Evolving Trends in Business Development Companies (BDCs) in the U.S. Direct Lending Market
April 21, 2026
OKUBO Tomohiro, KAIDO Yutaro, YAMAMOTO Kenta, WASHIMI Kazuaki
Financial System and Bank Examination Department
Abstract
In recent years, private credit has attracted growing attention as a form of financial intermediation by the NBFIs that mainly involves lending to unlisted firms. In particular, direct lending has been expanding, which provides loans to medium-sized firms and small firms, including through investment vehicles known as BDCs. BDCs are a U.S.-specific type of investment company and are considered relatively transparent due to mandatory quarterly disclosure requirements. At the same time, BDCs have a distinct liability structure compared to other direct lending funds (PD funds), as they raise capital from retail investors. This paper outlines trends and risks in the direct lending market, focusing on BDCs. Amid increasing linkages between Japanese banks and domestic institutional investors with BDCs and PD funds through investments and loans, the environment surrounding private credit markets could impact Japan's financial system. Close monitoring remains necessary.
Notice
The Bank of Japan Review Series is published by the Bank to explain recent economic and financial topics for a wide range of readers. This report, 2026-E-1, is a translation of the Japanese original, 2026-J-1, published in April 2026. Views expressed are those of the authors and do not necessarily reflect those of the Bank. If you have any comments or questions, please contact Financial System and Bank Examination Department (E-mail:post.bsd1@boj.or.jp).