UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 814-01427

LAFAYETTE SQUARE USA, INC.

(Exact name of registrant as specified in its charter)

Delaware	87-2807075
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

175 SW 7th St, Unit 1911

Miami, FL 33130

(Address of principal executive offices)

(786) 753-7096

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:.

Title of each class	Trading Symbol	Name of each exchange on which registered
None	None	None

Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:

Common Stock, par value $0.001 per share
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act. (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of March 20, 2024 the Registrant had 21,502,768 shares of common stock, $0.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for use in connection with its 2023 Annual Meeting of Stockholders, which is to be filed no later than 120 days after December 31, 2023, are incorporated by reference into Part III of this Annual Report on Form 10-K.

		Page
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	62
Item 1B.	Unresolved Staff Comments	95
Item 1C.	Cybersecurity	96
Item 2.	Properties	97
Item 3.	Legal Proceedings	97
Item 4.	Mine Safety Disclosures	97
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	98
Item 6.	Reserved	100
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	100
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	118
Item 8.	Consolidated Financial Statements and Supplementary Data	120
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	162
Item 9A.	Controls and Procedures	162
Item 9B.	Other Information	162
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	162
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	163
Item 11.	Executive Compensation	163
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	163
Item 13.	Certain Relationships and Related Transactions, and Director Independence	163
Item 14.	Principal Accountant Fees and Services	163
PART IV
Item 15.	Exhibits and Financial Statement Schedules	163
Item 16.	Form 10-K Summary	165
	Signatures	166

Lafayette Square USA, Inc.

Cautionary Statement Regarding Forward-Looking Statements

This report contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Lafayette Square USA, Inc., together with its consolidated subsidiaries (“we,” “us,” “our,” or the “Company”), our prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as “ anticipates,” “ expects,” “ intends,” “ plans,” “will,” “may,” “ continue,” “ believes,” “ seeks,” “ estimates,” “would,” “ could,” “ should,” “ targets,” “ projects,” “ outlook,” “ potential,” “ predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

•our business prospects and the prospects of the companies in which we may invest;

•the effect of the investments that we expect to make;

•our ability to raise sufficient capital to execute our investment strategy;

•the impact of economic recessions or downturns, which could impair our portfolio companies and lead to defaults by our portfolio companies, could harm our operating results;

•price inflation and changes in the general interest rate environment, which could adversely affect the operating results of our portfolio companies and impact their ability to pay interest and principal on our loans;

•general economic and political trends and other external factors, including the impact of any future pandemic or epidemic;

•heightened global political and economic uncertainty caused by war, social unrest and political tension;

•the demand from middle market businesses for capital investment and managerial assistance;

•our ability to create and preserve jobs and stimulate the economy;

•the ability of our portfolio companies to achieve their objectives;

•our expected financing arrangements and expected investments;

•changes in the general interest rate environment, including recent increases in interest rates;

•the adequacy of our cash resources, financing sources and working capital;

•the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;

•our contractual arrangements and relationships with third parties;

•actual and potential conflicts of interest with LS BDC Adviser, LLC (the “Adviser”) or any of its affiliates;

•the dependence of our future success on the general economy and its effect on the industries in which we invest;

•our use of financial leverage;

•the ability of the Adviser to source suitable investments for us and to monitor and administer our investments;

•the ability of the Adviser or its affiliates to attract and retain highly talented professionals;

•the impact on our business of U.S. and international financial reform legislation, rules and regulations;

•the effect of changes to tax legislation and our tax position;

•the ability of any of our subsidiaries (in existence now or which may be formed in the future) to obtain a small business investment companies license from the Small Business Administration (the "SBA"), including a license

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for a specialized small business investment company (“SSBIC”), or maintain such licenses, like the license for a small business investment company ("SBIC") currently held by Lafayette Square SBIC, LP, and the potential benefits from having such a license;

•our ability to adhere to or meet our goals, including our 2030 Goals (as defined herein);

•our ability to deploy at least 51% of our invested capital with working class communities;

•our ability to improve the retention, well-being, and productivity of employees in our portfolio companies;

•our ability to enhance the risk-adjusted financial returns of our portfolio companies;

•our ability to convince our portfolio companies to use our services platform, Worker Solutions;

•our ability to reduce employee turnover and increase median income of employees within our portfolio companies;

•our ability to encourage and increase participation in medical care benefits and retirement benefits by employees within our portfolio companies;

•our ability to create and preserve jobs and stimulate the economy;

•the likelihood that the federal government will expand its partnerships with the private sector, including through programs aligned with our 2030 goals; and

•our ability to qualify for and maintain our qualification as a regulated investment company (a “RIC”) and as a business development company (a “BDC”).

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of any projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. Moreover, we assume no duty and do not undertake to update the forward-looking statements, except as required by applicable law. Because we are an investment company, the forward-looking statements and projections contained in this report are excluded from the safe harbor protection provided by Section 21E of the U.S. Securities Exchange Act of 1934 Act, as amended (the “Exchange Act”).

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PART I

ITEM 1. BUSINESS

Lafayette Square USA, Inc. ("we" or the “Company,” which term refers to either Lafayette Square USA, Inc. or Lafayette Square USA, Inc. together with its consolidated subsidiaries, as the context may require) is an externally managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We focus on lending to middle market businesses located in and/or employing working class American communities while offering such businesses significant managerial assistance to strengthen their workforce, with the goal of enhancing those businesses' returns while creating and preserving jobs and stimulating economic growth across the United States.

Our investment objective is to generate favorable risk-adjusted returns, including current income and capital appreciation, principally from investments in “non-sponsored” middle market businesses that are primarily domiciled, headquartered and/or have a significant operating presence in each of ten regions across the United States, as listed in “Item 1. Business — Differentiators for Our Investment Strategy — Regional Focus to Promote Economic Growth and Create and Sustain Jobs” (the "Target Regions"). We aim to invest at least 5% of our assets in each Target Region over time, and expect to invest primarily in first and second lien loans and, to a lesser extent, in subordinated and mezzanine loans and equity and equity-like securities, including common stock, preferred stock, and warrants.

Along with our investment objective, we seek to identify investment opportunities that align with the main goal of our investment adviser's parent company, Lafayette Square Holding Company, LLC (together with its controlled subsidiaries, including LS BDC Adviser, LLC and LS Administration, LLC, “Lafayette Square”). Founded in November 2020, Lafayette Square aims to serve working class people while generating favorable risk-adjusted returns for its investors.

We aim to further Lafayette Square's goal in two ways. First, we aim to promote public welfare and community development in working class communities by deploying at least 51% of our invested capital to borrowers (i) located in and/or with a majority of operations in Working Class Areas1 or (ii) that provide Substantial Employment2 to LMI individuals. We may also invest in other community development and public welfare investments identified as qualifying for CRA credit under the Office of Comptroller of Currency (“OCC”) and/or Federal Reserve guidance. We refer to all of these types of investments as “LMI Targeted Investments.”

Second, we offer significant managerial assistance to all of our portfolio companies in an effort to strengthen the work experience and well-being of their employees. Such efforts are conducted through Lafayette Square's "Worker Solutions" human capital consulting platform, which coordinates with the human resources and personnel departments of our portfolio companies to identify and recommend appropriate services that would enhance employee well-being. These services include both traditional employee benefits, such as health insurance and retirement, and supplementary employee benefits, such as services that focus on the alleviation of financial insecurity and economic mobility issues. This program is consistent with the mandate that BDCs offer “significant managerial assistance” to their portfolio companies upon request, and we believe it has the potential to (i) positively affect employee well-being and (ii) enhance the risk-adjusted financial returns of the portfolio companies (including by increasing employee retention, morale and productivity).

Formed as a Delaware limited liability company, we elected to be regulated as a BDC under the 1940 Act and intend to elect to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for the tax year ended December 31, 2023, as well as maintain such election in future taxable years. We are externally managed by LS BDC Adviser, LLC (the “Adviser”), which is a wholly-owned subsidiary of Lafayette Square.

1 “Working Class Areas” refers to low- and moderate- income (“LMI”) areas, Empowerment Zones, as defined in the Empowerment Zones and Enterprise Communities Act of 1993, as amended (“Empowerment Zones”), Opportunity Zones, as defined in the U.S. Tax Cut and Jobs Act of 2017 (“Opportunity Zones”), and/or areas targeted by a government entity for redevelopment or to revitalize or stabilize designated disaster areas. LMI is defined under applicable CRA regulation as an individual income that is less than 80 percent of the area median income (“AMI”) or a median family income that is less than 80 percent in a census tract. AMI is defined as the median family income for the metropolitan statistical area or metropolitan division, if applicable, or if the person or census tract is located outside of a metropolitan statistical area, the statewide nonmetropolitan median family income. Census tracts are defined by the U.S. Government and may include LMI areas, Opportunity Zones and/or Empowerment Zones. Throughout this Form 10-K, we may use the terms "LMI", "underserved" and "working class" interchangeably.

2 “Substantial Employment” means more than 50% of the portfolio company’s workforce, measured by W-2 forms or 1099 forms filed by workers with the Internal Revenue Service.

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Our Investments

The Company currently invests in businesses that are primarily domiciled, headquartered and/or have a significant operating presence in eight of the ten Target Regions, with a goal to invest at least 5% of its assets in each Target Region over time. We are highly focused on constructing a diverse investment portfolio with broad diversification by company, industry sectors, and position size and while we seek to achieve the targets described above, the composition of our investment portfolio may vary from time to time due to various factors, such as market conditions and the availability of attractive investment opportunities.

The below is information related to our investment portfolio as of December 31, 2023:

•We had debt and equity investments in 19 companies with an aggregate fair value of approximately $273.6 million and an average position size of $14.4 million.

•All of our debt investments have financial covenants.

•Our portfolio companies had a weighted average annual EBITDA of $22.0 million.

•The interest coverage ratio for our first lien loans was 2.8x. Net leverage for our debt investments was 3.0x.

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We have set specific goals for the decade, informed by certain outside regulatory frameworks, including the Small Business Investment Act of 1958 (the “Investment Act”), the Community Reinvestment Act of 1977 (the “CRA”), the Small Business Investment Incentive Act of 1980 (the “Incentive Act”), the Investment Company Act of 1940 (the “1940 Act”), and the SECURE 2.0 Act of 2022 (the “Secure Act”). While these legislative acts were authored during distinctly different economic environments, all of them reflect a focus by the United States Congress ("Congress") and the Presidential Administration they worked with at the time on how to engage the private sector in financing job growth for all Americans, especially those in working class communities.

The Company’s 2030 goals are to (1) increase employment opportunities (by helping businesses create and/or retain 100,000 working class jobs, and 150,000 jobs overall), (2) provide significant managerial assistance to small and middle-market companies (by incentivizing at least 50% of our borrowers to adopt Worker Solutions), and (3) encourage economic growth in working class communities (by investing at least 50% of our portfolio in borrowers who are either located in Working Class Areas or are Substantial Employers of LMI people). As described below, each of these goals aligns with the various regulatory acts we have described above:

Company 2030 Goals
Investment Act	Help businesses create / retain 150,000 jobs (with 100,000 being working class jobs)
Incentive Act	50% borrowers adopting Worker Solutions services or HR policy changes
CRA	50% borrowers either located in Working Class Areas or are Substantial Employers of LMI people

The heatmaps on the following pages, generated by Lafayette Square's proprietary place-based analytics platform, Potomac x Lafayette Square, display the socioeconomic metrics of the communities in which our portfolio companies operate, with comparisons to the corresponding national averages. This content helps to inform recommendations to our portfolio companies from Lafayette Square's "Worker Solutions" human capital consulting platform, including with respect to delivery of impactful services to the employees of such portfolio companies.

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Communities in which Our Portfolio Companies Operate

Socioeconomic Metrics for Census Tract of Portfolio Company Headquarters vs National Benchmarks

Notes:

1.Metrics are given at the lowest level geography where data is available. Most metrics are at the tract or "neighborhood" level, except that the following metrics are provided at the county-level: Share of Population Living in LMI Area; Median Wage; Living Wage; and all Financial Stability metrics.

2.Metrics are primarily from December 31, 2021, except for Life Expectancy (December 31, 2015); Share Any Debt in Collections, Share Student Loan Debt, Share Medical Debt, Median Wage and Living Wage (December 31, 2022); and Share of Population Living in LMI Areas (December 31, 2023).

3.Suppressed values occur when the sample size of the area is too small to produce reliable estimates.

4.Source: Lafayette Square analysis of its investment portfolio and data from the U.S. Census Bureau, Bureau of Labor Statistics, Massachusetts Institute of Technology, Urban Institute, and Centers for Disease Control and Prevention.

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The Market Opportunity We See

We operate within a large addressable market of middle market businesses, yet our competitors tend to invest in the same limited number of locales at ever increasing deal sizes. We believe this continuing trend has led to capital scarcity among many middle market businesses, and consequently we have focused our origination efforts on outreach to founders and management teams rather than partnering with private equity firms to finance sponsor-led buy-outs. In the process, we believe we have further distinguished ourselves from the competition by offering tangible advice and solutions to our borrowers to help strengthen their work forces and ultimately, their bottom line.

The Middle Market is a Large Addressable Market

According to a study conducted by the National Center for the Middle Market in June 2022, the U.S. middle market3 contains nearly 200,000 businesses, representing approximately one-third of private-sector GDP and employing approximately 48 million people. During the financial crisis (2007-2010), these businesses outperformed other types of companies and added 2.2 million jobs across major industry sectors and geographies. Yet, we believe traditional lenders to the middle market, in particular regional banks, have either exited or de-emphasized their service and product offerings in the middle market. These traditional lenders have instead focused on lending and providing other services to large corporate clients, and have reduced their lending to commercial and industrial firms in the middle market, with non-banks now representing 33% of middle-market lending according to a report by the Bank Policy Institute (September 14, 2022). We believe this shift has resulted in fewer key players in this part of the lending sector and has reduced availability of debt capital to the companies we target.

These trends do not look likely to reverse given regulatory changes that have added increased capital requirements on US banks. Specifically, the Basel III Accord, the adoption of the Dodd-Frank Wall Street Reform and the Consumer Protection Act (the “Dodd-Frank Act”), and regulations implemented by the U.S. Federal Reserve, the OCC, and the Federal Deposit Insurance Corporation (“FDIC”), have significantly increased capital and liquidity requirements for banks, decreasing their capacity and appetite to hold non-investment grade loans on their balance sheets. Additionally the banking industry has seen an increasing cost of capital as a result of rising interest rates and the March 2023 banking turmoil. However, the Company may not be able to successfully capitalize on this current regulatory climate, and future regulatory or structural changes may adversely affect what we perceive as a current advantageous regulatory climate. 

We See Decreasing Competition to Lend to Certain Types of Borrowers and/or Borrowers in Certain Locations

While we see a large addressable market, we also believe that many of those financial institutions that have lent in the past or could lend today to these eligible businesses have instead focused on only a small number of locales and primarily larger sized borrowers. As a result, we see a significant opportunity to finance middle market businesses with annual revenues of between $10 million and $1 billion and annual EBITDA of between $10 million and $100 million.

