SBA-GUARANTEED DEBENTURES

12 Months Ended

Dec. 31, 2025

SBA-GUARANTEED DEBENTURES

SBA-GUARANTEED DEBENTURES

NOTE 10 — SBA-GUARANTEED DEBENTURES

Due to the SBIC subsidiaries’ status as licensed SBICs, the Company has the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the regulations applicable to SBIC funds, a single licensee can have outstanding debentures guaranteed by the SBA subject to a regulatory leverage limit, up to two times the amount of “regulatory capital,” as such term is defined by the SBA. SBA-guaranteed debentures have fixed interest rates that equal prevailing 10 year U.S. Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semi-annually. The principal amount of the SBA-guaranteed debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. SBA-guaranteed debentures are also subject to certain fees payable by the SBICs at the time such debentures are drawn. SBA-guaranteed debentures drawn before October 1, 2019 incur upfront fees of 3.425%, which consists of a 1.00% commitment fee and a 2.425% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. SBA-guaranteed debentures drawn after October 1, 2019 incur upfront fees of 3.435%, which consists of a 1.00% commitment fee and a 2.435% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. Once pooled, which occurs in March and September of each applicable year, the SBA-guaranteed debentures bear interest at a fixed rate that is set to the current 10 year treasury rate plus a spread at each pooling date.

As of both December 31, 2025 and 2024, the SBIC I subsidiary had $75,000,000 in regulatory capital and $124,000,000 and $150,000,000 of SBA-guaranteed debentures outstanding, respectively. During the year ended December 31, 2025, the SBIC I subsidiary repaid $26,000,000 of SBA-guaranteed debentures that matured during the period. As of both December 31, 2025 and 2024, the SBIC II subsidiary had $87,500,000 in regulatory capital and $175,000,000 of SBA-guaranteed debentures outstanding.

On August 12, 2014, the Company obtained exemptive relief from the SEC to permit it to exclude the SBA-guaranteed debentures of the SBIC subsidiaries from the definition of senior securities in the asset coverage requirement applicable to the Company under the 1940 Act. The exemptive relief provides the Company with increased flexibility under the asset coverage requirement by permitting it to borrow up to $325,000,000 more than it would otherwise be able to absent the receipt of this exemptive relief.

On a stand-alone basis, the SBIC subsidiaries collectively held $492,710,365 and $510,105,270 in assets at December 31, 2025 and 2024, respectively, which accounted for approximately 47.3% and 52.0% of the Company’s total consolidated assets at December 31, 2025 and 2024, respectively.

The following table summarizes the SBIC I subsidiary’s SBA-guaranteed debentures as of December 31, 2025:

Issuance Date	Licensee	Maturity Date	Debenture Amount		Interest Rate		SBA Annual Charge
October 22, 2015	SBIC I subsidiary	March 1, 2026	$	6,500,000	2.51	%	0.36	%
October 22, 2015	SBIC I subsidiary	March 1, 2026		1,500,000	2.51	%	0.74	%
November 10, 2015	SBIC I subsidiary	March 1, 2026		8,800,000	2.51	%	0.74	%
November 18, 2015	SBIC I subsidiary	March 1, 2026		1,500,000	2.51	%	0.74	%
November 25, 2015	SBIC I subsidiary	March 1, 2026		8,800,000	2.51	%	0.74	%
December 16, 2015	SBIC I subsidiary	March 1, 2026		2,200,000	2.51	%	0.74	%
December 29, 2015	SBIC I subsidiary	March 1, 2026		9,700,000	2.51	%	0.74	%
November 28, 2017	SBIC I subsidiary	March 1, 2028		25,000,000	3.19	%	0.22	%
April 27, 2018	SBIC I subsidiary	September 1, 2028		40,000,000	3.55	%	0.22	%
July 30, 2018	SBIC I subsidiary	September 1, 2028		17,500,000	3.55	%	0.22	%
September 25, 2018	SBIC I subsidiary	March 1, 2029		2,500,000	3.11	%	0.22	%
Total SBIC I subsidiary SBA-guaranteed Debentures			$	124,000,000

The following table summarizes the SBIC II subsidiary’s SBA-guaranteed debentures as of December 31, 2025:

