About Public Equity & Debt Offerings –
Business Development Corporations (BDCs)
A Business Development Company (“BDC”) is a type of closed-end fund that elects to be treated as a business development company under the Investment Company Act of 1940. As such, BDCs are subject to certain provisions of the 1940 Act, as well as the Securities Act of 1933, or the Securities Act, and the Securities Act of 1934, or the Exchange Act. BDCs make investments in private or thinly-traded public companies in the form of debt or equity capital, with the goal of generating current income and/or capital growth. BDCs can be internally or externally managed and qualify to elect to be treated as RICs for federal tax purposes.
BDCs are investment vehicles that allow everyday investors the opportunity to invest primarily in the debt or equity capital of middle market companies*. This investment strategy has predominantly only been available to institutional and high net work individuals through private, non-traded vehicles. BDCs, such as CION Investment Corporation, afford qualified investors the opportunity to invest in this segment of the economy with the benefit of increased transparency and governance of a public investment.
Financial planners generally recommend that investors hold a diversified investment portfolio, including traditional investments, such as stocks, bonds and mutual funds, and alternative investments, such as non-traded BDCs. An investment in a non-traded BDC may be regarded as an alternative investment and the appropriate proportion of an investor’s wealth portfolio that should be allocated to alternative investments will vary from investor to investor based on individual investment objectives, liquidity needs and risk tolerance.
*The definition of middle market companies varies from sponsor to sponsor. “Middle market” usually includes companies with annual EBITDA of $10million – $75 million.