BDC Leverage
Plain-English definition
BDC leverage is the use of borrowed money or other senior securities to finance investments in addition to shareholder capital.
Why it matters
Leverage can increase income and shareholder returns when investment earnings exceed funding and operating costs. It can also magnify losses, NAV declines, refinancing pressure, and share-price volatility.
Example
Under current federal rules, a BDC that satisfies the required approval and disclosure conditions may operate with minimum asset coverage of 150%, which can permit roughly $2 of debt for each $1 of net assets. A particular BDC may choose to use less.
How income investors use it
Compare debt to equity, statutory asset coverage, funding cost, maturity schedule, fixed and floating rate exposure, liquidity, and covenant headroom. Avoid treating the legal maximum as a target.
Fly High perspective
Leverage informs individual-company analysis because it can change both earning power and loss sensitivity. Fly High does not make leverage a separate universal score. Its effect becomes central when it changes the company-specific earnings supporting the dividend.
This material is general education, not individualized investment, tax, or legal advice.