Business Development Co. (BDC)

A Business Development Company (BDC) is a type of publicly traded company that makes investments in small and mid-sized businesses. In a way, a BDC is like a venture capital fund. The difference is, only institutions and very wealthy individuals can invest in VC funds. In contrast, BDCs are publicly traded on the stock market, so anyone— including unaccredited investors—can invest by buying shares of the BDC. They can also sell those shares if they need to, overcoming the problem of a lack of liquidity associated with other ways of investing in small companies.

BDCs may make equity or debt investments.

To qualify as a BDC, companies must be registered in compliance with Section 54 of the Investment Company Act of 1940. Congress updated the 1940 Act in the 1980s, creating the concept of a BDC as a way to encourage investment in small and mid-sized private (or thinly traded) companies.

A BDC is similar to a public holding company, like Berkshire Hathaway. However, public holding companies typically take a majority or outright ownership stake and an active role in management. BDCs, in contrast, take a minority stake and provide assistance, but do not control the companies. They are taxed as a regulated investment company, similar to a REIT.

BDCs have great potential for community-based investment and economic development, but they haven’t been used that way to date. Most BDCs, for example, focus on “middle market” companies, which are substantially larger than what we typically think of as small or Main Street businesses.

Community Business Development Company (CBDC)

The Commonwealth Group is one group that is pursuing the concept of a Community Business Development Company (CBDC). The idea is to adapt the BDC and public holding company models to community-scale businesses. Investments might be grouped around an industry vertical or affinity, for example renewable energy, or geography, such as a city, state or region.

For more information on BDCs and CBDCs, see


  • Allows ordinary investors to invest in a portfolio of private companies with the ease of buying stock.
  • The fund model provides diversification.
  • Because the BDC is publicly traded, investors can sell their shares or buy new ones at any time.
  • As a regulated investment company, a BDC must distribute at least 90% of its earnings to shareholders in the form of dividends



  • Today, most BDCs are big private-equity like funds. There aren’t any community-based BDCs, as of yet.
  • The success of a BDC depends upon its management, so do your due diligence
  • It’s unclear what fees would be charged by BDC management