WASHINGTON — Sen. Dave McCormick, R-Pa., and Senator Angela Alsobrooks, D-Md., introduced the Access to Small Business Investor Capital Act, which would support small- and middle-market businesses by making it easier for business development companies to attract capital.

“Small businesses are the engine that powers a growing economy and creates good-paying jobs on Main Street,” McCormick said. “I’m proud to partner with my Banking Committee colleague, Sen. Alsobrooks, on this legislation to eliminate red tape and make it more attractive for investors to put capital into job-creators.”

In 1980, Congress authorized the incorporation of business development companies (BDCs) to facilitate the flow of capital to small- and middle-market businesses. BDCs are required to hold at least 70% of their investments in certain eligible assets, including private U.S. companies or public U.S. companies with equity market capitalization of up to $250 million, and must provide substantial managerial assistance to their portfolio companies. Currently, there are more than 130 BDCs that have made over $300 billion of investments in middle-market companies across the United States.

BDCs, however, have a disadvantage for potential investors because their fees and expenses are both incorporated into their share price and required by law to be reported by acquiring funds in their fee table. This effective double counting of BDC fees and expenses can make them less attractive for investment by overstating fund expenses.

This bill would remove the requirement that investment funds acquiring a stake in business development companies include its fees and expenses in the acquiring fund’s expense ratio. Eliminating this requirement will ensure that investors receive an accurate picture of a fund’s true costs and eliminate an impediment for institutional investors to provide capital to BDCs that, in turn, will be used to support small- and middle-market business.