Capital Southwest subsidiary gains SBA license to boost lending

DALLAS - Capital Southwest Corporation (NASDAQ:CSWC), a business development company providing flexible financing solutions to middle market businesses with a market capitalization of $978.25 million and strong financial health according to InvestingPro metrics, announced today that its subsidiary, Capital Southwest SBIC II, LP, has been licensed by the U.S. Small Business Administration (SBA) to operate as a Small Business Investment Company (SBIC). This license allows the subsidiary to access additional leverage through SBA-guaranteed debentures, potentially increasing Capital Southwest’s lending capacity by up to $175 million.

The SBA’s approval enables SBIC II to issue debentures with a ten-year maturity and semi-annual interest payments, with the rate set at a spread over ten-year U.S. Treasury Notes. The new borrowing capacity is expected to enhance Capital Southwest’s ability to support acquisitions and growth initiatives within the lower middle market segment, which has been a key focus for the company.

Since its first SBIC license was granted in April 2021, the SBA program has been instrumental in Capital Southwest’s strategy to provide long-term capital to its portfolio companies. The company’s aggregate borrowing capacity through the SBIC program now totals up to $350 million.

Capital Southwest, headquartered in Dallas, Texas, specializes in investments ranging from $5 million to $50 million across various capital structures, including first lien, second lien, and non-control equity co-investments. With approximately $1.7 billion in investments at fair value as of December 31, 2024, the company is known for its flexible and long-term investment approach, facilitated by its permanent capital base as a public entity. The company maintains a robust 12.91% dividend yield and has consistently paid dividends for 43 consecutive years. InvestingPro subscribers can access detailed analysis and 6 additional key insights about CSWC’s financial performance and market position through comprehensive Pro Research Reports.

The announcement reflects Capital Southwest’s ongoing commitment to expanding its reach and support to middle market businesses, supported by strong revenue growth of 17.51% in the last twelve months and a healthy P/E ratio of 13.52. This development is based on a press release statement from the company.

In other recent news, Capital Southwest Corporation reported preliminary fourth-quarter earnings, highlighting a one-time expense of $2.8 million due to a leadership change. The company’s pre-tax net investment income is estimated between $0.55 and $0.56 per share, with adjusted figures excluding the one-time expense suggesting a higher range. Additionally, Capital Southwest has expanded its credit facility by $25 million, bringing the total to $510 million. This expansion was facilitated through agreements with Apple Bank and Mitsubishi HC Capital America, leveraging the facility’s accordion feature. The company also announced a significant leadership transition, appointing Michael Sarner as the new President and CEO, with Chris Rehberger and Tabitha Geiger taking on key financial roles. Meanwhile, JMP Securities maintained a Market Perform rating on Capital Southwest, citing solid fundamentals and a strong position in the lower middle markets. The analyst from JMP Securities expressed satisfaction with the company’s dividend trajectory and anticipated further growth in its investment portfolio. These developments underscore Capital Southwest’s ongoing strategic initiatives and financial adjustments.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.