SBIC II SBA-guaranteed Debentures

Issuance Date	Licensee	Maturity Date	Debenture Amount		Interest Rate		SBA Annual Charge
October 17, 2019	SBIC II subsidiary	March 1, 2030	$	6,000,000	2.08	%	0.09	%
November 15, 2019	SBIC II subsidiary	March 1, 2030		5,000,000	2.08	%	0.09	%
December 17, 2020	SBIC II subsidiary	March 1, 2031		9,000,000	1.67	%	0.09	%
December 17, 2020	SBIC II subsidiary	March 1, 2031		6,500,000	1.67	%	0.27	%
February 16, 2021	SBIC II subsidiary	March 1, 2031		13,500,000	1.67	%	0.27	%
February 26, 2021	SBIC II subsidiary	March 1, 2031		10,000,000	1.67	%	0.27	%
March 2, 2021	SBIC II subsidiary	March 1, 2031		10,000,000	1.67	%	0.27	%
April 21, 2021	SBIC II subsidiary	September 1, 2031		10,000,000	1.30	%	0.27	%
May 14, 2021	SBIC II subsidiary	September 1, 2031		6,700,000	1.30	%	0.27	%
May 28, 2021	SBIC II subsidiary	September 1, 2031		7,300,000	1.30	%	0.27	%
July 23, 2021	SBIC II subsidiary	September 1, 2031		16,000,000	1.30	%	0.27	%
February 25, 2022	SBIC II subsidiary	March 1, 2032		10,000,000	2.94	%	0.27	%
March 29, 2022	SBIC II subsidiary	September 1, 2032		10,000,000	4.26	%	0.27	%
April 1, 2022	SBIC II subsidiary	September 1, 2032		6,670,000	4.26	%	0.27	%
April 12, 2022	SBIC II subsidiary	September 1, 2032		6,665,000	4.26	%	0.27	%
April 21, 2022	SBIC II subsidiary	September 1, 2032		6,665,000	4.26	%	0.27	%
June 30, 2022	SBIC II subsidiary	September 1, 2032		3,600,000	4.26	%	0.27	%
July 28, 2022	SBIC II subsidiary	September 1, 2032		6,400,000	4.26	%	0.27	%
September 9, 2022	SBIC II subsidiary	March 1, 2033		6,000,000	5.17	%	0.27	%
November 9, 2022	SBIC II subsidiary	March 1, 2033		7,600,000	5.17	%	0.27	%
August 8, 2023	SBIC II subsidiary	September 1, 2033		9,120,000	5.69	%	0.27	%
September 19, 2023	SBIC II subsidiary	March 1, 2034		2,280,000	5.04	%	0.27	%
Total SBIC II subsidiary SBA-guaranteed Debentures			$	175,000,000
Total SBA-guaranteed Debentures			$	299,000,000

The fair values of the SBA-guaranteed debentures are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants

at the measurement date under current market conditions. The fair values of the SBA-guaranteed debentures are estimated based upon market interest rates for our own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. As of December 31, 2025, the estimated fair values of the SBA-guaranteed debentures as prepared for disclosure purposes was $290,359,247. As of December 31, 2024, the carrying amount of the SBA-guaranteed debentures approximated their fair value. At December 31, 2025 and 2024, the SBA-guaranteed debentures would be deemed to be Level 3, as defined in Note 6.

As of December 31, 2025, the Company has incurred $11,148,750 in financing costs related to the SBA-guaranteed debentures since receiving its licenses, which were recorded as prepaid loan fees. As of December 31, 2025 and 2024, $3,015,937 and $3,748,061 of prepaid financing costs had yet to be amortized, respectively. These prepaid loan fees are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.

The following is a summary of the SBA-guaranteed debentures, net of prepaid loan fees:

	December 31, 2025		December 31, 2024
SBA-guaranteed Debentures payable	$	299,000,000	$	325,000,000
Prepaid loan fees		(3,015,937)		(3,748,061)
SBA-guaranteed Debentures, net of prepaid loan fees	$	295,984,063	$	321,251,939

The following table summarizes the interest expense and amortized fees on the SBA-guaranteed debentures for the years ended December 31, 2025, 2024, and 2023:

	For the year ended
	December 31, 2025			December 31, 2024			December 31, 2023
Interest expense	$	9,968,297		$	10,497,375		$	10,047,058
Debenture fee amortization		732,124			978,582			1,255,753
Total interest and financing expenses	$	10,700,421		$	11,475,957		$	11,302,811
Weighted average interest rate		3.2	%		3.2	%		3.2	%
Effective interest rate (including fee amortization)		3.5	%		3.5	%		3.5	%
Average debt outstanding	$	308,224,658		$	325,000,000		$	318,847,123
Cash paid for interest	$	10,228,054		$	10,470,211		$	9,646,849