Direct Lenders in the U.S. Middle Market
71 Pages Posted: 3 May 2020 Last revised: 18 Apr 2024
Date Written: April 7, 2020
Abstract
This paper studies the rise of direct lending using a comprehensive dataset of investments by business development companies (BDC). We exploit three exogenous shocks to credit supply, including new banking regulations and a major finance company collapse, to establish that BDC capital acts as a substitute for traditional financing. Using firm-level data, we further document that firms' access to BDC funding stimulates their employment growth and patenting activity. Beyond credit provision, BDCs contribute to firm growth through managerial assistance.
Keywords: business development companies, direct lending, private debt, middle market, economic growth
JEL Classification: G20, G23, G32
Suggested Citation: Suggested Citation