How Do BDCs Fare Against Traditional Investments?

HOW DO BDCSFARE AGAINST TRADITIONALINVESTMENTS?

CHRISOBERBECK .COM

Chris Oberbeck

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

Key to the investment decision

is identifying the right BDC

management organization.

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