3 Business Development Companies (BDCs) That Yield 7% or More

BDCs raise much of their funding capital via initial public offering, but also use that capital to leverage against borrowings. So BDCs will borrow capital at a relatively low rate and lend it out at much higher rates. The money is usually loaned to “middle-market companies” that need growth capital. Hence, the name “business development companies.” BDCs will usually take warrants along with the money they loan, so if their borrower is successful, they can buy into the business at a favorable price and flip the investment if they so choose. BDCS With Killer Yields...

Wells Fargo Business Development Company Index (NYSEARCA:BDCS) does exactly that, investing in over 40 BDCs — pretty much all of them — and thus providing you the safety and security of knowing that if one blows up, the whole basket won’t. BDCS currently has an annualized yield of 7.6%. TCP Capital Corp (NASDAQ:TCPC) specializes in the arena that I like the best, which is offering loans between $10 million and $45 million to middle-market companies with enterprise values that range from small ($100 million) to large ($1.5 billion). Gladstone Capital Corporation (NASDAQ:GLAD) has advantages that other BDCs share, which is that they tend not to correlate with the overall market.

Source: InvestorPlace

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