Business Development Company (BDC)

A vehicle established by Congress in 1980 to allow smaller, retail investors to participate in and benefit from investing in small private businesses as well as the revitalization of larger private companies.

BDCs were designed to mimic venture capital (VC) or private equity (PE) funds to provide provide investors with a way to invest in small companies and participate in the sale of those investments. However, VC and PE funds are often closed to all but wealthy investors. BDCs, on the other hand, allow anyone who purchases a share to participate in the open market. This feature often attracts money to newly public BDCs, thereby giving them a faster way to raise capital for investments than VC funds, which are generally closed-end funds created by wealthy investors.

BDCs have, for a variety of reasons, not lived up to their original purpose and are mainly used for pooled debt securities.