The BDC industry investment landscape is highly concentrated. As seen in the following map (which illustrates where BDCs with public SEC filings (i.e., reporting required under the Exchange Act) are investing in portfolio companies in relation to working class places across the country) and accompanying charts, other BDCs disproportionately invest in businesses in the coastal regions, with the top five states representing almost 50% of the investment activity for these other BDCs. The concentrated capital in these states creates significant competition between, and overlapping exposure across, these other BDC portfolios. BDCs have also traditionally supported middle market companies by providing debt capital to companies supported by the same proven sponsors, resulting in a significant overlap in the investments across BDCs.

3 The National Center for the Middle Market defines U.S. middle market companies as those between $10 million and $1 billion in annual revenue, which we believe has significant overlap with our definition of U.S. middle market companies.

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Summary (Top 5 States by Capital Invested)
Number of Companies	2,538
Percentage of Total BDC Investments	49.5%
Number of BDCs Investing	129

Source: Lafayette Square analysis of the top five states (California, Texas, New York, Illinois and Massachusetts) by the amount of capital invested, based on data drawn from the U.S. Securities and Exchange Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database. As of September 30, 2023.

Number of BDC Portfolio Companies All States and Territories
State	2023 (Total Number of Companies)	2023 (Number of Companies Located in a LMI Tract)	2022 (Total Number of Companies)	2022 (Number of Companies Located in a LMI Tract)	2022 vs 2023 (Total Number of Companies)
California	868	148	834	131	▲ 34
New York	567	44	553	38	▲ 14
Texas	536	135	529	132	▲ 7
Illinois	297	33	283	29	▲ 14
Massachusetts	270	17	262	23	▲ 8
Florida	298	95	257	80	▲ 41
Georgia	201	42	206	44	▼ 5
New Jersey	165	22	171	25	▼ 6
Pennsylvania	182	14	170	16	▲ 12
Ohio	152	29	142	24	▲ 10
North Carolina	144	35	134	33	▲ 10
Virginia	116	22	110	21	▲ 6
Colorado	123	20	107	18	▲ 16
Arizona	94	28	103	33	▼ 9
Michigan	108	26	99	24	▲ 9
Tennessee	95	23	92	21	▲ 3
Minnesota	91	14	86	11	▲ 5
Connecticut	92	21	84	18	▲ 8
Washington	87	19	83	17	▲ 4
Missouri	80	24	68	21	▲ 12
Utah	77	12	67	13	▲ 10
Maryland	76	13	66	12	▲ 10
Wisconsin	48	8	50	9	▼ 2
Indiana	54	18	49	19	▲ 5
Alabama	45	6	44	7	▲ 1
Delaware	42	21	43	19	▼ 1
Oklahoma	36	9	41	12	▼ 5
Oregon	34	3	38	5	▼ 4
South Carolina	38	13	32	16	▲ 6
Kentucky	32	13	31	11	▲ 1
Kansas	36	11	31	8	▲ 5
Nevada	27	10	26	9	▲ 1
Louisiana	27	11	26	10	▲ 1

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Number of BDC Portfolio Companies All States and Territories
State	2023 (Total Number of Companies)	2023 (Number of Companies Located in a LMI Tract)	2022 (Total Number of Companies)	2022 (Number of Companies Located in a LMI Tract)	2022 vs 2023 (Total Number of Companies)
District of Columbia	33	8	26	4	▲ 7
New Hampshire	28	5	23	2	▲ 5
Mississippi	22	11	20	8	▲ 2
Arkansas	21	11	19	10	▲ 2
Nebraska	15	1	15	3	—
Wyoming	9	2	13	2	▼ 4
Rhode Island	15	3	13	2	▲ 2
Iowa	16	3	13	2	▲ 3
Maine	8	3	10	3	▼ 2
New Mexico	13	5	9	3	▲ 4
Idaho	10	2	9	2	▲ 1
South Dakota	8	4	7	4	▲ 1
Montana	7	1	6	1	▲ 1
Alaska	4	1	6	2	▼ 2
West Virginia	9	6	5	2	▲ 4
Vermont	7	2	5	2	▲ 2
Hawaii	5	2	5	2	—
Puerto Rico	4	—	2	—	▲ 2
North Dakota	1	—	1	—	—
United States Virgin Islands	1	—	—	—	—
Sum Total	5,374	1,029	5,124	963	▲ 249

Source: Lafayette Square analysis of data from the U.S. Securities and Exchange Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database. As of September 30, 2023.

We believe this industry concentration leads to correlation risk. For example, among BDCs making public filings, the top ten firms manage 68 percent of BDC invested assets ($89 billion out of $130 billion) and invest in 49 percent of the same transactions. Yet at the same time, this concentration can result in limited competition for direct lending in the remaining 45 states, which we believe can unlock proprietary deal flow for the Company while commanding premium pricing.

Alongside this focus on the same locations and the same deals, we believe private equity firms (and the private credit institutions that support them) are investing in increasingly larger companies. Private equity has been concentrating in larger funds, with 67.9 percent of fundraising in 2022 going to private equity funds larger than $5 billion and only 1,500 smaller private equity funds (i.e., those with less than $250 million) reaching their fundraising targets in 2022, down 51 percent from the year before. This trend has resulted in 40 percent of private equity deals taking place at larger than $500 million in deal size, according to a report by Deloitte in 2022. Overall, this trend should continue as the private equity industry has more than doubled since 2013 to a total of $1.1 trillion raised in 2023, according to a March 2024 study released by Statista Research Department. As part of this trend, we believe that many sponsor backed private debt lenders have emphasized their service and product offerings to support private equity backed companies, providing an opportunity for alternative funding sources like us to lend to true middle-market companies.

Private Credit Has Focused on Sponsor-Backed Companies

Preqin projects direct lending to double between 2021 and 2027, with private debt-managed assets expected to increase 11% compounded annually from 2021 and reach $2.3 trillion by 2027. The asset class will likely be among the faster growing alternatives segments, potentially ahead of private equity, and its share of overall alternatives could climb from 8% today to 10% by 2027.

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Yet, despite this impressive growth, new-money leveraged-loan issuance has become increasingly dominated by sponsor-backed borrowers, which we believe presents an opportunity for lenders like ourselves that focus on non-sponsor lending. Bloomberg data shows 81 percent of new leveraged-loan issuance since the start of 2021 supported private equity-backed companies, while LCD Pitch book data suggests private credit now funds 90 percent of buyout value (up from 61 percent in 2019), as banks exercise caution. Private equity demand has resulted in record dry powder awaiting deployment, and while a slowdown in the private equity cycle could be a knock-on risk to lenders supporting these transactions, we believe private credit firms will continue to support transactions.

Non-Sponsored Companies Have Disparate Financing Needs

The needs of middle market borrowers vary considerably based on company and industry-specific circumstances. We believe that the number of financing sources with a mandate to deliver tailored financial solutions addressing the needs in this market, particularly to non-sponsored borrowers, is limited. We believe that the combination of the broad investment mandate offered by the Lafayette Square platform together with the extensive experience of our investment team positions us as a favorable lending partner to such middle market borrowers.

One of the areas we view as attractive to such borrowers is our provision of impactful services. We believe limited investment in people reduces competitiveness, operational excellence, and employee retention, while services offerings like Worker Solutions aim to uplift portfolio companies by improving employee well-being, productivity and workforce retention.

Our Competitive Advantages

We believe that our regional focus, and disciplined approach to underwriting, portfolio construction, and risk management will enable the Company to achieve favorable risk-adjusted returns while reducing the risk of loss of shareholder capital, all while serving the public welfare and positively affecting communities across the United States. We see the following competitive strengths as positioning us well for continued growth:

We Target Borrowers in Locations that Other BDCs are Not Focused On

As described above, we believe that the BDC industry and regional banks that have historically provided credit to middle market businesses in Working Class Areas have more recently actively focused on only a small number of locales and primarily larger sized borrowers. As a result, we believe there is a significant opportunity for the Company to identify attractive middle market businesses that have meaningful capital needs and are not being served by other financing institutions.

We are Using Proprietary Data Analytics to Strengthen Our Origination, Underwriting and Monitoring Processes

We believe our data scientists and proprietary technology platform provide us with an advantage in identifying and underwriting businesses in overlooked places. The Lafayette Square Analytics Division is comprised of a dedicated team of technology professionals who build proprietary software and systems that work in conjunction with third-party tools to empower Lafayette Square investment professionals with data that informs risk decisions and builds relationships with clients.

One of the main products designed by the Analytics Division is Potomac X Lafayette Square ("Potomac"), a data platform with a place-based analytics tool that supports Lafayette Square’s investments by providing place-based socioeconomic data that offers insights into investments, both before and after they are made. Powered by a growing data lakehouse, Potomac overlays census information on top of company data from other third-party sources. In combination with the capabilities and relationships of our investment and origination team (including senior management contacts at target businesses), we are able to identify attractive investment opportunities and better understand the businesses we underwrite, both from an operational and a labor perspective.

We Have an Experienced Team of Investment Professionals

The members of the Investment Committee are seasoned investment professionals and have extensive experience with financing and managing small and medium-sized businesses through various credit cycles. With a collective average of almost 20 years of experience, the members of the Investment Committee have significant investing, finance, and risk management experience and provide valuable diligence insights to the investment team, which itself is an experienced group of underwriters and originators. We believe the combined experience of the Investment Committee will provide a wealth of strategic, financial, and operational knowledge regarding investments in middle market companies as well as the tools necessary to manage risks and achieve favorable risk-adjusted returns.

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Our Collaboration with Government Provides a Structural Advantage

We believe our access to various SBA programs, including SBIC funding, provides a structural advantage over most BDCs which lack access to 10-year fixed rate funding priced at a spread to US Treasuries. In our view, government funding such as SBA debentures for our SBICs provides the lowest cost and longest duration solution for our shareholders. Looking ahead, we believe the federal government will expand its partnerships with the private sector given the economic climate following COVID-19 and Federal Reserve interest rate hikes from historic lows, and we are actively looking to broaden and deepen our relationship with multiple government agencies sponsoring programs aligned with our 2030 Goals.

Our Delivery of Managerial Assistance to Portfolio Companies is Differentiated

Lafayette Square has developed our differentiated Worker Solutions human capital consulting platform, which makes available significant managerial assistance to portfolio companies by providing meaningful guidance and counsel concerning the management, operations and policies of a portfolio company, primarily with respect to human capital-related matters. In particular, we have marshalled our managerial assistance resources and expertise to support our portfolio companies in their efforts to improve worker well-being and labor force retention, including for those employees whose annual wages would qualify under the federal definition of low-to-moderate income.

Our Worker Solutions assistance covers both traditional employee benefits, such as health insurance and retirement, and supplementary employee benefits, such as services that focus on the alleviation of financial insecurity and economic mobility issues, although these services may address other objectives, such as health and wellness, education, and resource navigation. We coordinate directly with the human resources and personnel departments of our portfolio companies to (i) analyze their workforce, wages, and benefits, (ii) identify human capital challenges and benefits gaps, and (iii) recommend appropriate third-party solution providers or policy changes to workplace benefits that would enhance employee well-being and improve retention. Where possible, we aim to disaggregate and analyze health insurance and retirement benefits participation among such employee populations and recommend options to improve employee participation in those benefits.

As described further below in “Item 1. Business — The Lafayette Square Managerial Assistance Division”, we currently support our portfolio companies in managing their talent and human capital in four main ways, via (1) Incentives, (2) Workforce & Benefits Data Analytics, (3) Services, and (4) Consultation, although we are constantly innovating and may change these approaches in the future without notice to shareholders. Overall, we believe delivery of this type of managerial assistance has the potential to (i) positively affect employee well-being, (ii) enhance the risk-adjusted financial returns of our portfolio companies (through increased employee retention, morale, and productivity) and (iii) reduce our funding costs. In order to continue to fine-tune and expand the program, our team actively monitors the uptake and effectiveness of our managerial assistance recommendations.

We Employ a Comprehensive Investment Process and Risk Management

Our investment strategy is focused on long-term credit performance and downside protection. This approach involves a comprehensive, multi-stage due diligence process, followed by ongoing investment monitoring for each asset in the portfolio. We do not intend to underwrite springing or covenant-lite transactions. We have designed our ongoing monitoring to detect credit deterioration at an early stage in order to minimize defaults and potential losses. Although the Company invests in illiquid securities for which there are limited secondary market selling opportunities, we value each investment on a mark-to-market basis in accordance with our internal policies and procedures and United States generally accepted accounting principles (“GAAP”). These policies and procedures include obtaining third-party valuations to provide an objective perspective and transparency into the performance of our portfolio companies.

Insured Depository Institution Investors May Potentially Receive CRA Credit

The CRA requires the three U.S. federal bank supervisory agencies, the Federal Reserve Board (“FRB”), the OCC, and the FDIC, to encourage certain FDIC-insured financial institutions to help meet the credit needs of their local communities, including LMI neighborhoods, consistent with the safe and sound operation of such institutions. Each agency operates under substantially similar rules and regulatory guidance for evaluating and rating an institution’s CRA performance. These rules vary according to an institution’s asset size and business strategy.

We believe depository institutions may be eligible to receive CRA credit for their indirect investments through the Company under the existing so-called “investment test” and under the community development financing test to be implemented under the New CRA Final Rule (defined and described in more detail in “Item 1.A Risk Factors — Insured depository institution shareholders that are subject to regulatory examination for CRA compliance may fail to obtain

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favorable regulatory consideration of their investment under the CRA."). Specifically, we believe that each of the LMI Targeted Investments made by the Company are the type of qualifying activities for which an insured depository institution should be eligible to receive credit under the CRA if such investment were made by the depository institution directly. Moreover, because we are committing that at least 51% of our investments will be LMI Targeted Investments, we also believe that an insured depository institution should be eligible to receive CRA credit for its investment in the Company. Additionally, in February 2023, the SBA approved the Company’s application for an SBIC license, which is held by the Company’s subsidiary, Lafayette Square SBIC, LP. Insured depository institutions are generally eligible to receive credit under the CRA for lending to or investing in an SBIC, and so depository institutions may also be eligible to receive CRA credit for investments by the SBIC in their assessment area.

In order to substantiate its position that the Company has deployed at least 51% of its invested capital to LMI Targeted Investments, the Company requires its prospective and actual portfolio companies to deliver supporting data throughout the term of the loan. Such data may include the borrower’s employment of LMI workers, business locations, and/or operations in Working Class Areas. This information is designed to be helpful in substantiating a position by an insured depository institution investor that its investment in the Company should be eligible for CRA credit from the applicable banking regulator.

