstanding federal, state, or local tax liens on the applicant's principals, the Prior Fund, and/or the sponsoring entity of applicant.