Morris Manning & Martin, LLP

Alphabet soup: The ABCs of BDCs

04.13.2018

The Small Business Credit Availability Act (SBCAA), which was signed into law on March 23, includes provisions to allow business development company (BDC) managers to potentially deploy more capital by reducing the asset coverage ratio from 200% to 150%, as well as streamline the process for registering new public BDCs with the SEC.

The law also has implications for BDC managers and private credit specialists, including the potential for the ‘private BDC’, which is a non-traded, privately-offered fund regulated as a BDC, to emerge as a simpler alternative to more established private credit fund structures. Alt Credit Intelligence turned to Partner Owen Pinkerton, who explained that the private BDC model can eliminate the need for cumbersome fund structuring for offshore investors. “Most if not all, private BDCs are treated as RICs, which means that they benefit from pass-through tax treatment as long as they distribute at least 90% of their income to investors,” said Pinkerton.

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Article by: James Harvey

Featured in Alt Credit Intelligence, April 13, 2018