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Bill to Modernize BDCs Overwhelmingly Passes House Committee

A bipartisan bill that would change certain requirements relating to the capital structure of business development companies passed the House Financial Services Committee in a 58-2 vote on Wednesday.

H.R. 4267, the Small Business Credit Availability Act, amends the Investment Company Act of 1940 to modernize the regulatory regime for BDCs for the first time since the 1980s.

BDCs are investment vehicles designed to facilitate capital formation for small- and middle-market companies. The legislation requires the SEC to streamline the offering, filing, and registration processes for BDCs to eliminate certain regulatory burdens and increases a BDCs’ ability to deploy capital to businesses by reducing its asset coverage ratio—or required ratio of assets to debt—from 200 percent to 150 percent if certain requirements are met.

The bill is sponsored by Rep. Steve Stivers (R-OH) and co-sponsored by four Democrats and three Republicans including Rep. Gwen Moore (D-WI), Rep. Patrick McHenry (R-NC), and Rep. James Himes (D-CT).

The committee also passed H.R. 4263, the Regulation A+ Improvement Act, which increases the amount that companies can offer and sell under SEC Regulation A, Tier II, from $50 million to $75 million, adjusted for inflation by the SEC every 2 years to the nearest $10,000. The bill, which was introduced by Rep. Tom MacArthur (R-NJ), passed in a 37-23 vote.

House and Senate votes are required before the bills are passed.

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