Business development companies are still lagging the market in a sign of persisting concern over the performance of loans to small and midsize businesses. Although default rates and losses in BDC loan portfolios have not been as dire as initially expected during the depth of the market panic in March, BDCs have struggled to recover, even as the broader market has rebounded.
Liquidity injections by BDCs, loan modifications, the reopening of the economy and government funding programs have helped to sustain cash flows and stave off defaults by small to midsize businesses. Yet the risk of default rates rising remains elevated as long as the economy is not out of the woods. The potential threat of a second wave of the pandemic also looms large.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.