Omnibus Budget Bill Eases BDC Leverage, Filing, Reporting And Communication Rules

Business development companies (BDCs) won greater flexibility to leverage their loans to small and midsize businesses when President Trump signed the $1.3 trillion government spending bill on March 22, 2018. The 2,148 page Consolidated Appropriations Act of 2018 (the "Budget Act") increases BDC leverage caps to two times equity. The law also eases offering, proxy and reporting requirements that previously applied only to operating companies. These revised requirements are, together, expected to help BDCs raise capital.

BDC Leverage Limits Expanded

Section 61(a) of the Investment Company Act of 1940, as amended (the "1940 Act") applies the asset coverage requirements of Section 18(a)(1)(A) to BDCs. Under prior law, BDCs must maintain asset coverage of 200 percent when they obtain leverage.