Business Development Company (BDC)You may have heard of the term Business Development Company (BDC) and wondered what makes them different. We are currently invested in a few in our own personal portfolio, and recently a friend asked me to explain why they are different. Funny thing – I did not know!

What I did know is that we have been pleased with the performance of those in our portfolio, which were hand picked by Tim Plaehn, whose guidance we follow on most of our investments. (See this post for more on Tim.) Tim specifically picks BDC’s that are not highly leveraged and stand a good chance to grow – we love that!

So what are they, exactly? To find out, I turned to my new “friend.” the latest version of ChatCPT. Here is what I learned:

A Business Development Company (BDC) is a type of publicly traded investment company that primarily invests in small and medium-sized businesses. BDCs are designed to provide investors with exposure to these types of companies, which might otherwise be difficult for individual investors to access.

BDCs are regulated investment companies, which means they must meet certain requirements set by the U.S. Securities and Exchange Commission (SEC). BDCs are required to distribute at least 90% of their taxable income to investors in the form of dividends, and they are generally exempt from corporate income tax.

Investing in a BDC can be a good way to diversify your portfolio and potentially earn a higher return than you might get from more traditional investments like stocks or bonds. BDCs often pay high dividend yields, which can be particularly attractive to income-focused investors.

Now we know!

(From: ChatGPT Feb 13 Version.)