However, we cannot offer any assurance that an insured depository institution’s banking regulator would consider an indirect investment through the Company as CRA eligible. Currently, an investment in the Company is not deemed a CRA eligible investment by any of the U.S. federal bank supervisory agencies, and the OCC declined to prospectively confirm that an investment in the Company would qualify as a CRA activity when the Company sought clarity on the question from the OCC (which was prior to the adoption of the New CRA Final Rule). Since we cannot offer assurance that an investor in the Company which is subject to CRA requirements will receive CRA credit for its investment in the Company, insured depository institution investors interested in applying for CRA credit must make their own assessment as to the likelihood that their banking regulator will grant CRA credit. For more information, see “Item 1.A Risk Factors — Insured depository institution shareholders that are subject to regulatory examination for CRA compliance may fail to obtain favorable regulatory consideration of their investment under the CRA."

Our Investment Strategy

Our primary investment strategy is to create a portfolio of investments across a range of industries and communities to mitigate certain risks and achieve our investment objective of generating favorable risk-adjusted returns while also promoting public welfare and community development in working class communities. We believe demand for capital investment and managerial assistance is particularly acute among middle market companies4 located in overlooked places, given that public business development companies primarily focus on businesses located in high income places (as illustrated in “Item 1. Business — How We Align our Strategy with Regulatory Intentions — The Community Reinvestment Act”). We believe inflationary pressures and the increasing employee benefits gap exacerbate this demand, enabling us to utilize our investment approach to select favorable risk-adjusted return opportunities.

We generate revenue primarily in the form of interest and fee income on debt investments we hold and capital gains, if any, on our investments. We generally expect to hold our investments until maturity or until such investments are refinanced by the portfolio company. From time to time, we may invest in loans with other lenders, or “club loans,” and may serve as agent in connection with any such loans. Currently, approximately 16 percent of the portfolio (measured on a straight-line basis) consists of "club loans", with Lafayette Square being lead agent on 63 percent of those deals. We may also participate in loans in the broadly syndicated loan market. Our debt investments in our portfolio companies typically have principal amounts of up to $50 million, bear interest at floating rates of interest tied to a widely available risk-free rate such as the U.S. Prime Rate, or the Secured Overnight Financing Rate (“SOFR”), and generally are not guaranteed by the federal government or otherwise. The debt instruments in which we invest are typically not rated by any rating agency, but we believe that if they were, they would be rated below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB–” by Fitch Ratings or lower than “BBB–” by Standard & Poor’s Ratings Services). Under the guidelines established by these rating agencies, such ratings are an indication of such debt instruments having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. Debt instruments that are rated below investment grade are sometimes referred to as “high yield bonds” or “junk bonds.”

We primarily focus our origination efforts on “non-sponsored” businesses, which we define as companies substantially owned by people rather than funds or financial institutions where we can establish a direct lending relationship without

4 We define middle market businesses as companies having annual revenues between $10 million and $1 billion and annual earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of between $10 million and $100 million, although we may invest in larger or smaller companies.

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the involvement or backing of a traditional buyout fund sponsor. We believe this focus will enable us over time to source investments through a less competitive lending process than if we focused on "sponsored" businesses, putting us in a better position to achieve favorable economic and structural terms for our investments. We intend to complement this investment strategy with robust risk management practices and rigorous ongoing portfolio monitoring. For a discussion of the risks inherent in our portfolio investments, please see the discussion under “Item 1A. Risk Factors.”

While we are generally industry agnostic with respect to our focus on investment sectors, we tend to primarily invest in the business services, franchising, technology & telecommunications, transportation & logistics, and healthcare sectors. In addition, among other things, we have opportunistically looked for exposures in the real-estate industry (including with companies that manage real estate and with real estate-related projects that advance our 2030 Goals) and the solar power industry (including with companies working to strategically enact energy transition plans).

We divide our investing approach into eight steps:

Step 1: We seek market rate returns from attractively priced assets, typically offering interest rates to our borrowers of SOFR plus a meaningful spread. We believe this pricing represents a premium to similar risk in liquid markets, including high yield and broadly syndicated loans.

Step 2: We typically prioritize companies with a strong free cash flow profile.

Step 3: We prioritize companies located outside of high-income places, often situated in Working Class Areas, because we believe there is less competition to lend to such companies and therefore an opportunity to identify quality investments at preferential pricing. We also believe that by focusing investments on communities with a higher density of LMI individuals, we create an opportunity for the Company to negotiate lower cost funding from government sources and the capital markets.

Step 4: We prioritize companies with EBITDA below $50 million because we believe there is less competition to lend to such companies and therefore an opportunity to charge higher pricing than larger EBITDA opportunities.

Step 5: We prioritize companies who are large employers of working class people because we believe the need for managerial assistance is higher in these companies. With this focus, we create opportunities for the Company to negotiate lower cost funding from government sources and the capital markets.

Step 6: We offer managerial assistance to portfolio companies because we believe it can ultimately strengthen our investments while also benefiting working class populations, in line with the original intentions of a variety of regulatory frameworks (including the Investment Act and the CRA).

Step 7: We reward portfolio companies with interest rate stepdowns based on achieving specific goals and adopting services from third party solution providers that have demonstrated track records of improving worker well-being.

Step 8: We seek low-cost, long duration funding premised on our portfolio construction which focuses on working class communities and managerial assistance for portfolio companies.

Differentiators for Our Investment Strategy

We seek to generate favorable risk-adjusted returns, including current income and capital appreciation, principally from directly originated investments in middle market companies that are primarily domiciled, headquartered and/or have a significant operating presence in the United States. We intend to create a broad portfolio of investments across industries to mitigate risk and achieve our investment objectives. We believe our investment strategy contains several factors that provide us with a strategic advantage, in particular amongst some of our competitors.

Established Businesses with Strong Free Cash Flow Profiles

We intend to focus on directly originating investment opportunities in established businesses which have strong free cash flows. These businesses may operate in a variety of industries including, but not limited to, manufacturing, wholesale, franchising, transportation, business and information services, technology and telecommunications, finance, construction and related services, and healthcare. We primarily target borrowers with established operating histories that generate annual revenues of between $10 million and $1 billion and annual EBITDA of between $10 million and $100 million. We intend to invest in financially sound and well-positioned companies that we believe can service and repay our investment. We expect that such businesses generally maintain market share under a variety of market conditions. These businesses

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are often large employers of working class people, and we believe such businesses are often underserved by banks. We do not intend to invest a meaningful portion of our portfolio in real-estate related loans, start-ups or companies with speculative business plans. We will primarily focus our origination efforts on non-sponsored borrowers, utilizing our strong relationships with financial intermediaries and the networks of our senior investment professionals to source private investment opportunities, although we expect to also lend to certain private equity sponsor-backed borrowers.

Direct Origination Model

We primarily intend to directly originate investment opportunities to non-sponsored businesses. We believe that this class of borrower is underserved by other financial institutions, which often means that such lending opportunities are less competitive than sponsored investments, allowing us to achieve better risk-adjusted returns and obtain comprehensive downside protection. Many of these transaction terms help to identify deterioration in the portfolio company’s credit quality at an early stage and enable us to take actions to minimize downside risks. We seek to ensure an alignment of interests between the equity holders and our interests as a lender by partnering with portfolio company owners that have meaningful management equity investments and appropriately sized incentive plans.

The Adviser’s investment professionals, including a seasoned team of originators spread across the Target Regions, have a deep understanding of their regions from professional and educational experiences in those communities. This local sourcing effort is supported by Lafayette Square's proprietary place-based analytics platform, Potomac X Lafayette Square, which provides our origination team with insights about the places and people we invest in and helps them build trust with prospective middle market borrowers. Cumulatively, the investment and origination teams have deal sourcing relationships with hundreds of business professionals, including investment bankers, commercial bankers, buy-out funds, institutional investors, impact-driven funds, asset-based lenders, attorneys, accountants, and others. As a result, we believe we will generate substantial deal flow from proprietary sources and selectively marketed transactions, including many available through less competitive processes, leading to favorable pricing dynamics and repeat borrowers. We do not typically participate in auctions or widely marketed transactions.

Regional Focus to Promote Economic Growth and Create and Sustain Jobs

We invest in businesses that are primarily domiciled, headquartered and/or have a significant operating presence in each of the ten regions below (each, a "Target Region"), with a goal to invest at least 5% of our assets in each Target Region over time. However, we anticipate that it could take some time to invest substantially all of the capital we expect to raise in a geographically diverse manner due to general market conditions, the time necessary to identify, evaluate, structure, negotiate and close suitable investments in private middle market companies, and the potential for allocations to other affiliated investment vehicles which focus their investments on a specific region. As a result, at any point in time, the Company may have a disproportionate amount of investments in certain regions and there can be no assurance that the Company will achieve geographic diversification across all ten Target Regions.

•The Cascade Region: Alaska, Idaho, Oregon and Washington

•The Empire Region: New York, New Jersey, Connecticut and Pennsylvania

•The Far West Region: California, Hawaii and Nevada

•The Four Corners Region: Arizona, Colorado, New Mexico and Utah

•The Great Lakes Region: Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin

•The Gulf Coast Region: Arkansas, Louisiana, Oklahoma and Texas

•The Mid-Atlantic Region: Delaware, Kentucky, Maryland, North Carolina, South Carolina, Tennessee, Virginia and West Virginia and the District of Columbia

•The Northeast Region: Maine, Massachusetts, New Hampshire, Rhode Island and Vermont

•The Plains Region: Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming

•The Southeast Region: Alabama, Georgia, Florida, Mississippi and Puerto Rico

Downside Protection Through Holistic Risk Management

We employ a disciplined approach to risk management, ensuring that we apply best practices consistently. We will construct our portfolio carefully to mitigate credit-specific risk. We will invest the portfolio broadly across industries and sub-industries and communities across the Target Regions. Our risk management practices are grounded in an established investment process comprising systematic underwriting, rigorous due diligence (including select third-party reviews and reports), and Investment Committee approval, all accompanied by a proprietary, dynamic post-investment monitoring system for updating issuer data.

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Structuring to Improve Exit Timing and Optionality

The investment team has experience structuring investments with various characteristics to preserve and enhance opportunities for successful investment exits. The lack of an active secondary market for most of our portfolio investments will make robust due diligence and planning of exit strategies paramount. With limited ability to liquidate holdings through market sales, we expect to take a longer-term, “originate-to-hold” investment approach while building realization features into our deal documents. “Realization features” are loan terms providing for mandatory repayments of principal. These may include required amortization payments, mandatory cash flow “sweeps,” mandatory repayments upon the occurrence of specified events (such as a receipt of insurance or asset sale proceeds outside the ordinary course of business), and stated loan maturities. Other securities, such as structured equity investments or warrants, are often accompanied by put rights, which mimic a stated maturity provision in a loan agreement.

How Our Investment Strategy Aligns With Our Goals

As described above, the Company has set ambitious 2030 goals to increase jobs and benefit participation across a diverse swath of the United States, with a focus on Working Class Areas. The Company's investment strategy is designed to complement these goals by focusing its investing on areas of the United States where demand for capital is high but where lenders have historically focused less attention.

Those 2030 goals, along with our approach to risk management and generating favorable risk-adjusted returns, were inspired by existing regulations dating to the 1950s, which were aimed at increasing prosperity in all communities. To that end, as we make investments we intend to work with a mission-aligned network of service providers that deliver services seeking to improve the well-being of working class people and communities.

In the following pages, we describe (1) the original intention of the regulations inspiring our strategy, (2) how we align our strategy with such regulatory intentions, and (3) the goals we have set to match investor expectations with regulatory intent.

Original Intention of Regulations Inspiring Our Strategy

Our investment strategy is designed to reflect the intentions of three legislative acts authored during distinctly different economic environments: the Investment Act, the CRA, and the Incentive Act (together with the Investment Act and the CRA, the "Acts").5

	Date Enacted	Unemployment Rate at time of enactment*		Federal Funds Rate at time of enactment		US Treasury 10 Year Note at time of enactment		S&P 500 Price to Earnings at time of enactment	Total Commercial Banks (insured by FDIC)**
Investment Act	August 1958	7.4	%	1.8	%	N/A		16.5x	13,115
CRA		6.8	%	6.2	%	7.5	%	8.7x	14,397
Incentive Act	October 1977	7.5	%	12.6	%	11.7	%	8.9x	14,421
As of February 2024		3.9%*		5.3	%	4.3	%	27.8x	4,587***

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*Unemployment rates are determined based on monthly unemployment surveys conducted on the 12th of each month.

** For the legislative acts, each figure corresponds to the number of banks as of the end of the indicated year.

***This is the latest available information, as of December 30, 2023. Source: FDIC.

The Investment Act was enacted on August 21, 1958 to allow the SBA to, among other things, provide inexpensive leverage to investment firms running SBICs licensed by the SBA. Congress believed an “equity gap” had developed that harmed small businesses, who did not fit into the typical groups financed by banks, on one end of the spectrum, and institutional lenders, on the other end, and therefore could not get access to the capital they needed to grow and modernize. Rather than finance such businesses itself, Congress adopted the Investment Act, which aimed to incentivize private capital to support small businesses via SBICs, a public-private partnership model. Under SBA regulations, SBICs

5 Lafayette Square is not backed or guaranteed in any way or supported by the U.S. government, its agencies and instrumentalizes. The discussion below reflects our investment philosophy and not any official mandates under the Acts.

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make loans to eligible small businesses, as well as invest in the equity securities of such businesses and provide them with consulting and advisory services.

The CRA was enacted on October 12, 1977 by Congress to encourage financial institutions to meet the credit needs of the communities in which they do business, with a particular focus on increasing the availability of credit in LMI communities. As part of this focus, Congress sought to direct more capital to small business, addressing concerns about the deteriorating conditions of American cities – particularly LMI and minority neighborhoods – and the systemic inequalities in the banking system that led financial institutions to consume deposits from working class areas and redirect such capital to wealthier communities. With those concerns in mind, Congress adopted the CRA with a goal to require banks to keep capital within the same communities that supplied a meaningful portion of the banks' customer base. Among other things, the CRA requires federal banking agencies to assess a bank’s record of lending in LMI neighborhoods, and take such record into account when granting banking licenses. Such agencies also count bank investments into SBICs when performing such assessment.

The Incentive Act was enacted on October 21, 1980 to support the flow of capital to small, growing companies through a new kind of investment vehicle called a Business Development Company (“BDC”). The BDC structure focuses on lending to U.S.-based small and mid-sized businesses. By overlaying certain investor protections of the 1940 Act onto this new vehicle, while streamlining some of the more onerous regulations applicable to mutual funds, the Incentive Act permitted a broader type of investors to invest in BDCs, therefore allowing BDCs to raise larger pools of capital than traditional private funds while being subject to less restrictive regulations than a traditional mutual fund. As part of Congress' intention to assist small businesses by injecting the expertise of venture capital into their operations, the Incentive Act requires that BDCs offer significant managerial assistance to portfolio companies, although there is no requirement for such portfolio companies to accept such assistance.

How We Align our Strategy with Regulatory Intentions

While there are multiple benefits to operating a BDC structure, the structure naturally aligns with our strategic intentions for a number of reasons, including:

•requirement to offer "significant managerial assistance" to portfolio companies, which we believe reduces certain risk for such companies (including by increasing employee retention, morale and productivity);

•flexibility to partner with SBA and its SBIC program, which provides access to cheaper sources of financing; and

•mandatory quarterly filing requirement with SEC, which we believe provides investors with added transparency.

