Spending Legislation Contains Long-Awaited Reforms For BDCs

On March 23, 2018, Congress passed and President Trump signed the Consolidated Appropriations Act of 2018, the omnibus spending bill to fund the federal government through September. The spending bill included the Small Business Credit Availability Act (the "SBCAA"), which relaxes leverage and offering restrictions that many business development companies ("BDCs") have been seeking over the last several years.

The SBCAA amends the Investment Company Act of 1940, as amended (the "1940 Act") to permit a BDC to double the amount of leverage the BDC may utilize. It does so by reducing a BDC's required asset coverage¹ from 200% to 150%, subject to certain initial approval and ongoing reporting requirements. The SBCAA also will meaningfully change how BDCs are operated and offered to investors, as it requires the Securities and Exchange Commission ("SEC") to streamline the offering, filing and registration processes for BDCs to more closely mirror those available to