Business Development Company

A Business Development Company is a type of unregistered closed-end investment company that invests in small and midsize businesses. Congress first created this type of investment company in 1980 as an amendment to the Investment Company Act of 1940. Its name reflects its mission: to assist entrepreneurs and small businesses. These companies invest in new and established companies. The best candidates for this type of company are entrepreneurs with an entrepreneurial spirit who have the right to grow and expand their businesses.

A business development company invests in privately owned small to mid-sized businesses. These companies often face challenges that prevent them from obtaining traditional financing, and may not be able to secure conventional loans. They also aim to turn the businesses into profit-generating companies at a later time. Business development companies are similar to venture capital and private equity funds, except that the latter is publicly traded, and are popular among income-seeking investors. For this reason, these companies are an excellent way to invest in small businesses and benefit from high dividend yields.

A BDC is a great way to diversify your portfolio and earn complementary income streams. In the United States, most BDCs are regulated investment companies, which means that they must stay diversified and never put more than 5% of their assets in a single security. Further, a BDC is not allowed to own more than 5% of a company’s voting stock or put more than one-quarter of its assets into a business that it controls.