	Legislative Objective	Lafayette Square Alignment
Investment Act	Increase employment opportunities	Credit for small and medium sized employers of American workers
CRA	Encourage economic growth in underserved communities	Borrowers located in Working Class Areas or Substantial Employers of LMI people3
Incentive Act	Offer significant managerial assistance	Worker Solutions

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3 To determine whether a borrower is “located” in a Working Class Area, the Company relies on the Borrower’s self-reported principal place of business, headquarter location and/or whether they have significant operations in such community.

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Investment Act

SBICs are designed to stimulate the flow of capital to eligible small businesses6 and are prohibited from investing in companies outside of the United States. Due to this focus, we believed it would be in line with our investment strategy to add an SBIC as a wholly-owned subsidiary of the Company. On February 1, 2023, our wholly-owned subsidiary, Lafayette Square SBIC, LP (“SBIC LP”), received an SBIC license from the SBA, which may provide up to $175.0 million in long-term capital in the form of SBA-guaranteed debentures. Lafayette Square intends to apply for additional SBIC licenses and if successful, such additional SBIC licenses may provide such SBICs up to $350.0 million in SBA-guaranteed debentures in accordance with the SBA’s regulations applicable to SBIC funds under common control. See “Item 1A. Risk Factors—SBIC LP is licensed by the SBA and is subject to SBA regulations.” SBIC LP is able to borrow funds from the SBA against the SBIC LP’s regulatory capital (which approximates equity capital) and is subject to customary regulatory requirements, including, but not limited to, an examination by the SBA. See “Item 1. Business—Small Business Investment Company Regulations.”

We have applied for exemptive relief from the Securities and Exchange Commission ("SEC") to permit us to exclude the debt of SBIC LP that is guaranteed by the SBA from the 150% asset coverage ratio we are required to maintain under the 1940 Act. Pursuant to the 150% asset coverage ratio limitation, we are permitted to borrow two dollars for every dollar we have in assets, less all liabilities and indebtedness not represented by debt securities we issue or loans we obtain. If we receive this exemptive relief, we will have increased capacity to fund up to $175.0 million (the maximum amount of SBA-guaranteed debentures an SBIC may currently have outstanding once certain conditions have been met) of investments with SBA-guaranteed debentures in addition to being able to fund investments with borrowings up to the maximum amount of debt that the 150% asset coverage ratio limitation would allow us to incur. There can be no assurances that such exemptive relief will be granted.

SBIC LP's license allows access to 10-year financing for loans to eligible "small businesses" (as defined by the SBA) via the trust certificate debenture program with a permitted leverage ratio of debt-to-equity up to two-to-one. SBA regulations currently permit SBIC LP to borrow up to $175 million in SBA-guaranteed debentures with at least $87.5 million in regulatory capital (as defined in the SBA regulations), subject to SBA approval. The SBA has two scheduled pooling dates for SBA Debentures (in March and September), establishing the fixed interest rate for this borrowing upon issuance. The March 2024 issuance of SBA debentures was at a fixed trust certificate coupon rate of 5.035%, which means SBIC LP is able to borrow at that rate (plus fees and other financing costs) and then lend at its typical rates of 3-month SOFR (5.33% as of 3/19/24) plus a meaningful interest spread (as of March 20, 2024, weighted average spread of all floating rate investments were 7.0%). As mentioned above in “Item 1. Business — Our Competitive Advantages — Our Collaboration with Government Provides a Structural Advantage.", we believe our access to various SBA programs, including SBIC funding, provides a structural advantage over most BDCs which lack access to 10-year fixed rate funding priced at a spread to US Treasuries.

We believe the addition of SBIC LP under our BDC structure allows us to specifically target and inject capital into American businesses that are on the lower end of the middle-market. We believe that these businesses have historically been underserved by traditional financial institutions and typically lack the capital resources to build a competitive business and marketing infrastructure on their own. Furthermore, in today’s economic climate, we believe small businesses have particular difficulty obtaining capital from traditional lending sources. We believe our overarching investment strategy and the ability to target small businesses through the use of our SBIC will encourage economic growth in this much-needed sector of our economy.

6 Under present SBA regulations, eligible small businesses generally include businesses (together with their affiliates) that have a tangible net worth not exceeding $24.0 million and have average annual net income after U.S. federal income taxes not exceeding $8.0 million (average net income to be computed without benefit of any carryover loss) for the two most recent fiscal years. In addition, an SBIC must devote 25% of its investment capital to “smaller enterprises” as defined by the SBA. A smaller enterprise generally includes businesses (including their affiliates) that have a tangible net worth not exceeding $6.0 million and have average annual net income after U.S. federal income taxes not exceeding $2.0 million (average net income to be computed without benefit of any net carryover loss) for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility for designation as an eligible small business or smaller enterprises, which criteria depend on the industry in which the business (including its affiliates) is engaged and are based on the number of employees and gross revenue.

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Community Reinvestment Act

The Company purposefully invests with working class communities while offering significant managerial assistance to businesses with the goal of creating and preserving jobs and stimulating economic growth in underserved and overlooked markets. This intentional investing aims to address labor challenges by endeavoring to positively affect employee well-being and consequently enhance the risk-adjusted financial returns of our portfolio companies (including by increasing employee retention, morale and productivity). We have positioned our investment strategy to finance businesses primarily serving and/or employing LMI communities for the following reasons:

•The Census Bureau and other government sources provide robust data substantiating demand for capital and services in LMI places and for working-class people.

•There is a large addressable market of profitable middle market companies located in LMI places.

•Other BDCs are primarily investing in non-LMI locations, which we believe translates into less competition to lend to companies in Working Class Areas and therefore an opportunity to identify quality investments for the Company at preferential pricing.

To highlight the opportunity referenced in the last bullet above, it is illustrative to review the map in “Item 1. Business — Market Opportunity — We See Decreasing Competition to Lend to Certain Types of Borrowers and/or Borrowers in Certain Locations” representing the locations where BDCs with public SEC filings (i.e., reporting required under the Exchange Act) are investing in relation to LMI places across the country. The map, along with the chart below, demonstrates how less than twenty percent of such BDCs' portfolio companies are located in an LMI tract.

Incentive Act

Currently, middle market companies confront numerous labor challenges, including:

•Recruiting and retention of labor, particularly frontline workers (i.e., workers in a non-supervisory capacity who are required to interact in person with their customers and clients)

•Uneven uptake of traditional workplace benefits (e.g., healthcare) by LMI employees vs non-LMI employees

•Impact of inflation on employees, in particular LMI individuals

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Lafayette Square's services platform, Worker Solutions, seeks to improve the retention, well-being, and productivity of employees by connecting our portfolio companies with third-party service providers that deliver workplace benefits and/or advisory support ("Third-Party Solution Providers"). In doing this, we aim to help our portfolio companies implement more effective benefits that can support workers and provide services that are currently not available to them. The Worker Solutions team intends to coordinate with the human resources and personnel departments of our portfolio companies to identify appropriate services that would enhance employee welfare, focusing on a variety of areas such as financial well-being, health and wellness, and education and training. Where possible, Worker Solutions aims to analyze existing benefit offerings for portfolio company employees to improve employee uptake (in particular for LMI workers) of those benefits (e.g., health care & retirement) while also encouraging the implementation of new employee benefits more tailored for LMI workers (e.g., matched liquid savings) to mitigate inflationary pressures and improve worker financial security.

We believe our Worker Solutions platform has the potential to (i) positively affect employee well-being and (ii) enhance the risk-adjusted financial returns of the portfolio companies (including by increasing employee retention, morale and productivity). In addition, we view Worker Solutions as a platform to support financial stability and resiliency for LMI workers, especially during periods of elevated inflation, which tend to create disproportionate financial burdens on working class households relative to other income groups because such households spend more of their income on necessities (such as rent, energy, and food) that have higher than average inflation rates. Through services like zero percent interest loans for unplanned expenses, credit score support through rent payments, and financial coaching services targeting increased savings and reduced debt, Worker Solutions aims to offer ways for employees to reduce monthly costs in areas such as education and health care. Despite the intentions stated above, we offer no assurance that these services will have their intended impact or that they will be utilized by the employees of our portfolio companies.

It should be noted that neither the Company nor any of its affiliates currently receive any compensation for the recommendation to use the Third-Party Solution Providers. However, we intend to offer portfolio companies a small stepdown on financing costs from the Company if they engage the Third-Party Solution Providers and/or adopt certain other designations (such as B-Corporation status) or human capital advice, and in some cases, will negotiate discounts for them on the services provided by Third-Party Solution Providers. Through these discounts, we seek to enhance our investment returns in a quantifiable manner, while also positively affecting our portfolio companies in both quantifiable and qualitative ways by providing relatively low-cost services and incentivizing a prioritization of employee well-being (as further described below).

We seek to reduce risk in the operations of portfolio companies with Worker Solutions by improving portfolio company capacity to attract and retain talent and providing increased access to benefits to employees, which we believe will strengthen employee well-being and may lead to enhanced labor productivity. In addition, we believe Worker Solutions can enhance investment returns if we are able to negotiate discounts on our own financing arrangements based upon the amount of capital we deploy to businesses that meet certain defined criteria, such as operating in or substantially employing working class communities. While our current facility features this discount arrangement, we can offer no assurance that we will be able to secure any similar financing arrangements in the future. Also, while we believe the discounts we have negotiated with our current subscription facility may at least partially offset any step downs we offer our borrowers, such offset may not be material. However, while a portion of the cost of providing such services will likely be borne by the Company and, ultimately, by the Company's shareholders, we believe that this investment in employee services will improve the operating capabilities of our portfolio companies and, over time, improve our investment returns.

Tracking Progress Towards Our Goals

In order to follow our progress towards our 2030 Goals, we track a variety of employee data and key performance indicators (“KPI’s”) for our portfolio companies. Some of the metrics we track rely on feedback on certain employee data points from our portfolio companies. We cannot guarantee the accuracy of the information provided to us by our portfolio companies and the metrics used by different portfolio companies to calculate the information that they provide to us may differ significantly as between such portfolio companies.

Businesses Located in Working Class Areas and / or Substantially Employing LMI People

As of December 31, 2023, 50.1% percent of our portfolio (and 57.0% of the transactions where we were lead agent) was invested in borrowers who are either located in Working Class Areas or are Substantial Employers of LMI people, with

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6,497 LMI individuals employed out of a total of 15,494 employees.7 In addition, with respect to engagement by our portfolio companies with our Third-Party Solution Providers, as of December 31, 2023, 26.3% of our Portfolio Companies (and 41.7% of the transactions where we were lead agent) had adopted our Third-Party Solution Providers (for a total of five Third-Party Solution Providers), with 447 workers served and a total of 3,295 workers with access to services.

By comparison, as of December 31, 2022, 46% percent of our portfolio (and 46% of the transactions where we were lead agent) was invested in borrowers who were either located in Working Class Areas or were Substantial Employers of LMI people, with 1,296 LMI individuals employed out of a total of 1,781 employees. In addition, with respect to engagement by our portfolio companies with our Third-Party Solution Providers, as of December 31, 2022, 40% of our Portfolio Companies (and 40% of the transactions where we were lead agent) had adopted our Third-Party Solution Providers (for a total of two Third-Party Solution Providers), with 22 workers served and a total of 403 workers with access to services.

Over time, we believe our portfolio companies' uptake of Third-Party Solution Providers, in combination with our capital, will contribute to an improvement in the below metrics, shown over the past two years:

Lafayette Square USA, Inc.’s Portfolio Company Human Capital Data (As of December 31, 2023)
	Portfolio Company Average Employee Data	National Average Employee Data
Employee Turnover8	58.8%	48.2%
Participation in Medical Care Benefits9	37.5%	46.0%
Participation in Retirement Benefits10	29.2%	53.0%
Median Employee Income		National Median Family Income11
LMI Employee Median Income12	$37,440	$92,148
Non-LMI Employee Median Income	$86,706

7 For those portfolio companies who did not agree to provide census data, job totals are based on data provided by such portfolio companies at time of transaction.

8 Turnover rates are calculated by dividing the total terminations for the period by the average number of employees who worked during or received pay for the same period. National turnover includes private employee data from the U.S. Bureau of Labor Statistics - Job Openings and Labor Turnover Survey.

9 Medical Care Benefits are plans that provide services or payments for services rendered in the hospital or by a qualified medical care provider. Participation is calculated from the unrounded percentage of workers who participate in the plan. National average is private industry from the U.S. Bureau of Labor Statistics - National Compensation Survey.

10 Retirement Benefit plans includes defined benefit pension plans and defined contribution retirement plans. Participation is calculated from the unrounded percentage of workers who participate in the plan. 252 employees from portfolio companies who did not provide retirement benefits data to the Company were not included in this calculation. The national average is private industry from the U.S. Bureau of Labor Statistics - National Compensation Survey.

11 National median income data is from the U.S. Census Bureau - 2022 American Community Survey. This is the most recent data available as of March 2024. Median family income is used to calculate individual LMI per CRA guidelines. The metric is included at the national level to serve as a similar, but not exact, comparison.

12 LMI is defined under applicable CRA regulation as an individual income that is less than 80 percent of the area median income (“AMI”) or a median family income that is less than 80 percent in a census tract. AMI is defined as the median family income for the metropolitan statistical area or metropolitan division, if applicable, or if the person or census tract is located outside of a metropolitan statistical area, the statewide nonmetropolitan median family income

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Lafayette Square USA, Inc.’s Portfolio Company Human Capital Data (As of December 31, 2022)
	Portfolio Company Average Employee Data	National Average Employee Data
Employee Turnover	60%	52%
Participation in Medical Care Benefits	37%	47%
Participation in Retirement Benefits	21%	52%
Median Employee Income		National Median Family Income13
LMI Employee Median Income	$46,138	$85,028
Non-LMI Employee Median Income	$83,475

Our current portfolio consists of borrowers from a variety of sectors, with locations in eight of our ten Target Regions. The map below illustrates (to the extent we have the information from portfolio companies) the location of portfolio company headquarters and where portfolio company employees work in comparison to LMI and non-LMI census tracts. The table that follows provides further details of our portfolio companies' business objectives, sectors, and headquarters as organized by region and zip code:

13 National median income data is from the U.S. Census Bureau - 2021 American Community Survey. This is the most recent data available as of March 2023. Median family income is used to calculate individual LMI per CRA guidelines. The metric is included at the national level to serve as a similar–but not exact–comparison.

