Prior to the existence of BDCs,
the ability for smaller companies
to raise capital were minimal,
often being rejected by banks.
WHAT AREBUSINESS
DEVELOPMENTCOMPANIES?
WHAT DOBDCS DO?
BDCs are able to invest in numerous, types
of securities that include debt and equity
— known as a business’ capital structure.
In the capital structure system, loans reapreturns on investors’ principal and interestwithout the participation of the investor in
the growth of the company.
When investing in equity, the commonstock of the small to mid-sizedcompany may increase substantially invalue depending on its growth.
TRADITIONALCLOSE-END FUNDS
At their core, BDCs resembletraditional closed-end funds,administered by the InvestmentCompany Act of 1940.
In terms of net of returns, the dividendyields for BDCs are most often greater
than traditional closed-end funds.
BDCs create personalized sourcing andunderwriting directly to borrowers — a
shift from the traditional bank transaction.
As banks become less willing to lend to alternative
small and mid-sized asset class, BDCs are filling
the gap to offer capital to this marginalized class.
BANKS
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