Direct Lenders in the U.S. Middle Market

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

Davydiuk, Tetiana and Marchuk, Tatyana and Rosen, Samuel, Direct Lenders in the U.S. Middle Market (April 7, 2020). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3568718 or http://dx.doi.org/10.2139/ssrn.3568718