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Portfolio Company Name	Portfolio Company Description	Sector	Headquarters Zip Code4	Headquarters Region
GK9 Global Companies, LLC	GK9 is an independent provider of canine screening services to the air cargo industry under the TSA’s third-party canine program. The company serves as an outsourced compliance function for its customers who are liable for the safety of the cargo they handle and/or ship.	Commercial Services & Supplies	36804	Southeast
Rotolo Consultants, Inc.	Rotolo is a southeast regional landscaping service business headquartered in Louisiana serving a multi-state commercial market. The company started with corporate landscape installation and later added property management and hardscape aquatic businesses.	Commerical Services & Supplies	70460	Gulf Coast
Zero Waste Recycling, LLC	Zero Waste Recycling, LLC provides outsourced waste management services to corporations in South and North Carolina. Zero Waste specializes in processing, collecting, and selling waste by-products and provides end-to-end waste management services, including integrated management, janitorial services, warehousing & inventory management, mechanical maintenance, on-site trucking, and scrap & plastic hauling to companies.	Commerical Services & Supplies	28208	Mid-Atlantic
H.W. Lochner Inc.	H.W. Lochner Inc. offers a full suite of engineering and design services for transportation-focused infrastructure (including tollway authorities, cities and counties, and general and commercial aviation authorities) to high growth end markets across the United States.	Construction & Engineering	60606	Great Lakes
Synergi, LLC	Synergi, LLC is a specialty engineering & construction services company that designs, fabricates, and installs engineered modular staircases and architectural features for landmark properties across North America.	Construction & Engineering	21075	Mid-Atlantic
TCFIII Owl Buyer LLC	Oscar W. Larson Company provides full-service petroleum and fluid handling equipment contracting services. The company offers mechanical, electrical, and HVAC equipment contracting, excavation, remodeling, and installation services, as well as tank installation and removal, environmental remediation, site development, demolition, fleet fueling, site design and analysis, and architectural services. The company serves automotive, airline, marine, petroleum, restaurant, convenience stores, and service industries.	Construction & Engineering	48348	Great Lakes
Trilon Group, LLC	Trilon Group, LLC is a platform of engineering services companies that provide planning and design services for mission critical infrastructure.	Construction & Engineering	80202	Four Corners

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Portfolio Company Name	Portfolio Company Description	Sector	Headquarters Zip Code4	Headquarters Region
Ironhorse Purchaser, LLC	Ironhorse provides specialty asset rental solutions for the containment of liquid & solid waste along with complementary waste hauling and “in-the-fence” coordination solutions.	Environmental and Facilities Services	77081	Gulf Coast
Salt Dental Collective, LLC	Salt Dental Collective, LLC is a Dental Service Organization focused on pediatric dentistry and orthodontics, with dozens of locations across Washington, Oregon, Idaho,and Arizona.	Health Care Providers & Services	97501	Cascade
Critical Nurse Staffing, LLC	Critical Nurse Staffing, LLC offers home health care to the American workforce, primarily to beneficiaries under the Energy Employees Occupational Illness Compensation Program Act.	Health Care Services	81501	Four Corners
Medical Specialists of the Palm Beaches, Inc.	Medical Specialists of the Palm Beaches, Inc. operates as a primary care-focused, multi-specialty physician group practice, serving South Florida. It offers primary care, cardiology, neurology, hematology/oncology, concierge medicine, and laboratory services.	Health Care Equipment & Services	33437	Southeast
Aetius Holdings, LLC	Aetius Holdings LLC is a holding company managed by private equity firm Axum Capital Partners that owns an entertainment and comfort-themed casual dining brand with locations across the United States.	Hotels, Restaurants & Leisure	28056	Mid-Atlantic
Dartpoints Operating Company, LLC	DartPoints is a provider of co-location, cloud, cybersecurity, and enabler of advanced solutions, including artificial intelligence, machine learning, and high-performance computing.	IT Services	75201	Gulf Coast
Dance Nation Holdings LLC	Dance Nation Holdings LLC is a dance entertainment company encompassing touring theatrical productions, dance workshops, photo and video production, corporate events and apparel.	Leisure Facilities	90038	Far West
Direct Digital Holdings, LLC	Direct Digital Holdings is a efficiency-focused solutions provider in the digital marketing and advertising sector, serving direct advertisers, agencies, publishers, and marketers.	Media	77027	Gulf Coast

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Portfolio Company Name	Portfolio Company Description	Sector	Headquarters Zip Code4	Headquarters Region
M&S Acquisition Corp	Marshall & Stevens is a leading provider of independent valuation and advisory services to middle market companies, providing multi-disciplinary solutions for independent assessments of corporations, debt and equity instruments, infrastructure, intangible assets, machinery and real estate. The Company services a broad spectrum of both publicly traded and privately held clients, including large banks and financial institutions, consumer product companies, commercial real estate firms, healthcare services companies, industrial and infrastructure companies, investment funds, non-profit organizations, professional associations and technology companies.	Professional Services	90017	Far West
Standard Real Estate Investments LP	Standard Real Estate Investments is a minority-owned and controlled real estate private equity firm that manages capital on behalf of institutions and specializes in real estate development investments.	Real Estate Management & Development	90028	Far West
Café Zupas Franchising, LLC	Café Zupas Franchising, LLC owns and operates fast-casual restaurants in Utah and Arizona. The company offers soups, specialty salads, sandwiches, and desserts. It also provides catering services. Café Zupas Franchising, LLC was founded in 2006 and is based in West Jordan, Utah.	Restaurants	84119	Four Corners
Best Friends Pet Care Holdings Inc.	Best Friends Pet Care Holdings Inc. provides an array of services under one roof including boarding, doggy day camp, and grooming. Some also include veterinary clinics and training.	Specialized Consumer Services	6854	Empire

——

4Based on information provided by each portfolio company to the Company.

Worker Solutions Goals and Engagement Key Performance Indicators

In addition to our 2030 Goals and the portfolio company human capital metrics discussed above, we currently track the progress of our portfolio companies adopting Worker Solutions recommendations and employee uptake of benefits and services. Over time, we may adjust the goals and KPI’s described below depending on a variety of factors, including the share of transactions as primary lender or lead agent.

1.Company Adoption: We seek to offer managerial assistance to our portfolio companies, and set a goal for at least 50 percent of our portfolio companies to adopt Worker Solutions recommendations for services or human resources policy changes, although we expect this uptake to be more prevalent among borrowers where Lafayette Square serves as lead agent.

2.Employee Participation: We seek to maximize portfolio company employee participation in traditional benefits such as healthcare and retirement benefits as well as new benefits recommended by Worker Solutions.

a.Participation in Healthcare & Retirement Plans: For employee uptake, we seek to double LMI employee participation in healthcare and/or retirement benefits across our portfolio companies adopting Worker Solutions. However, depending on the initial analysis of the portfolio company, such improved

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benefits participation may not be a focus or a priority, and the portfolio company may elect to focus on another human capital priority or workplace benefit.

b.Participation or Uptake for Services in Worker Solutions: For portfolio companies adopting Third-Party Solution Providers, our goal is for at least 10 percent of employees to utilize Third-Party Solution Provider services.

c.Joint Participation Targets: Given the range of benefits and services offered by Third-Party Solution Providers, our Worker Solutions team sets specific employee participation goals for each engagement between a portfolio company and Third-Party Solution Provider. Typically, we will coordinate with the Third-Party Solution Provider and the company to establish a joint uptake goal within the first year of implementation. With a participation target, we can manage troubleshooting and outreach strategies accordingly.

3.Additional KPIs: In addition to the items mentioned above, we track a variety of other KPIs to measure and help maximize portfolio company adoption of Worker Solutions recommendations while also tracking the efficiency and effectiveness of our managerial assistance and the value provided for employers and employees.

Potential for Funding Enhancement from Managerial Assistance

Furthermore, we believe Worker Solutions has the ability to improve our overall return on investment and strengthen our risk-adjusted return by helping to (i) decrease our overall funding costs, (ii) diversify our funding options and (iii) secure longer duration financing. For example, our current subscription-based credit facility with Sumitomo Mitsui Banking Corporation provides that under certain circumstances, the interest rate payable on borrowings under the facility may be reduced if such borrowings are used to finance portfolio companies that meet specified parameters (primarily related to our 2030 Goals) set forth in the facility. While the facility is expected to expire on May 2, 2024, we intend to negotiate similar discounts on future financing arrangements based upon the amount of capital we deploy that meets certain defined impact criteria, although we can offer no assurance that we will be able to secure such financing arrangements or that such discounts will be meaningful.

About the Company

We were formed as a Delaware limited liability company on February 19, 2021. Lafayette Square USA, Inc. ("we" or the “Company,” which term refers to either Lafayette Square USA, Inc. or Lafayette Square Empire BDC, Inc. together with its consolidated subsidiaries, as the context may require) is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). On May 16, 2022, Lafayette Square Empire BDC, Inc. filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to change its corporate name from “Lafayette Square Empire BDC, Inc.” to “Lafayette Square USA, Inc.” effective May 16, 2022.

In addition, for U.S. federal income tax purposes, the Company adopted an initial tax year end of December 31, 2021, and was taxed as a corporation for the tax years ending December 31, 2021 and December 31, 2022. The Company intends to elect to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for the tax year ended December 31, 2023, as well as maintain such election in future taxable years. However, there is no guarantee that the Company will qualify to make such an election for any taxable year. As a BDC, and when we qualify as an RIC, there will be certain regulatory requirements with which we must comply. See “Item 1. Business — Regulation as a Business Development Company” and “Item 1. Business — Certain U.S. Federal Income Tax Considerations.”

The Company has formed wholly-owned subsidiaries, LS BDC Holdings, LLC and LS BDC Holdings (DN), LLC, both Delaware limited liability companies, to hold certain equity or equity-like investments in portfolio companies. Additionally, the Company has formed a wholly-owned subsidiary, Lafayette Square SBIC, LP (“SBIC LP”), an SBIC licensed by the SBA to invest in eligible “small businesses” as defined by the SBA. SBIC LP received its SBIC license on February 1, 2023 (made effective as of January 27, 2023). SBA regulations currently permit SBIC LP to borrow up to $175.0 million in SBA-guaranteed debentures to the extent SBIC LP has at least $87.5 million in regulatory capital (as defined by SBA regulations). The Company consolidates its wholly-owned subsidiaries in these consolidated financial statements from the date of each subsidiary’s formation. All significant intercompany transactions and balances have been eliminated in such consolidation.

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Our Investment Adviser

The Company is externally managed by LS BDC Adviser, LLC (the “Adviser”) pursuant to an investment advisory and management agreement between the Company and the Adviser, dated August 7, 2023 (and as may be amended, the “Investment Advisory Agreement”). The Adviser was organized on February 19, 2021 as a Delaware limited liability company, is registered as an investment adviser under the Advisers Act, and is a wholly-owned subsidiary of Lafayette Square Holding Company, LLC (together with its controlled subsidiaries, including the Adviser and LS Administration, LLC, “Lafayette Square”). The Adviser oversees the management of the Company’s activities and is responsible for making investment decisions with respect to the Company’s portfolio.

The Adviser is obligated to allocate investment opportunities among the Company and any of its other clients fairly and equitably over time in accordance with the Adviser’s allocation policy. However, we can offer no assurance that such opportunities will be allocated to us fairly or equitably in the short-term or over time. See "Item 13. Certain Relationships and Related Transactions, and Director Independence" below. We have received exemptive relief from the SEC that permits us to co-invest with certain of our affiliates, subject to the conditions of such exemptive order. We believe that such co-investment relief affords us additional investment opportunities in a wide range of companies.

We currently do not have any employees. Our investment activities are managed by the Adviser. The Adviser is responsible for sourcing potential investments, conducting research and due diligence on prospective investments and equity sponsors, analyzing investment opportunities, structuring our investments, and monitoring our investments on an ongoing basis. Under the Investment Advisory Agreement, we will pay the Adviser a base management fee and an incentive fee for its services. See “Item 1. Business — Investment Advisory Agreement” for a discussion of the base management fee and incentive fee payable by the Company to the Adviser and the risk factor entitled “Our management and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.”

The investment decisions of the Company will be managed by the Adviser's Investment Committee, which is currently comprised of Damien Dwin, Phil Daniele, Ryan Ochs, Don Baylor, Jr. and Nicole Pereira, although such membership may change at any time without notice to shareholders. Mr. Dwin and Mr. Daniele are currently considered "Key Persons" under the Company's constituent documents.

Damien Dwin

Damien Dwin is the Founder and Chief Executive Officer of Lafayette Square. Previously, Damien served as Co-Founder and Co-CEO of Brightwood Capital Advisors from its founding in 2010 to October 2020. 

Damien began his career as a trader with Goldman Sachs, New York & London, there earning the Michael P. Mortara Award for Innovation. At Credit Suisse, he was the Co-Founder and Head of the North American Special Opportunities business until 2010. Damien also served on the Vice President Selection Committee and led the Fixed Income Division Credit Training Program. 

He is an active thought leader on place-based investing, mass incarceration, and the use of capitalism for good. He has written for Financial Times, Entrepreneur, and Inc.com.  Damien currently serves as Chair of the Board of Trustees for Vera Institute of Justice. He also serves on the non-profit boards of Lincoln Center for the Performing Arts, Children’s Hospital of Philadelphia, Studio Museum in Harlem, National Trust for Historic Preservation, Woodberry Forest School, and Boys’ Club of New York. He is also a Council Member of the Smithsonian National Museum of African American History and Culture.

Damien received a B.S./B.A. from Georgetown University where he served two terms on the Board of Regents. 

Phil Daniele

Phil Daniele is the Chief Risk Officer at Lafayette Square. With over 37 years of experience, Phil was the former Chief Risk Officer at Brightwood Capital and served on Brightwood’s Executive and Valuation Committees. Prior to Brightwood, he was the Chief Credit Officer for the Americas at Credit Suisse. He was responsible for approving all credit extensions in the Americas portfolio including corporates, financial institutions, hedge funds and private clients. Previously, Phil served as Head of Corporate Credit Americas, which included the Credit Suisse Leveraged Finance business. He began his career at CIT Factoring in 1984.

Phil is a Board Member and has been actively involved with Flames Neighborhood Youth Association since 1979. Flames is a Brooklyn based organization primarily dedicated to the improvement of the lives of African American youth and the betterment of interracial relationships in the communities that the organization serves. Additionally, he is a Board Member

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of Soul of the Peruvian Andes, a nonprofit whose mission is providing healthcare and education support to the impoverished villages of the Andes Mountains in Peru.

Originally from Brooklyn, NY, Phil holds a B.B.A., Accounting, and an M.B.A., Finance from Pace University.

Our Administrator

LS Administration, LLC (the "Administrator"), which is also a wholly-owned subsidiary of Lafayette Square, has entered into an administration agreement (the “Administration Agreement”) with the Company and a staffing agreement (the "Staffing Agreement") with the Adviser. As the Company itself has no employees, under the Staffing Agreement, the Administrator makes experienced investment professionals available to the Adviser and provides access to the senior investment personnel of Lafayette Square and its affiliates as well as the services of a full complement of investment professionals of Lafayette Square. The Administrator also commits the members of the Adviser’s Investment Committee to serve in that capacity. The Adviser seeks to capitalize on the significant deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management, and monitoring experience of Lafayette Square’s professionals.

