In practice
A BDC is formed under the Investment Company Act of 1940 and elects BDC status, which allows a closed-end structure with limits on leverage and affiliated dealings. It usually qualifies as a regulated investment company for tax purposes, which drives the payout. Variants include publicly traded, non-traded and private BDCs. It is often confused with an interval fund.
An example
Round numbers, not a real fundSay a BDC raises $1 billion and lends it to mid-sized companies at an average 11% interest. It generally pays most of that income out to shareholders.
Why it matters
It is a common way for individual investors to own private credit, and some BDCs trade on an exchange while others do not.
In the news
Recent stories that use the termA definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.