Access to Small Business Investor Capital Act

This bill, S. 1808, directly amends the calculation of acquired fund fees and expenses for registered investment companies. Specifically, it permits these companies to omit fees incurred indirectly from investments in Business Development Companies (BDCs) from their fee table disclosure. This change makes BDC investments more appealing to registered investment companies, as it reduces the reported expense ratio associated with holding BDCs. The immediate effect is a regulatory tailwind for BDCs, as a larger pool of institutional capital gains an incentive to invest in them. The money trail flows directly into BDCs. Registered investment companies, such as mutual funds and ETFs, will find BDCs more attractive for portfolio allocation due to the reduced reporting burden on fees. This increased demand for BDC shares translates into higher valuations for BDCs and provides them with more capital to deploy into small and medium-sized businesses. BDCs are structured to provide debt and equity financing to private companies, so this legislation ultimately channels more capital into the small business sector, fostering growth and job creation. There is no direct appropriation of funds; the mechanism is regulatory relief. Historically, regulatory changes that reduce reporting burdens or increase investment attractiveness for specific asset classes have led to increased capital flows and positive market reactions for the affected entities. While a direct historical precedent for BDC fee exclusion is not available, similar legislation easing investment restrictions or reporting for specific investment vehicles has consistently resulted in increased demand. For example, the JOBS Act of 2012, which eased regulations for small companies to raise capital, led to a surge in crowdfunding and small IPOs, benefiting the broader small-cap market over the subsequent years. Specific winners include publicly traded BDCs. Companies like Ares Capital Corporation ($ARCC), Main Street Capital Corporation ($MAIN), Hercules Capital, Inc. ($HTGC), Blackstone Secured Lending Fund ($BXSL), and Carlyle Secured Lending, Inc. ($CGBD) will experience increased institutional demand for their shares. This demand will support their stock prices and provide them with a lower cost of capital, enabling them to expand their lending and investment activities. There are no clear losers from this legislation; it is a net positive for BDCs and the small businesses they fund. The bill has been introduced in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs. With bipartisan sponsorship, including Senator McCormick, a Republican, and Senator Alsobrooks, a Democrat, the bill has a strong likelihood of advancing through committee and receiving a floor vote. The next step is committee consideration and markup. Given the non-controversial nature of the regulatory adjustment and its benefit to small businesses, passage is probable within the current legislative session.