For this work, the Company pays no compensation directly to any interested director or executive officer of the Company, but does reimburse the Administrator for the Company’s allocable portion of certain expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the cost of its Chief Financial Officer and Chief Compliance Officer and their respective staffs and its allocable portion of the cost of providing managerial assistance upon request to portfolio companies. Additionally, the Administrator performs certain required administrative services, which include coordinating or providing assistance in accounting, legal, compliance, operations, investor relations, technology, and loan agency services (including any third party service providers related to the foregoing), as well as maintaining the financial records that the Company is required to maintain and preparing reports for the Company’s shareholders and reports filed with the SEC. The Administrator will be reimbursed at cost for certain expenses that it or the Adviser incur on our behalf. The Administrator reserves the right to waive all or part of any reimbursements due from the Company at its sole discretion. See “Item 1. Business– Administration Agreements” below for a discussion of the expenses (subject to the review and approval of our independent directors) for which we expect to reimburse to the Administrator.

Lafayette Square

Founded in November 2020, Lafayette Square seeks investment opportunities that stimulate economic growth across the United States through the creation and preservation of jobs for working class communities. Lafayette Square’s flagship direct lending strategy primarily focuses on lending capital to profitable middle market companies in historically overlooked areas, and seeks to generate differentiated returns through localized origination efforts across the United States.

In addition to such targeted investing, Lafayette Square seeks to improve the recruitment, retention, well-being, and productivity of employees by connecting its portfolio companies with Third-Party Solution Providers that deliver workplace benefits and/or advisory support through our managerial assistance platform, Worker Solutions. This support is driven by key insights from Lafayette Square’s proprietary data analytics platform, Potomac X Lafayette Square, that overlays portfolio company data with place-based socioeconomic data and industry-specific labor benchmarks, and allows Lafayette Square to track and manage results. Lafayette Square believes the integration of these benefits will positively affect employee well-being and ultimately enhance risk-adjusted financial returns.

Lafayette Square’s primary objective is to serve the interests of working-class people while making money for its investors. Lafayette Square has three divisions supporting its mission: Analytics, Investments and Managerial Assistance. Through the Company, we have established three primary goals for 2030: (1) help businesses create and/or retain 100,000 working class jobs, and 150,000 jobs overall; (2) invest at least 50% of our portfolio in borrowers who are either located in working class communities or are substantial employers of LMI people; and (3) reach 50% adoption of managerial assistance by our portfolio companies.

The Lafayette Square Analytics Division

The Lafayette Square Analytics Division is comprised of a dedicated team of technology professionals who build proprietary software and systems that works with third-party tools to empower Lafayette Square investment professionals with data that informs risk decisions and builds relationships with clients. One of the main products designed by the Analytics Division is Potomac X Lafayette Square, a data platform with a place-based analytics tool that supports

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Lafayette Square’s investments by providing place-based socioeconomic data that offers insights into investments, both before and after they are made.

Potomac X Lafayette Square

Potomac X Lafayette Square is a data platform that informs risk decisions based on localized socioeconomic and financial data. Built to help businesses understand their and their employees' challenges within their respective communities, we leverage this platform in a few different ways:

•To provide insight about a community where a portfolio company and/or its employees are located, such as demographic, economic and social data;

•To help identify ways to support such businesses and the communities in which they and/or their employees are located, including through our Worker Solutions platform (described in more detail in "The Lafayette Square Managerial Assistance Division" below);

•To analyze the socioeconomic challenges affecting middle market businesses and employees, including:

◦Recruitment and retention of labor, particularly of frontline workers,

◦Uneven uptake by workers of traditional workplace benefits, and

◦Impact of inflation on employees, particularly working class people;

•As a risk mitigation tool, with a goal to strengthen our investment outcomes and returns, including by increasing employee retention, morale and productivity.

Infrastructure as a Service

Drawing on experience from Lafayette Square's own technology and data infrastructure build out, Lafayette Square launched a revenue generating Infrastructure as a Service (IaaS) business. Lafayette Square currently offers three core deliverables with this offering:

•Cloud infrastructure deployment

•Data lake house deployment with data sourcing from disparate sources

•Reporting and analytics engine that sits on top of the data lake house

Support of Managerial Assistance Offerings

We analyze our portfolio companies’ employee data to identify ways to improve worker well-being with Lafayette Square's Worker Solutions offering. Potomac plays a critical role in driving and tracking how Worker Solutions services affect portfolio company employees. Lafayette Square believes impactful services will have a positive effect on portfolio company employees and consequently will increase their productivity and decrease turnover, which should theoretically improve the performance of the portfolio company and reduce its risk of default.

The Lafayette Square Investment Division

Lafayette Square seeks to generate premium asset spreads and source low-cost, long duration funding by aligning its goals with public policy and seeking cooperation with government. As part of this strategy, Lafayette Square currently manages fund vehicles regulated under provisions of the 1940 Act as well as private vehicles which are exempt from registration as an investment company under the 1940 Act.

Vehicles Regulated Under the 1940 Act

As described in more detail herein, the Lafayette Square Investment Division currently operates the Company as its only investment vehicle regulated under the 1940 Act. With committed capital from both institutional and individual shareholders, the Company makes loans to eligible borrowers using both drawn equity from the Company's shareholders and financing from (i) government partnerships such as the SBA, using the Company’s wholly-owned SBIC subsidiary and (ii) the capital markets, such as the Company’s Subscription Facility with Sumitomo Mitsui Banking Corporation.

Private Vehicles In Partnership With Government Entities

As reflected by its name, which references the park outside the White House located in the heart of downtown Washington D.C., Lafayette Square values the support of government entities like the SBA to pursue its investment strategy. In particular, the Company has worked extensively with the SBA to license its wholly owned subsidiary as an

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SBIC, which fulfills both the SBA’s mission as well as the Company’s investment objectives and Lafayette Square's ultimate goals.

(1) Lafayette Square SBIC, LP

The Company’s wholly-owned subsidiary, Lafayette Square SBIC, LP (“SBIC LP”), is an SBIC licensed by the SBA. Under SBA regulations, SBICs make investments in eligible small businesses, which may include loans and equity investments. SBICs are required to comply with investment restrictions, including strict limitations on the size of the companies in which they invest and limitations on taking controlling interests. Like other SBICs, SBIC LP makes qualifying loans financed via the SBA's debenture program, which provides up to $175 million of SBA-guaranteed debentures to licensees, subject to the SBA’s approval. These debentures have maturities of ten years and have fixed interest rates tied to the U.S. 10 Year Treasury rate, which interest rates are generally lower than comparable bank rates and other forms of debt.

(2) Lafayette Square SSBIC, LP

On May 18, 2023, the SBA issued a “green light” letter inviting the Company to submit its application to obtain a license to operate a specialized small business investment company (“SSBIC”). Such letter does not assure an applicant that the SBA will ultimately issue an SSBIC license, and the Company has received no assurance or indication from the SBA when or if it will receive an SSBIC license. However, to the extent such a license is received, it is expected to be held by another wholly-owned subsidiary of the Company, Lafayette Square SSBIC, LP (“SSBIC LP”), making SSBIC LP one of only a few existing Specialized Small Business Investment Companies. Like an SBIC, an SSBIC makes loans to and/or invests in eligible small businesses, but with a focus on small business entrepreneurs whose participation in the free enterprise system has historically been hampered because of social or economic disadvantage. SSBIC LP could provide up to an additional $175.0 million of SBA-guaranteed debentures, subject to the SBA’s approval.

Private Vehicles in Partnership with Private Entities

(1) Lafayette Square Private Fund, LLC

Lafayette Square Private Fund, LLC (the “Private Fund”) was formed on September 28, 2022 to serve as a fund of one for a European institutional investor, and invest primarily alongside the Company in the same types of portfolio companies. The institutional investor, who retains discretion over any investments made by the Private Fund, agreed to provide up to $200 million in committed and contingent capital to the Private Fund, and as of the date hereof, the Private Fund had invested a meaningful portion of its committed capital in some of the same portfolio companies in which the Company has invested.

Other Investments

In addition to the vehicles described above, Lafayette Square has made a limited number of proprietary investments in a variety of early-stage companies, including an ongoing minority stake in a renewable energy company that Lafayette Square co-founded which deploys capital to develop community solar projects across the United States, with a goal to bring energy cost savings to working class communities.

The Lafayette Square Managerial Assistance Division

Worker Solutions leverages Potomac and coordinates directly with the human resources and personnel departments of our portfolio companies to (i) analyze their workforce, wages, and benefits, (ii) identify human capital challenges and benefits gaps, and (iii) recommend appropriate Third-Party Solution Providers and/or policy changes to existing workplace benefits (such recommendations defined as "Qualifying Human Capital Investments") that we believe would enhance employee well-being and improve retention. Where possible, we use Potomac to disaggregate and analyze health insurance and retirement benefits participation and collect metrics regarding different aspects of the employee experience and human resources infrastructure in order to recommend Qualifying Human Capital Investments to improve employee participation in those benefits as well as monitor portfolio company progress compared against a baseline.

While we are constantly innovating and may change our managerial assistance approach in the future without notice to shareholders, we currently support our portfolio companies in managing their talent and human capital in four main ways, via (i) Incentives; (ii) Workforce & Benefits Data Analytics; (iii) Services; and (iv) Consultation.

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1.Incentives:

a.Interest rate step down: We encourage a portfolio company’s adoption of new or expanded Qualifying Human Capital Investments by offering an interest rate step down on the portfolio company’s borrowing rate from the Company in our credit agreements, from a minimum of five basis points for adoption of one Qualifying Human Capital Investment to a twenty-five basis points reduction for the adoption of two or more Qualifying Human Capital Investments. Since the inception of our BDC in 2021, at least four portfolio companies have received the interest rate step down by making a total of nine Qualifying Human Capital Investments (including adoption of six services and three policy changes), allowing the companies to save in interest payments on their borrowing from the Company. As of December 31, 2023 and 2022, savings for those portfolio companies from such interest rate step down totaled $42,303 and $13,553, respectively.

b.Third-Party Solution Provider Discounts: Our portfolio companies typically pay for the cost of engaging our Third-Party Solution Providers, with such costs offset in whole or in part by the aforementioned interest rate step downs. As part of our executed agreements with our Third-Party Solution Providers—which we refer to as Impact Collaboration Agreements—we aim to negotiate data delivery specifications and reduced pricing from the Third-Party Solution Providers for our portfolio companies. When successful, these provider discounts, negotiated on behalf of our portfolio companies, support adoption of Qualifying Human Capital Investments to improve employee well-being and retention, which we believe is a common goal across our portfolio companies. To date, Worker Solutions has negotiated discounts with certain Third-Party Solution Providers that range from 5 percent to 40 percent off selected service offerings.

c.Payroll Tax Savings: As part of providing managerial assistance, Worker Solutions has also identified employee benefits that may have an employer federal payroll tax deduction, such as tuition reimbursement, student loan repayment, or retirement plan contributions. These types of benefits enable employers to deduct these benefit contributions on their federal income tax return, up to certain annual contribution limits, as delineated by federal law. Due to recent federal legislation, an employer can now contribute up to $5,250 tax-free towards an employee’s student loan obligation. In introducing such a student loan repayment program, Worker Solutions can also advise companies to communicate to their employees that employer contributions are not considered income and therefore are tax-free contributions to the employee. As part of providing managerial assistance, Worker Solutions also educates portfolio companies about any applicable estimated tax savings that might accrue by adopting eligible solutions with payroll tax implications, so they can collaborate with their tax and accounting advisers to potentially benefit from such solutions.

2.Workforce & Benefits Data Analytics:

a.Baseline Workforce Assessment: Prior to deal-close or upon becoming a portfolio company, Worker Solutions typically performs a “Know Your Workforce Assessment” that provides an analysis of employee demographics and benefits usage. Given available data, Worker Solutions will disaggregate this information by job type, geographic location or job site, and/or wage bands, and aim to supplement company data with place-based analytics using public and private data sources, such as local and regional demographic and socio-economic data and trends related to financial well-being, education and training, income status, and health and wellness. We also seek to collect information on additional ancillary benefits available, share of employees receiving bank direct deposit, employer share of health premiums, and employer retirement contributions. As part of our managerial assistance, we share this analysis with the portfolio company to establish a baseline upon our initial investment and to consult with the portfolio company about potential options to maximize their human capital return-on-investment.

b.Human Capital Trend Analytics: As part of our managerial assistance, if permitted by a portfolio company, we use Lafayette Square's proprietary data platform, Potomac, to collect several dozen metrics regarding different aspects of the employee experience and human resources infrastructure, including historical employee and benefits participation data. As of December 31, 2023, 31.6 percent of our portfolio companies provide such metrics, which we aim to update at least quarterly. Through Potomac, we analyze employee turnover, changes in headcount, and employee wages as they relate to the local labor market and cost-of-living. This tech-enabled platform allows us to share this data with our portfolio companies and monitor company progress compared against the baseline.

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c.Employee Input Analytics: We believe that gathering data directly from employees about their experience and workplace benefits is an important step in identifying gaps in benefits or design issues with existing benefits and tracking employee satisfaction. As part of our managerial assistance, we offer to support portfolio companies in designing, administering, and analyzing employee surveys to collect employee input on benefits offerings. Survey topics may include employee satisfaction, benefits satisfaction, demand for various types of new and enhanced benefits, benefits design, employee financial health, and company culture.

3. Services:

a.Curation: To address issues of financial well-being, health and wellness and education and training for portfolio company employees, Worker Solutions has curated a suite of solutions, such as emergency savings, homebuyer assistance, employer-based college savings plan (529) matching and student loan repayment, benefits navigation, stress management, workforce development, and primary-care focused health plans for self-funded employers. Worker Solutions has secured agreements with 16 Third-Party Solution Providers. As part of providing managerial assistance, Worker Solutions continues to manage this network to ensure that the consortium includes services that appeal to a significant cross-section of our portfolio companies.

b.Recommendation: Based upon the initial assessment and consultation with the portfolio company, we typically recommend solutions to support employee well-being and improve the human capital operations of the portfolio company. Worker Solutions facilitates service provider introductions and product demonstrations for the company to review and consider potential new employee benefits. There is no guarantee that the portfolio company will onboard or utilize the recommended services. However, if the company selects a Third-Party Solution Provider, the company will typically receive two incentives in connection with the adoption of that service provider: (i) an interest rate stepdown to reduce loan interest costs and (ii) program discounts on provider fees negotiated by Lafayette Square or its affiliates. We confirm adoption by the portfolio company through the receipt of an executed contract between the portfolio company and the selected service provider. This construct may also result in reduced funding costs for the Company from its own lenders.

c.Implementation: As part of our managerial assistance, we support the portfolio company with solution onboarding, implementation, and employee outreach strategies to maximize uptake and impact. Additionally, we Worker Solutions works with the portfolio company and Third-Party Solution Providers to establish and monitor employee participation rates.

