1. Evaluation as a growing concern, not just a credit risk. A BDC looks at the entire business and its prospects for growth rather than just its credit history. Banks under tighter scrutiny as a result of recent law and regulation, such as the Dodd-Frank Act, now have less freedom in accepting risk. A BDC working with a bank can structure deals that otherwise might not be acceptable.
2. Focus on relationships, not just transactions. A BDC typically takes on an investment that is higher risk than most bank portfolios can tolerate. This opportunity means the BDC needs to truly understand a company’s business and to form an ongoing relationship with it, so it can help the company to expand. BDCs grow by doing their homework and maintaining investment discipline.
3. Certainty of closing. Once a BDC approves a company, there is a high certainty of closing a deal without wasting time. Often those who arrange a deal are on the investment committee approving it, unlike other financial institutions, where there are multiple levels of approval and fewer people who fully understand a company and its marketplace.
4. Shrinking capital market. There are fewer banks with lower market shares and their capital structures have become more conservative. This contraction has narrowed the capital window for many smaller, middle-market companies, even stable and conservative ones.
5. Customized financial engineering. BDCs take on more financial engineering than just term loans. It is common for a BDC to fund a shareholder buyout or a dividend recap, allowing owners to take money from a business. BDCs with extensive experience in the lower, middle market create customized, financing solutions for clients. As solutions-oriented lenders, they partner with business owners, equity sponsors, fundless sponsors, family-owned businesses and management teams to craft capital structures that enable them to pursue their business plans.
6. Experienced professionals. BDCs are staffed by professionals with deep experience, both in the private-equity side and the mezzanine and senior lending side of businesses. They have closely examined thousands of companies and can understand more extensively and quickly how to customize a financing solution for a client.
BDCs are beginning to emerge as a significant force in lending to smaller, middle-market businesses, but there still is limited understanding of what they are and how they work. CEOs who haven’t encountered them will find them not only to be alternative sources of capital, but easier to work with than traditional lenders, and conclude that they should be a regular part of their financing tools.
Christian L. Oberbeck is chairman of the board and CEO of Saratoga Investment, a business development company traded on the NYSE (SAR).
Chief Executive Group exists to improve the performance of U.S. CEOs, senior executives and public-company directors, helping you grow your companies, build your communities and strengthen society. Learn more at chiefexecutivegroup.com.
0
1:00 - 5:00 pm
Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process
Executives expressed frustration with their current strategic planning process. Issues include:
Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns. They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning. Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process. This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented. If you are ready for a Strategic Planning tune-up, select this workshop in your registration form. The additional fee of $695 will be added to your total.
2:00 - 5:00 pm
Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations.
Limited space available.
10:30 - 5:00 pm
General’s Retreat at Hermitage Golf Course
Sponsored by UBS
General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.
The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.
