Henri Steenkamp

Research Studies and Opinions


Despite high-profile commitments by major banks to small-business lending, overall loan volume to small and middle-market companies has declined. Estimates from the Federal Reserve Bank of Cleveland reveal that small-business lending has plummeted from more than 50 percent of non-farm, nonresidential bank lending in 1995 to less than 30 percent in 2014, with little sign of a reverse. In addition, few banks are willing to make cash-flow loans to smaller middle-market companies, those with EBITDA of less than $10 million.

CFOs looking for capital, especially cash-flow loans, are increasingly discovering alternative sources, particularly Business Development Companies (“BDCs”). In the 1970s, a perceived crises in capital markets led Congress to amend the Investment Company Act of 1940 in 1980. This added a new category of closed-end investment companies known as BDCs. BDCs make cash-flow loans as capital providers to private or thinly traded portfolio companies for the long-term, and BDCs work best when they function as a business partner. There are now about 50 BDCs in the US with more on the way. CFOs of companies with $10 million to $50 million in EBITDA should know how to engage, connect and work with them.

Read the full article at Saratoga Investment Corp.