What is a BDC?

What is a BDC?

A BDC is a closed-end investment company that focuses on investing in small-sized and medium-sized private companies rather than large public companies.


Since their creation by Congress in 1980, BDCs have become an important source of capital by lending to American businesses that might not otherwise obtain financing from the banking or capital markets. Our industry today has grown to approximately 50 publicly traded BDCs, which pay no corporate income tax if, among other requirements, they distribute at least 90% of their taxable income to shareholders.

BDCs are regulated under the Securities Act of 1933 and the Investment Company Act of 1940. As a result, shareholders of BDCs receive the investor protections of our securities laws while having an opportunity to participate in the types of investments that otherwise are only available to deep-pocketed investors through private partnerships. In addition, BDCs offer advantages to the companies that are in need of investment capital to grow. For many of the companies in which a BDC invests, traditional sources of financing like bank lending or public offerings are unavailable. BDCs are also required to offer managerial assistance to the companies in which they invest.

In summary, BDCs provide substantial benefits to the American economy, providing an alternative source of capital for small-sized and medium-sized private companies subject to public disclosure and transparency. BDCs also serve as a tax-efficient and income-oriented investment vehicle for shareholders.