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What is a business development company (BDC)?
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The Business Development Bank of Canada (BDC; French: Banque de développement du Canada) is a Crown corporation and national development bank wholly owned by the Government of Canada, mandated to help create and develop Canadian businesses through financing, growth and transition capital, venture capital and advisory services, with a focus on ...
- What Is A Business Development Company (BDC)?
- Understanding Business Development Companies
- Bdcs vs. Venture Capital
- Advantages and Disavantages of BDC Investment
- How to Invest in A BDC
- How Does A BDC Make Money?
- The Bottom Line
A business development company (BDC) is an organization that invests in small- and medium-sized companies as well as distressed companies. A BDC helps these firms grow in the initial stages of their development. With distressed businesses, the BDC helps the companies regain sound financial footing. Similar to closed-end investment funds, many BDCs ...
The U.S. Congress created business development companies in 1980 to fuel job growth and assist emerging U.S. businesses in raising funds. BDCs are closely involved in mentoring and developing the companies in their portfolios because it is in a BDC's best interest to help them become successful. BDCs invest in private companies and small public fir...
If BDCs sound similar to venture capital funds, they are. However, there are some key differences. One relates to the nature of the investors each seeks. Venture capital funds are primarily available to large institutions and wealthy individuals through private placements. In contrast, BDCs allow smaller, nonaccredited investors to invest in them, ...
Advantages Explained
1. High dividend yields: Because BDCs are regulated investment companies(RICs), they must distribute over 90% of their profits to shareholders. That RIC status means they don't pay corporate income tax on profits before distributing them to shareholders. The result is above-average dividend yields. 2. Open to retail investors: BDCs expose investors to debt and equity investments in predominantly private companies—typically closed to retail investors. 3. Liquid: BDCs trade on public exchanges,...
Disadvantages Explained
1. High risk: Although a BDC itself is liquid, many of its holdings are not. The portfolio holdings are primarily private firms or small, thinly-traded public companies. BDCs invest aggressively in companies that offer both income now and capital appreciation later; as such, they register somewhat high on the risk scale. 2. Sensitive to interest rate spikes: A rise in interest rates—making it more expensive to borrow funds—can impede a BDC's profit margins. 3. Illiquid or opaque holdings: Bec...
A business development company is a publicly traded firm with stocks trading on public exchanges, so you can purchase stocks through your broker. Some BDC stocks are included in exchange-traded funds and mutual funds. For example, the VanEck BDC Income ETF is offered through many brokers and is available to retail investors.
Business development companies can make money in several different ways. One of the most common is to purchase equity from the companies they provide funding for and sell it when it appreciates. If a BDC buys convertible bonds from a company it has invested in, it can receive yields from the bonds and later convert them to equity. Once converted, t...
Business development companies are firms that exist to assist smaller or financially struggling businesses. BDCs use fundraising techniques to raise capital for themselves from investors and then use that money to invest in these smaller businesses. They were created by Congress in 1980 to help small businesses grow while attempting to shield them ...
A Business Development Company (" BDC ") is a form of unregistered closed-end investment company in the United States that invests in small and mid-sized businesses. This form of company was created by the US Congress in 1980 in the amendments to the Investment Company Act of 1940.
Sep 29, 2022 · What is the Business Development Bank of Canada (BDC)? The Business Development Bank of Canada (BDC) was founded in 1944 to help Canadian entrepreneurs and small and medium-sized...
- Will Kenton
May 7, 2021 · A business development company invests money in privately owned, small- and medium-sized companies. Generally the businesses are facing challenges and need help to grow or get back on...
- Robyn Conti
We are BDC, the Business Development Bank of Canada and the financial institution devoted to Canadian entrepreneurs.
We are BDC, the Business Development Bank of Canada and the financial institution devoted to Canadian entrepreneurs. We help create and develop strong Canadian businesses through financing, advisory services and capital, with a focus on small and medium-sized enterprises.
