Believe it or not, the U.S. government is one of the biggest backers of high-yield BDCs, which frequently pay investors 10% or more per year in dividends. Through the Small Business Administration, BDCs large and small are borrowing cheap capital. Golub Capital BDC (NASDAQ: GBDC) and Fifth Street Finance (NASDAQ: FSC) have two licenses from which they can borrow money at rates mere basis points higher than the U.S. Government.
Likewise, smaller players including Main Street Capital (NYSE: MAIN) and Triangle Capital (NYSE: TCAP) are virtually reliant on the U.S. government to fund their balance sheet. And while it may seem to be a boon for shareholders at the cost of government, this program has been an absolute success. See why these high-yield BDCs love borrowing from the government at rates you simply will not believe.
Source: Motley Fool
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