Here, then, are six reasons why BDCs are thriving and will continue to grow as a source of capital for smaller, middle-market companies and why CEOs should understand how valuable they are as a source of financing.

1. Reasons Why
CEOs Should Know
About BDCs
C h r i s O b e r b e c k
6

2. Few investors or CEOs have known what BDCs
are and why they are advantageous to growing
businesses, but that situation is changing.

3. Here, then, are six reasons why BDCs are thriving
and will continue to grow as a source of capital
for smaller, middle-market companies and why
CEOs should understand how valuable they are as
a source of financing.

4. Evaluation as
a Growing Concern,
Not Just a Credit Risk.
1

5. A BDC looks at the entire business and its prospects for
growth rather than just its credit history.
1.

6. A BDC looks at the entire business and its prospects for
growth rather than just its credit history.
Banks under tighter scrutiny as a result of recent law and
regulation now have less freedom in accepting risk.
1.

7. A BDC looks at the entire business and its prospects for
growth rather than just its credit history.
Banks under tighter scrutiny as a result of recent law and
regulation now have less freedom in accepting risk.
A BDC working with a bank can structure deals that
otherwise might not be acceptable.
1.

8. Focus on Relationships,
Not Just Transactions.
2

9. A BDC typically takes on an investment that is higher risk
than most bank portfolios can tolerate.
2.

10. A BDC typically takes on an investment that is higher risk
than most bank portfolios can tolerate.
This means the BDC needs to truly understand a company’s
business and to form an ongoing relationship with it, so it
can help the company to expand.
2.

11. A BDC typically takes on an investment that is higher risk
than most bank portfolios can tolerate.
This means the BDC needs to truly understand a company’s
business and to form an ongoing relationship with it, so it
can help the company to expand.
BDCs grow by doing their homework and maintaining
investment discipline.
2.

12. Certainty of Closing
3

13. Once a BDC approves a company, there is a high certainty
of closing a deal without wasting time.
3.

14. Once a BDC approves a company, there is a high certainty
of closing a deal without wasting time.
Often those who arrange a deal are on the investment
committee approving it, unlike other financial institutions,
where there are multiple levels of approval.
3.

15. Shrinking Capital Market
4

16. There are fewer banks with lower market shares and their
capital structures have become more conservative.
4.

17. There are fewer banks with lower market shares and their
capital structures have become more conservative.
This contraction has narrowed the capital window for many
smaller, middle-market companies, even stable and
conservative ones.
4.

18. Customized Financial
Engineering
5

19. BDCs take on more financial engineering than just term
loans.
5.

20. BDCs take on more financial engineering than just term
loans.
BDCs with extensive experience in the lower, middle market
create customized, financing solutions for clients.
5.

21. BDCs take on more financial engineering than just term
loans.
BDCs with extensive experience in the lower, middle market
create customized, financing solutions for clients.
As solutions-oriented lenders, they partner with business
owners, equity sponsors, fundless sponsors, family-owned
businesses and management teams to craft capital
structures that enable them to pursue their business plans.
5.

22. Experienced Professionals
6

23. BDCs are staffed by professionals with deep experience,
both in the private-equity side and the mezzanine and
senior lending side of businesses.
6.

24. BDCs are staffed by professionals with deep experience,
both in the private-equity side and the mezzanine and
senior lending side of businesses.
They have closely examined thousands of companies and
can understand more extensively and quickly how to
customize a financing solution for a client.
6.

25. BDCs are beginning to emerge as a significant
force in lending to smaller, middle-market
businesses, but there still is limited understanding
of what they are and how they work.

26. CEOs who haven’t encountered them will find
them not only to be alternative sources of
capital, but easier to work with than traditional
lenders, and conclude that they should be a
regular part of their financing tools.

27. w w w . c h i e f e x e c u t i v e . n e t
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