On March 23, 2018, Congress passed its omnibus spending bill, the Consolidated Appropriations Act of 2018, to fund the federal government until October. Included within the spending bill is legislation, titled the Small Business Credit Availability Act, related to business development companies (BDCs). Included in the Small Business Credit Availability Act are various changes to regulations under the federal securities laws that impact BDCs. Among other things, the BDC-related portions of the legislation expand the ability of BDCs to utilize leverage and provide them with the ability to rely on liberalized SEC communication and offering rules currently only available to operating companies.

The BDC-related language contained in the omnibus spending legislation is fairly consistent with the most recent iterations of BDC legislation, but notably, it does not contain provisions pertaining to BDC ownership of registered investment advisers or certain revisions to the rules regarding eligible portfolio company investments.

Most significantly, the legislation:

• Allows BDCs to increase their debt-to-equity ratio from 1:1 to 2:1; and
• Aligns the BDC communication and offering rules with the more liberalized rules available to operating companies.

The chart below summarizes the changes to current BDC regulations that are included in the Small Business Credit Availability Act. The full text of the Consolidated Appropriations Act of 2018 and Small Business Credit Availability Act is available at http://docs.house.gov/billsthisweek/20180319/BILLS-115SAHR1625-RCP115-66.pdf. For information regarding prior iterations of the BDC legislation, please see the Eversheds-Sutherland (US) LLP legal alerts available at https://www.publiclytradedprivateequity.com/News/Legal-Alerts.

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