How Business Development Companies Work
A business development representative (BDR) is responsible for discovering new business opportunities for a client’s company. Companies like Elchai Group conduct market research, talk to current and potential customers, and schedule marketing assessments for sales reps. They also stay on top of new trends and competitors. A business development representative is the most valuable member of the company’s team, as they can identify areas that need improvement to boost sales.
Ares Capital Corporation
Ares Capital Corporation is a private equity firm that focuses on investments in middle market companies. Its main investment strategies include mezzanine debt, acquisitions, restructurings, and leveraged buyouts. In addition, it makes equity investments. Ares Capital invests in businesses with a stable cash flow, proven competitive advantages, and experienced management teams.
The company invests in both debt and equity capital from investors. In addition to investing in equity, it also invests in subordinated debt, which is provided to risky middle market companies at high rates. These investments carry a higher risk than common and preferred equity, but are safer than secured debt. Because of this, Ares Capital can issue a loan to a company at a higher interest rate than the company can afford, and it can potentially reduce the risk of a permanent loss of capital.
Ares is a leading alternative credit manager. The firm manages $60 billion in AUM for this sector. The industry is booming due to low interest rates, which have driven investors to seek higher yields. Additionally, increased regulation has forced banks to exit certain lending segments. The company has developed a model to invest in companies outside the banking system.
Ares Capital has solid second-quarter results. Its weighted average annualized yield increased from 3.6% to 8.6%. It also boasts a low spread of 5.0%, which is double the rate of most large commercial banks. With the strong second-quarter results, Ares Capital looks like a solid buy-and-hold option.
Oaktree Specialty Lending Corporation
Oaktree Specialty Lending Corporation (OSLC) is a business development company that specializes in investments in middle market companies. Its portfolio consists of debt instruments like bonds and preferred equity. Moreover, it also invests in sponsor-led acquisitions and leveraged buyouts. The company has over $166.0 billion in assets under management.
Despite the current difficult economic environment, the company is well-positioned for continued strong performance. Its recent results have been quite impressive. It has delivered an annualized return on equity of 12.0% and a steady increase in net asset value since the beginning of 2018. Furthermore, OCALA’s most recent reported NAV of $7.22 per share is the highest under Oaktree’s management, and the company’s dividend yield is 8.6%.
The company is a business development company, regulated under the Investment Company Act of 1940. The company’s management fees are based on the net asset value of its assets. It has the right to call undrawn capital from investors in its funds. Moreover, it values its collateralized loan obligation vehicles based on the aggregate par value of their principal cash and collateral assets. Meanwhile, the value of publicly traded business development companies is based on the total net assets of the company, excluding cash.
OCSL’s strategic focus is on financing solutions for middle-market companies. It aims to deliver flexible and innovative solutions to businesses across a variety of industries.
Ares Capital is one of the leading Alternative Credit managers in the United States, with more than $60 billion in assets under management (AUM). As interest rates remain low, more investors are looking for alternative investment options with higher yields. Additionally, increased regulation is causing banks to exit certain lending segments.
Ares Capital’s investment strategy focuses on mid-market companies that are looking to grow. The firm prefers to invest in companies with proven competitive advantages and experienced management teams. Its investments are typically a combination of debt and equity investments. Its investments are typically backed by first and second-lien loans, mezzanine debt, and warrants.
Ares Capital’s size gives it a competitive advantage when looking for new investments. Its affiliation with Ares Management, a company with more than $42 billion in assets, helps the company to close larger deals than smaller BDCs. Additionally, it has more than 100 direct loan originators across six offices in the U.S. That allows Ares Capital to make deals of up to $400 million. The company also has a larger portfolio than smaller BDCs, with investments in over 360 companies. Its largest investments account for 4.6% of its portfolio.
The management of Ares Capital receives a 1.5% fee on the assets they invest in. This gives them an incentive to use the equity and leverage they have built up in their portfolio to generate the greatest amount of profits. As a result, Ares Capital is able to achieve a high rate of return on their equity.
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