Business development companies, or BDCs, can give investors exposure to private businesses across a range of industries while generating high cash flow. Their are a major draw for investors seeking a stream of passive income, but 2026 has found BDCs at the center of several current tensions.
“Much of the pressure over the last year has revolved around headlines related to liquidity and redemption limits at some non-traded funds, a few idiosyncratic credit events like First Brands and Tricolor (bankruptcies) and uncertainty about how AI may disrupt certain software borrowers,” says Coulter Regal, product manager at VanEck, which manages the VanEck BDC Income ETF (ticker: ). He adds that lower interest rates have also weighed on the group because BDC loans are predominantly floating-rate.
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Still, Regal says those concerns have affected sentiment more than fundamentals in many cases, with credit quality across most BDCs holding up reasonably well. “The income case also remains compelling,” he says, “with many BDCs yielding double digits, an attractive level relative to other areas of the income market today.”
Publicly traded BDCs are also trading at discounts to , which Regal says may mean “much of the fear around private credit is already priced in.”
What Is a Business Development Company?
Business development companies invest in or lend to small and midsize businesses that may not have access to the same capital markets as larger corporations. Because these borrowers can be riskier, BDCs can often charge higher interest rates. Many BDC loans are floating-rate, which can generate more income when rates are higher but become a headwind when rates fall.
BDCs are diversified across many companies, but diversification only goes so far if credit quality deteriorates. The primary risk with BDCs is poor credit underwriting, says David Miyazaki, who focuses on BDCs as a portfolio manager at Confluence Investment Management.
“Rising or high levels of credit problems in loan portfolios are yellow and red flags, as they can lead to declining net asset value, lower income and ultimately, lower dividends,” he says.
Higher-quality BDCs tend to have strong management teams, disciplined underwriting and better portfolio construction, Regal says. He adds they often have “lower nonaccrual rates, dividends well covered by net investment income and a history of relatively stable NAVs across cycles.”
More vulnerable BDCs may have rising nonaccruals, heavy concentration in one sector or borrower, and distributions that look stretched relative to what the portfolio is earning, he says.
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Advantages and Risks of BDCs
The main benefit of BDCs is income. Like , BDCs generally must pay 90% of taxable income to shareholders. This is one reason their dividend yields are often much higher than traditional dividend stocks.
However, those distributions are treated as ordinary income, not , which can reduce the after-tax yield in taxable accounts. BDC exchange-traded funds can also have confusing fund fees and expenses from the underlying BDCs they hold, so investors should look at total return, not yield alone.
With that in mind, here are some of the top BDC stocks and ETFs to buy:
| BDC Stock/ETF | Forward Yield |
| Ares Capital Corp. () | 10.2% |
| Main Street Capital Corp. () | 8.2% |
| Blackstone Secured Lending Fund () | 13.3% |
| Hercules Capital Inc. () | 12.0% |
| FT Confluence BDC & Specialty Finance Income ETF () | 9.5%* |
| VanEck BDC Income ETF () | 9.6%* |
| Virtus Private Credit Strategy ETF () | 14.9%* |
*30-day SEC yield is reported for these funds.
Ares Capital Corp. ()
Ares Capital is the obvious starting point for a BDC income list because it’s the largest publicly traded BDC by market capitalization. Size is king in a sector where access to capital and portfolio selection can separate durable income from yield traps.
In the first quarter of 2026, the company’s was valued at $29.5 billion. It also had net investment income of 55 cents per share, which comfortably covers its 48-cent second-quarter dividend. This, combined with over $13.6 billion in market cap and a 10.2% forward yield, makes ARCC an intriguing option.
Main Street Capital Corp. ()
Main Street Capital is the polished overachiever of this BDC group. It offers a lower yield than some of its competitors, but it pays a monthly dividend and offers exposure to lower-middle-market companies where it can provide customized debt and equity capital.
The company declared a 26.5-cent-per-share dividend for July, August and September 2026 after paying a 30-cent supplemental dividend in June. Even better is that the preliminary second-quarter results point to another NAV increase, marking its 16th consecutive quarterly increase. So MAIN stock is less about chasing the highest yield and more about .
Blackstone Secured Lending Fund ()
Blackstone gives investors the opportunity to own BDCs with the backing of one of the world’s largest alternative asset managers. It invests primarily in first-lien senior secured debt. This type of debt is usually the highest priority for a firm and paid back first.
The company kicked off 2026 with a strong quarter, despite market volatility. Its net investment income for the quarter fully covered its 77-cent-per-share dividend. Nonaccruals — loans that have not been repaid in 90 days — did rise for the quarter, so it’s not risk-free. But its combination of income, scale and senior-secured credit does differentiate it from more growth-oriented or equity-heavy BDCs.
Hercules Capital Inc. ()
Hercules Capital focuses on venture, growth and established companies backed by venture capital and private equity firms in technology and life sciences. This gives it a more distinctive angle, but also a different risk profile since venture loans can have a higher risk of default and tech-related companies tend to be more volatile.
The company’s latest numbers were strong, though. In the first quarter of 2026, Hercules reported total investment income of $141.5 million, an 18.4% increase year over year, and net investment income of 48 cents per share, which covered its base cash distribution by 120%. It also increased its assets under management by nearly 22% year over year to $6.1 billion.
FT Confluence BDC & Specialty Finance Income ETF ()
FBDC takes an active management approach to BDC investing. It invests at least 80% of assets in BDCs and other specialty finance companies selected by the fund’s subadvisor, Confluence Investment Management. Having can be beneficial in an asset class where quality can vary widely, as it does with BDCs.
FBDC focuses on companies “led by management teams with long track records of success through multiple market cycles,” Miyazaki says. It has a large allocation to internally managed BDCs, which the managers believe have offered compelling risk-adjusted returns versus externally managed peers.
FBDC also makes a monthly payout, giving investors more frequent income than some other BDC ETFs. But this is paired with a 0.95% management fee, the highest on this list.
VanEck BDC Income ETF ()
is a good idea when investing in any asset class, and BDC stocks are no exception. For BDC diversification, BIZD is a top choice. It tracks the MVISUS Business Development Companies Index, which in turn tracks the largest and most liquid BDC companies trading in the U.S.
BIZD holds 36 of these BDCs currently, with Ares Capital the largest component of the portfolio at nearly 15% of assets. You’ll also find Main Street Capital, Blackstone and Hercules Capital in the top five holdings. This makes it a solid alternative if you were already considering those stocks for your portfolio or having trouble choosing between them.
And don’t let the 9.69% expense ratio reported on many fund pages scare you; this includes acquired fund fees and expenses from the BDCs it holds. The actual management fee is only 0.4% plus 0.02% in other fees.
Virtus Private Credit Strategy ETF ()
VPC is the most diversified approach on this list, but it’s not a pure BDC ETF. Instead, it tracks the Indxx Private Credit Index, which includes U.S.-listed BDCs as well as non-BDC with significant private credit exposure. VPC has nearly 60 holdings with the top 10 representing just under one-third of its assets. It also has a 0.75% management fee, but the 30-day SEC yield is 14.9%.
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Update 07/27/26: This story was previously published at an earlier date and has been updated with new information.
