What is a business development company, or BDC?
Answer: A business development company, or BDC, is a closed-end investment company that primarily lends to or invests in small and midsize businesses, often privately held. Investors gain exposure to private credit or equity and potential distributions, but face borrower defaults, leverage, and valuation risks. BDC shares may be publicly traded or nontraded.
By Edward Papier, CIMA, CF2, CM&AA ยท Last updated November 5, 2026
What is the difference between a traded and a non-traded BDC?
A traded BDC lists its shares on a stock exchange, so investors can buy and sell daily, but the share price can move well above or below the value of the loans it holds. A non-traded BDC is sold through advisors and offers limited periodic repurchases, usually at net asset value. Non-traded BDCs avoid market price swings but are much less liquid.
How are BDC distributions taxed?
Most BDCs elect to be taxed as regulated investment companies. They avoid corporate income tax by distributing at least 90% of their taxable income to shareholders. Because that income is mostly interest from loans, distributions are generally taxed as ordinary income rather than at lower qualified dividend rates. Holding a BDC in an IRA can defer that tax.
Is a BDC the same as a private credit fund?
Not exactly. Many BDCs are, in effect, private credit funds wrapped in a registered structure, and they are one of the main ways individual investors reach private lending. But BDCs are subject to rules that private funds are not, such as leverage limits and public reporting, and they are open to investors who are not accredited.
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Edward Papier, CIMA, CF2, CM&AA
President, Amadeus Wealth Alternatives, Hackensack, NJ
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