4.Consultation:

a.Additional Human Resources Capacity: Through our managerial assistance, we offer to consult with our portfolio companies as they attempt to address a particular set of human capital challenges that are important to the company’s overall performance, such as best practices in employee engagement or navigating the evolving benefits landscape. Depending on the issue, Worker Solutions conducts research, performs industry benchmarking, and/or identifies major policy issues or trends affecting the workplace. This type of technical assistance or human capital consulting also includes our other pillars of managerial assistance, particularly services and place-based and employee data analytics.

b.Support for SECURE Act 2.0 Alignment & Implementation: We believe that SECURE Act 2.0 holds the opportunity to improve wealth building access and opportunities for working class people through enhanced workplace benefits, particularly for small and medium-sized businesses. We believe that human resources leaders need assistance in navigating the various applicable provisions in the law while also developing strategies to maximize results for their employees and the company. As a result, Worker Solutions has developed in-house expertise to support our portfolio companies make the transition in an efficient manner. Worker Solutions has secured related solutions such as employer-based student loan repayment benefits, emergency savings, and lower-cost retirement plans that could increase participation and assets for working class people, who have had lower participation in workplace savings programs, including employer-sponsored retirement plans.

c.Strategic Goal-Setting: For companies with meaningful LMI worker populations, it can be common to have a gap in benefits participation—employer-based healthcare and retirement plans—between middle/upper-income employees and lower-income employees. As part of our managerial assistance, we may inquire about the

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intentions of the portfolio company to improve retirement participation for LMI workers, and then work with the portfolio company to set short, medium, and long-term goals that would increase retirement participation for such workers or a designated category of frontline workers. As part of our managerial assistance, we could also provide options for the human resources team to review and consider. For example, Worker Solutions could recommend an employer non-elective contribution or automatic or “opt-out” retirement strategy to drive participation for the under-enrolled segments of the employee base. Finally, we would also utilize our employee data analytic capability to track and analyze participation data and confirm with the portfolio company.

Investment Process

The Adviser is responsible for the origination, underwriting, structuring, and monitoring of our investments. The Adviser intends to organize the investment process into nine stages:

(i) Origination;

(ii) Initial Screening;

(iii) Broad Screening and Preliminary Due Diligence;

(iv) Comprehensive Due Diligence & Structuring;

(v) Investment Committee Approval;

(vi) Closing;

(vii) Portfolio Monitoring;

(viii) Risk Management; and

(ix) Valuation (as described in more detail in “Item 1. Business — Valuation Procedures")

The investment team and Investment Committee are responsible for stages i-vi, and the portfolio management team is responsible for stages vii-ix, in each case as further described below. The format of the Investment Process, and its application to any particular deal(s), may change in the future without notice to shareholders.

Origination

The Adviser's senior investment professionals have networks and long-term relationships with management teams, industry experts, and financial intermediaries within the United States. We source investment opportunities from various sources, including management teams, family offices, investment bankers, financial intermediaries, accounting firms, law firms, and private equity sponsors.

Initial Screening

The Adviser screens potential investment opportunities on a consistent and thorough basis. Upon receiving a new opportunity, the Adviser staffs the opportunity with a deal team typically consisting of a senior and junior underwriter which produces a preview memorandum outlining the opportunity, company details, summary financials, investment highlights, and a discussion of the key risks and mitigants for review by the investment team. At this stage, key initial diligence items, if any, are flagged for follow up.

Broad Screening and Preliminary Due Diligence

If the opportunity passes Initial Screening on its merits, the preview memorandum, incorporating any feedback from the Initial Screening phase—including answers to preliminary due diligence questions—is presented again to the broader investment team as well as to our Adviser’s Chief Risk Officer (the “CRO”) and representatives from the portfolio management and legal & compliance teams. Should the CRO and the wider investment team collectively determine that an opportunity be pursued, the deal team will negotiate a preliminary term sheet with the borrower and seek to obtain exclusivity. Next, the deal will proceed to an intensive due diligence process, tailored to the transaction’s specific risks.

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Comprehensive Due Diligence & Structuring

The deal team, led by a senior underwriter, conducts due diligence of the opportunity and produces a full investment analysis. This will typically include:

•discussion of the sources and uses and the transaction rationale;

•a qualitative and quantitative assessment of the company;

•an analysis on the defensibility of its business model;

•a review and assessment of whether the company’s performance and operating metrics qualify it as an LMI Targeted Investment;

•analysis of competitive and industry dynamics;

•a comprehensive financial review of management and third-party financial information including, in most cases, a quality of earnings report;

•a meeting(s) with management and owners;

•sensitivity testing of company projections for key input factors;

•a valuation analysis with transaction comparables, publicly traded comparables, and discounted cash flow analysis;

•calls with key customers and independent expert advisors;

•review of loan documentation, accompanied by outside counsel and;

•legal and compliance diligence, including reference and background checks.

We seek to maximize risk-adjusted return, aiming to structure investments to include features such as:

•cash coupon and closing fees from providing current income and current return of capital;

•contractual amortization;

•comprehensive collateral packages, typically including a first lien on all assets and the company’s stock;

•other situational rights and remedies; and

•conditions precedent for closing the transaction.

Investment Committee Approval

After Comprehensive Due Diligence and Structuring is complete, the deal team presents an investment memorandum to the Investment Committee. The Investment Committee assesses the merits of the proposed transaction based on the materials presented and applies their significant investment experience to determine whether to proceed with a potential investment.

Closing

Once approved, the deal team works towards closing and funding the investment. If there are any material changes to the investment that occur following Investment Committee approval, the deal team must notify the Investment Committee and seek its consent to proceed. Key data are captured and logged as part of each closing process and, once closed, the deal team produces a closing memorandum.

Portfolio Monitoring and Risk Management

Ongoing monitoring and risk management of each asset is conducted by our Adviser's portfolio management team under the supervision of the Chief Risk Officer. The portfolio management team is distinct and separate from the Adviser's investment team, and has primary responsibilities to:

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•formally monitor portfolio companies post-investment on an ongoing basis;

•perform quarterly valuations of all assets in partnership with third-party valuation agent(s);

•maintain and update internal and external asset ratings;

•oversee BDC-level monitoring;

•lead amendment, “work out,” or restructurings processes. 

The portfolio management team monitors the financial trends of each portfolio company to determine if it is meeting its respective business plan and to assess the appropriate course of action with respect to our investment in each portfolio company. The portfolio management team has several methods of evaluating and monitoring the performance and fair value of our investments, which may include, but are not limited to the following:

•periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and variants from approved budgets and internal projections;

•assessment of performance relative to business plan and key operating metrics and compliance with financial covenants;

•assessment of performance relative to industry benchmarks or portfolio comparables, if any;

•attendance at and participation in board meetings and lender calls; and

•review of monthly, quarterly and annual financial statements and financial projections of portfolio companies.  

Mandatory reports from portfolio companies typically include: (1) a quarterly financial reporting package, including financial statements and compliance certificates, and (2) annual audited financial statements presented in accordance with generally accepted accounting principles. The Adviser uses this data, alongside an ongoing review and analysis to identify risk factors.

As part of the monitoring process, our Adviser employs an internal investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser rates the credit risk of all investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or acquisition), although it may also take into account the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. These internal risk ratings do not constitute ratings of investments by a nationally recognized statistical rating organization. The rating system is as follows:

Investment Rating Scale

1.    Involves the least amount of risk to our initial cost basis. The borrower is performing above expectations, and the trends and risk factors for this investment since the time of origination or acquisition are generally favorable which may include the performance of the portfolio company or a potential exit.

2.    Involves an acceptable level of risk that is similar to the risk at the time of origination or acquisition. The borrower is generally performing as expected and the risk factors are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a rating of 2.

3.    Involves a borrower performing below expectations and indicates that the loan’s risk has increased since origination or acquisition. The borrower could be out of compliance with debt covenants; however loan payments are generally not past due.

4.    Involves a borrower performing materially below expectations and indicates that the loan’s risk has increased materially since origination or acquisition. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 120 days past due)

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5.    Involves a borrower performing substantially below expectations and indicates that the loan’s risk has increased substantially since origination or acquisition. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.

The Adviser monitors and, when appropriate, changes the Internal Risk Rating assigned to each investment in our portfolio. In connection with our valuation process, the Adviser reviews these Internal Risk Ratings on at least a quarterly basis.

Upon entering the portfolio, each asset will have a credit estimate and/or credit score assigned by an external third-party rating agency - Moody’s, S&P, Fitch, or DBRS. This process is overseen and maintained by the portfolio management team. We make no guarantee as to the rating accuracy or performance of investments contained in our portfolio.

Private Offering

Our initial private offering of shares of common stock, $0.001 par value per share ("Common Stock") was conducted in reliance on Regulation D under the Securities Act (“Regulation D”). Any investors in our initial private offering were required to be “accredited investors” as defined in Regulation D of the Securities Act. The criteria required of Regulation D under the Securities Act may not apply to investors in subsequent offerings.

We entered into subscription agreements with investors in this private offering. Each investor made a capital commitment to purchase shares of Common Stock pursuant to a subscription agreement (a “Subscription Agreement”). Investors are required to make capital contributions to purchase shares of Common Stock each time we deliver a drawdown notice, which notice is delivered at least eight business days prior to the required funding date, in an aggregate amount not to exceed their respective Capital Commitments. All purchases will generally be made pro rata in accordance with the investors’ Capital Commitments, at a per-share price as determined by the Company’s board of directors (the “Board”), including any committee thereof, which price will be determined prior to the issuance of such shares of Common Stock and in accordance with the limitations under Section 23 of the 1940 Act. The Board may set the per-share price above the net asset value per Share based on a variety of factors, including the total amount of our organizational and other expenses. Prior to a Liquidity Event (defined below in the section entitled “Term”), no investor who participated in the private offering will be permitted to sell, assign, transfer or otherwise dispose of its shares of Common Stock or Capital Commitment unless we provide our prior written consent and the transfer is otherwise made in accordance with applicable law.

Closings

On December 22, 2021, we completed our initial closing of capital commitments for shares of our Common Stock issued in the Private Offering (the "Initial Closing"), and we have held additional closings subsequent to the Initial Closing. As of March 20, 2024, we have received signed Subscription Agreements totaling approximately $458.2 million - however, due to investor concentration limits agreed to with certain investors, we have only accepted approximately $377.0 million to date. We expect to continue to hold additional closings subsequent to the Initial Closing.

Catch-up Purchases

We will permit, subject to our sole discretion, additional closings from time to time thereafter, and we reserve the right to conduct additional offerings of securities in the future in addition to the initial private offering. In the event that we enter into a Subscription Agreement with one or more investors after the initial drawdown from its non-affiliated investors (the "Initial Drawdown"), each such investor will be required to make purchases of shares of Common Stock (each, a “Catch-up Purchase”) on one or more dates to be determined by us. The aggregate purchase price of the Catch-up Purchases will be equal to an amount necessary to ensure that, upon payment of the aggregate purchase price, such investor will have contributed the same percentage of its Capital Commitment to us as all investors whose subscriptions were accepted at previous closings. Catch-up Purchases will be made at a per-share price as determined by our Board (including any committee thereof), which price will be determined prior to the issuance of such shares of Common Stock and in accordance with the limitations under Section 23 of the 1940 Act. In order to more fairly allocate organizational expenses among all of our stockholders, investors subscribing after the Initial Drawdown will be required to pay a price per share above net asset value reflecting a variety of factors, including the total amount of our organizational and other expenses.

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Default

In addition to all legal remedies available to us, failure twice by an investor to purchase additional shares of Common Stock when requested will (following a cure period of ten business days) result in that investor being subject to certain default provisions set forth in the Subscription Agreement. Defaulting investors may also forfeit their right to participate in purchasing additional shares on any future drawdown date or otherwise participate in any future investments in shares of our Common Stock.

Under certain subscription line credit facilities into which we may enter, we may pledge our right to make capital calls of stockholders as collateral to a lender, which will be able to call for capital contributions upon the occurrence of an event of default under such credit facility. To the extent such an event of default does occur, stockholders could be required to fund any shortfall up to the amount of their remaining Capital Commitments, without regard to the underlying value of their investment.

Term

The Company’s term is perpetual. Subject to market conditions and Board approval, we will target a Liquidity Event within seven years following the completion of our initial offering stage.

If we have not consummated a Liquidity Event, as defined below, by the tenth anniversary following the completion of our offering stage, as such period may be extended by up to one additional year pursuant to the Adviser’s recommendation and the approval of the Board, the Board (subject to market conditions and any necessary approvals of our stockholders and applicable requirements of the 1940 Act) will use commercially reasonable efforts to wind down, sell and/or liquidate and dissolve the Company in an orderly manner (the “Wind-Down Period”).

We define a “Liquidity Event” as any of: (1) a quotation or listing of our Common Stock on a national securities exchange, including an initial public offering (an “Exchange Listing”) or (2) a Sale Transaction. A “Sale Transaction” means (a) the sale of all or substantially all of our capital stock or assets to, or another liquidity event with, another entity or (b) a transaction or series of transactions, including by way of merger, consolidation, recapitalization, reorganization, or sale of stock in each case for consideration of either cash and/or publicly listed securities of the acquirer. Potential acquirers could include entities that are not BDCs that are advised by the Adviser or its affiliates.

At any time during the Wind-Down Period, the Board may seek stockholder approval to enter into a transaction (an “Accelerated Liquidity Event”) in which we would sell all or substantially all of our assets to, or another liquidity event with, an entity for consideration of cash and/or publicly listed securities of the acquirer. Potential acquirers could include entities that are not BDCs that are advised by the Adviser or its affiliates. For the avoidance of doubt, an Accelerated Liquidity Event does not include an initial public offering or listing on a national securities exchange of the Common Stock.

Prior to the occurrence of a Liquidity Event, our Common Stock may not be sold without the written consent of the Company.

Investment Advisory Agreement

Under the Investment Advisory Agreement, the Adviser manages the day-to-day operations of, and provides investment advisory services to, the Company. The Board most recently approved the Investment Advisory Agreement in June 2023. The Adviser is a registered investment adviser with the SEC. The Adviser receives fees for providing services, consisting of two components, a base management fee and an incentive fee. In addition, we will reimburse the Adviser for certain expenses it incurs on our behalf beginning in the period of our Initial Drawdown.

For more information regarding potential conflicts of interest between us and our Adviser, see the risk factors entitled “There are significant potential conflicts of interest that could affect our investment returns”, as well as “Item 13. Certain Relationships and Related Transactions, and Director Independence.”

Base Management Fee

The base management fee is payable quarterly in arrears beginning in the period of its Initial Drawdown at an annual rate of (i) prior to a Liquidity Event, 0.75%, and (ii) following a Liquidity Event, 1.00%, in each case of the average value of

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our gross assets (gross assets equal the total assets of the Company as set forth on the Company’s balance sheet) at the end of the two most recently completed calendar quarters. For services rendered under the Investment Advisory Agreement, the base management fee will be payable quarterly in arrears. No management fee will be charged on committed but undrawn capital commitments. Base management fees for any partial month or quarter will be appropriately pro-rated.

