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Operationally, Patriot Capital Funding, Inc. (PCAP) is a business development company that provides customized financing to private equity sponsors that invest primarily in small and mid-sized companies. PCAP typically invests in companies with annual revenues of $10$100 million. Investments usually take the form of senior secured loans, junior secured loans, and subordinated debt investments, often with an equity component. PCAP also offers a "one-stop" financing alternative that typically includes a revolving credit line, one or more senior term loans, and a subordinated debt investment. PCAP was founded in November 2002, and funded its first investment in late 2003.
Organizationally, PCAP is a closed-end management investment company (a closed-end fund), regulated as a Business Development Company (BDC) under the Investment Company Act of 1940 and treated as a Regulated Investment Company (RIC) for income tax purposes. To maintain its RIC status, PCAP must distribute the vast majority of its investment company income, meaning that the firm must rely significantly on outside funding for growth, rather than internal capital generation. As of September 30, 2007, PCAP had net investments of approximately $325 million in 25 portfolio companies, total assets of $338 million, and net assets/shareholders' equity of $195 million ($10.67 net asset value per share).
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