Business Development Company (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. But 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 private investments.

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 managerial assistance, but do not control the companies.

BDCs have great potential for community-based investment and economic development—imagine a locally-focused BDC. But they haven’t been used that way to date. Most BDCs are Wall Street creations focused on “middle market” companies, which are substantially larger than what we typically think of as small, Main Street or even mid-sized businesses.

The 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.


  • A source of long term capital that falls somewhere between venture capital, IPOs and m&a
  • BDCs have been legal since 1980
  • Portfolio companies benefit from the expertise and economies of scale of the BDC, while retaining their independence
  • Shares in the BDC may appreciate faster and be more valuable than an individual company’s shares
  • Ordinary investors can invest in a BDC with the ease of buying stock



  • 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
  • BDCs charge a fee for their management services


For more information on BDCs and CBDCs, see