The
regulatory framework for Business Development Companies
(BDCs) was created in 1980 by the U.S. Congress. Congressional
intent behind the creation of BDCs was to encourage the
flow of public capital to private companies. It is StarInvest Group’s intent to do just that by financing
small companies and helping them to fulfill their business
plans and build value for StarInvest Group shareholders
by increasing the asset value of its portfolio.
In the past, private investments were generally limited
to accredited investors (wealthy individuals) and institutional
investors (banks, insurance companies, employee benefit
plans, and trusts and charitable organizations). However,
the introduction of the Business Development Company model
has created a conduit for individual investors to invest
in both private & public companies, and for ‘underserved’
companies to receive the financing they need to continue
growth. |
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There
are a number of characteristics that differentiate Business
Development Companies from other public companies.
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A BDC is eligible to raise up to $5M per year by the issuance
and sale of “free trading stock” using an exemp-tion
from registration with the SEC (Regulation E).
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As an investment company under the 1940 act, a BDC is by definition
not considered a ‘Penny Stock’. A BDC is exempt
from the SEC’s Penny Stock Rule 15g-9 that requires
broker/dealers to qualify investors prior to purchasing certain
low priced securities and prohibits solicitation of those
securities.
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The asset to debt ratio requirement for BDCs provides for
a very conservative capital structure compared to other finance
companies including banks. The 1980 Act, which established
the rules and regulations for BDCs, requires that BDCs maintain
at least 200% asset coverage or a equity to debt ratio of
no less than 2:1.
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