Business Development Companies (BDCs)

A type of closed-end investment company that is regulated by the Securities and Exchange Commission under the Investment Company Act of 1940 and primarily invests in small and mid-sized companies (often privately held or founder-owned). 

BDCs were initiated by US Congress in 1980 (Small Business Investment Incentive Act) to help facilitate investment in small, growing, U.S. businesses to provide a financing alternative for companies that may otherwise experience difficulty accessing traditional financing via bank loans or public markets. 

To maintain BDC status, the company must invest 70% of its assets in qualifying assets. Generally, qualifying assets are private U.S. companies or public U.S. companies with a market capitalization of less than $250 million at the time the investment was made. The remaining 30% can generally include other assets.