The Small Business Administration yesterday proposed wide-ranging new regulations designed to curb potential losses to the agency through its troubled small business investment company program.

Small business investment companies (SBICs) combine private capital and government-guaranteed borrowing to help finance fledgling firms that would have trouble raising money through conventional channels.

The program is understood to be a high-risk undertaking, but in recent years the size and rate of failure among SBICs has caused concern within the agency and on Capitol Hill.

In an effort to improve agency control over SBICs, Administrator Susan Engeleiter has been shifting people and toughening standards.

The new rules announced yesterday place limits on the amount of debt that the agency will "subordinate" to other creditors of an SBIC. Currently, the SBA comes last in line among creditors of a failed SBIC, which often means that the agency recovers little or nothing after the company's debts are settled.

Under the new rule, only debts that exceeded the lesser of $10 million or twice the SBIC's private capital would be subordinated. The rest of the agency's claims would be on an equal footing with other creditors.

The rules also require much more rigorous financial reporting, both by companies in which the SBIC proposes to invest and by SBICs themselves. They also would limit the size of firms an SBIC could invest in, and require that unused SBIC funds be invested in Treasury securities or insured bank deposits.