The Adviser and its affiliates, at their own expense and out of their own assets, may make payments to, or enter into arrangements with, financial intermediaries or other persons in consideration of services, arrangements, significant investments in shares of our Common Stock or other activities that the Adviser and its affiliates believe may benefit our business, facilitate investment in our Common Stock or otherwise benefit our stockholders. Payments of the type described above are sometimes referred to as profit-sharing payments.

Incentive Fee

We will also pay the Adviser an incentive fee consisting of two parts: (1) an incentive fee, determined and paid quarterly, based on pre-incentive fee net investment income of the Company (the “Income-Based Fee”) and (2) an incentive fee, determined and paid in arrears, based on net capital gains as of the end of each calendar year or upon the termination of the Investment Advisory Agreement (the “Capital Gains Fee”), which are described in more detail below.

(1) Incentive Fee on Pre-Incentive Fee Net Investment Income

The portion based on our income is based on Pre-Incentive Fee Net Investment Income Returns. “Pre-Incentive Fee Net Investment Income Returns” means, as the context requires, either the dollar value of, or percentage rate of return on the value of our net assets at the end of the immediately preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement ), and any interest expense or fees on any credit facilities or outstanding debt and distributions paid on any issued and outstanding preferred shares, but excluding the incentive fee).

Pre-Incentive Fee Net Investment Income Returns include, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind (“PIK”) interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income Returns do not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. See the risk factor entitled “There are significant potential conflicts of interest that could affect our investment returns – Our management and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.”

 Pre-Incentive Fee Net Investment Income Returns, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, is compared to a “hurdle rate” of return of 1.25% per quarter (5.0% annualized).

 Prior to a Liquidity Event, we pay the Adviser an incentive fee quarterly in arrears with respect to our Pre-Incentive Fee Net Investment Income Returns in each calendar quarter as follows:

 • no incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which our Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.25%;

 • 100% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.47% (5.88% annualized). We refer to this portion of our Pre-Incentive Fee Net Investment Income Returns (which exceeds the hurdle rate but is less than 1.47%) as the “catch-up.” The “catch-up” is meant to provide the Adviser with approximately 15% of our Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.47% in any calendar quarter; and

• 15% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.47% (5.88% annualized). This reflects that once the hurdle rate is reached and the catch-up is achieved, 15% of all Pre-Incentive Fee Net Investment Income Returns thereafter are allocated to the Adviser.

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Pre-Incentive Fee Net Investment Income Returns Prior to a Liquidity Event

(expressed as a percentage of the value of net assets)

Percentage of Pre-Incentive Fee Net Investment Income

Allocated to Quarterly Incentive Fee

Following a Liquidity Event, we will pay the Adviser an incentive fee quarterly in arrears with respect to our Pre-Incentive Fee Net Investment Income Returns in each calendar quarter as follows:

• no incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which our Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.25%;

• 100% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.47% (5.88% annualized). The “catch-up” is meant to provide the Adviser with approximately 17.5% of our Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.47% in any calendar quarter; and

• 17.5% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.47% (5.88% annualized). This reflects that once the hurdle rate is reached and the catch-up is achieved, 17.5% of all Pre-Incentive Fee Net Investment Income Returns thereafter are allocated to the Adviser.

Pre-Incentive Fee Net Investment Income Returns Following a Liquidity Event

(expressed as a percentage of the value of net assets)

Percentage of Pre-Incentive Fee Net Investment Income

Allocated to Quarterly Incentive Fee

These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to the Adviser with respect to Pre-Incentive Fee Net Investment Income Returns. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a calendar quarter in which we incur an overall loss taking

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into account capital account losses. For example, if we receive Pre-Incentive Fee Net Investment Income Returns in excess of the quarterly hurdle rate, we will pay the applicable incentive fee even if we have incurred a loss in that calendar quarter due to realized and unrealized capital losses. If a Liquidity Event occurs on a date other than the first day of a calendar quarter, the incentive fee will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Liquidity Event based on the number of days in such calendar quarter before and after the Liquidity Event.

(2) Incentive Fee on Capital Gains

The second component of the incentive fee, the capital gains incentive fee, is payable at the end of each calendar year (or at the time of a Liquidity Event) in arrears. Such capital gains incentive fee will be equal to 15% of (1) realized capital gains less (2) realized capital loss, less unrealized capital losses on a cumulative basis from inception through the day before the Liquidity Event, less the aggregate amount of any previously paid capital gains incentive fees in the year of calculation.

Prior to a Liquidity Event, the amount payable equals:

• 15% of cumulative realized capital gains less all realized capital losses and unrealized capital depreciation on a cumulative basis from inception through the end of such calendar year (or upon a Liquidity Event), less the aggregate amount of any previously paid incentive fee on capital gains in the year of calculation, as calculated in accordance with U.S. GAAP.

Following a Liquidity Event, the amount payable equals:

• 17.5% of cumulative realized capital gains from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with U.S. GAAP.

If a Liquidity Event occurs on a date other than the first day of a fiscal year, a capital gains incentive fee will be calculated as of the day before the Liquidity Event, with such capital gains incentive fee paid to the Adviser following the end of the fiscal year in which the Liquidity Event occurred. Solely for purposes of calculating the capital gains incentive fee after a Liquidity Event, the Company will be deemed to have previously paid capital gains incentive fees prior to a Liquidity Event equal to the product obtained by multiplying (a) the actual aggregate amount of previously paid capital gains incentive fees for all periods prior to a Liquidity Event by (b) the percentage obtained by dividing (x) 17.5% by (y) 15%.

Each year, the fee paid for the capital gains incentive fee is net of the aggregate amount of any previously paid capital gains incentive fee for all prior periods. We will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if we were to sell the relevant investment and realize a capital gain. In no event will the capital gains incentive fee payable pursuant to the Investment Advisory Agreement be in excess of the amount permitted by the Investment Advisers Act of 1940, as amended (the “Advisers Act”), including Section 205 thereof. For the purpose of computing the incentive fee on capital gains, the calculation methodology will look through derivative financial instruments or swaps as if we owned the reference assets directly.

Our Board will monitor the mix and performance of our investments over time to satisfy itself that the Adviser is acting in our interests and that our fee structure appropriately incentivizes the Adviser to do so. 

The fees that are payable under the Investment Advisory Agreement for any partial period are appropriately prorated.

Examples of Quarterly Incentive Fee Calculation

Income-Based Fee (*):

Example 1

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Investment income (including interest, dividends, fees, etc.)
    =1.25%

Hurdle rate (1)
    = 1.25%

Base management fee (2)
    = 0.25%

Other expenses (legal, accounting, custodian, transfer agent, etc.) (3)
    = 0.25%

Pre-incentive fee net investment income:

(investment income – (base management fee + other expenses)) = 0.75%

Pre-incentive net investment income does not exceed the hurdle rate. Therefore, there is no incentive fee.

Example 2

Investment income (including interest, dividends, fees, etc.)
    = 1.90%

Hurdle rate (1)
    =1.25%

Base management fee (2)
    = 0.25%

Other expenses (legal, accounting, custodian, transfer agent, etc.) (3)
    = 0.25%

Pre-incentive fee net investment income:

(investment income – (base management fee + other expenses))
    = 1.40%

Incentive fee:

= 15% × pre – incentive fee net investment income, subject to the “catch – up” (4)
    = 100% × (1.40% − 1.25%)
    = 0.15%

Example 3

Investment income (including interest, dividends, fees, etc.)
    = 2.50%

Hurdle rate (1)
    = 1.25%

Base management fee (2)
    = 0.25%

Other expenses (legal, accounting, custodian, transfer agent, etc.) (3)
    = 0.25% 

Pre-incentive fee net investment income:

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= (investment income – (base management fee + other expenses))
    = 2.00%

Incentive fee:= 15% × pre – incentive fee net investment income, subject to the “catch – up” (4)
    = 100% × “catch – up” + (15% × (pre – incentive fee net investment income - 0.22%)) 

Catch – up
    = 100% × 0.22% = 0.22% 

Incentive fee
    = (100% × 0.22%) + (15% × (2.00%– 1.47%))
    = 0.22% + (15% × 0.53%)
    = 0.22% + 0.08%
    = 0.30% 

(*)The hypothetical amount of pre-incentive fee net investment income shown is based on a percentage of total net assets.

(1)Represents a 5.00% annualized hurdle rate.

(2)Represents a 1.00% annualized base management fee.

(3)Excludes organizational and offering expenses.

(4)The “catch-up” provision is intended to provide our Adviser with an incentive fee of 15% on all of our pre-incentive fee net investment income as if a hurdle rate did not apply when our net investment income exceeds 1.47% in any calendar quarter.

Capital Gains Fee

Example 1

•         Year 1:

◦$20 million investment made in Company A (“Investment A”), and $30 million investment made in Company B (“Investment B”)

•         Year 2:

◦Investment A sold for $50 million, and the fair market value (“FMV”) of Investment B is determined to be $32 million

•         Year 3: 

◦FMV of Investment B determined to be $25 million

 •         Year 4: 

◦Investment B sold for $31 million

The capital gains portion of the incentive fee, if any, would be: 

•        Year 1: 

◦None

•        Year 2: 

◦$4.5 million capital gains incentive fee, calculated as follows:

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◦$30 million realized capital gains on the sale of Investment A multiplied by 15% 

•         Year 3: 

◦None, calculated as follows:

◦($0.75) million cumulative fee (15% multiplied by $25 million ($30 million Cumulative Capital Gains less $5 million cumulative capital depreciation)) less $4.5 million (previous capital gains fee paid in Year 2) 

•         Year 4: 

◦$0.15 capital gains incentive fee, calculated as follows:

◦$0.15 million cumulative fee ($31 million Cumulative Capital Gains multiplied by 15%) less $4.5 million (previous capital gains fee paid in Year 2) 

Example 2 

•         Year 1:

◦$20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”), and $25 million investment made in Company C (“Investment C”) 

•         Year 2:

◦Investment A sold for $50 million, FMV of Investment B determined to be $25 million, and FMV of Investment C determined to be $25 million 

•         Year 3: 

◦FMV of Investment B determined to be $27 million, and Investment C sold for $30 million 

•         Year 4: 

◦FMV of Investment B determined to be $35 million 

•         Year 5: 

◦Investment B sold for $20 million 

The capital gains portion of the incentive fee, if any, would be: 

•         Year 1: 

◦None 

•         Year 2: 

◦$3.75 million capital gains incentive fee, calculated as follows:

◦15% multiplied by $25 million ($30 million realized capital gains on sale of Investment A less $5 million unrealized capital depreciation on Investment B) 

•         Year 3: 

◦$1.05 capital gains incentive fee, calculated as follows:

◦$4.8 million cumulative fee (15% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation)) less $3.75 million (previous capital gains fee paid in Year 2) 

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•         Year 4: 

◦$0.45 capital gains incentive fee, calculated as follows:

◦$5.25 million cumulative fee (15% multiplied by $35 million cumulative realized capital gains) less $4.8 million (previous cumulative capital gains fees paid in Year 2 and Year 3) 

•         Year 5: 

◦None, calculated as follows:

◦($1.5) million cumulative fee (15% multiplied by $25 million ($35 million cumulative realized capital gains less $10 million realized capital losses)) less $5.25 million (previous Cumulative Capital Gains fee paid in Year 2, 3 and Year 4) 

Administration Agreements

Pursuant to the Administration Agreement, the Administrator furnishes the Company with office space, office services, and equipment. Under the Administration Agreement, our Administrator performs or oversees the performance of our required administrative services, which include providing assistance in accounting, legal, compliance, operations, technology, internal audit, and investor relations, and being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, our Administrator assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, our internal control assessment under the Sarbanes-Oxley Act, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. 

Payments under the Administration Agreement are equal to an amount that reimburses our Administrator for its costs and expenses, including for our allocable portion of expenses incurred by the Administrator in performing its obligations under the Administration Agreement (including our allocable portion of the compensation paid to our Chief Compliance Officer and Chief Financial Officer and their respective staffs and of the cost of providing managerial assistance upon request to portfolio companies). The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party. Additionally, we ultimately bear the costs of any sub-administration agreements that our Administrator may enter into. Our Administrator reserves the right to waive all or part of any reimbursements due from us at its sole discretion. 

The Administration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, our Administrator and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it will be entitled to indemnification from us for any damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Administrator’s services under the Administration Agreement or otherwise as administrator for us. 

Additionally, pursuant to a sub-administration agreement with SS&C Technologies, Inc. (“SS&C Administration Agreement”), SS&C performs certain of the Company’s required administrative services, which include providing assistance in accounting, legal, compliance, operations, investor relations and technology, being responsible for the financial records that the Company is required to maintain and preparing reports to the Company’s Shareholders and reports filed with the SEC. SS&C will also be reimbursed for certain expenses it incurs on our behalf. 

We expect our Administrator and Adviser to enter into one or more staffing agreements with affiliates of Lafayette Square pursuant to which such Lafayette Square affiliates would agree to provide our Administrator and Adviser with access to certain legal, operations, financial, compliance, accounting, internal audit (in their role of performing our Sarbanes-Oxley Act internal control assessment), clerical and administrative personnel. 

Valuation Procedures 

We will conduct the valuation of our assets, pursuant to which our net asset value will be determined, at all times consistent with GAAP and the 1940 Act. We value our investments in accordance with the terms of Topic 820 of the

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Financial Accounting Standards Board’s Accounting Standards Codification, as amended (the “ASC”), Fair Value Measurement and Disclosures (“ASC 820”).

ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability). 

ASC 820 establishes a hierarchical disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value. 

The three-level hierarchy for fair value measurements is defined as follows: 

Level 1 — inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. We will not adjust the quoted price for these instruments, even in situations where we hold a large position and a sale could reasonably impact the quoted price. 

Level 2 — inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs. 

Level 3 — inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, CLOs, and certain over-the-counter derivatives where the fair value is based on unobservable inputs. 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. 

Pursuant to the framework set forth above, we will value securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. We may also obtain quotes with respect to certain of our investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets. Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, we will determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we will use the quote obtained. 

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Adviser, does not represent fair value, will each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques may vary by investment, but typically include comparable public market valuations,

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comparable precedent transaction valuations, and discounted cash flow analyses. A multi-step quarterly valuation process used to determine the applicable value will be as follows: 

•Each portfolio company or investment is initially valued by the portfolio management professionals of the Adviser responsible for credit monitoring in consultation with the independent valuation firm(s); 

•Preliminary valuation conclusions are documented and reviewed by members of our Adviser’s senior management;

•The Adviser’s valuation committee with respect to us (the “Valuation Committee”) reviews each valuation recommendation to confirm they have been calculated in accordance with our valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable;

•The Adviser’s Valuation Committee then determines fair value marks for each of our portfolio investments; and

•Our Board and Audit Committee periodically review the valuation process and provide oversight in accordance with the requirements of Rule 2a-5 under the 1940 Act.  

As part of the valuation process, we take into account relevant factors in determining the fair value of our investments for which reliable market quotations are not readily available, many of which are loans, including and in combination, as relevant: (i) the estimated enterprise value of a portfolio company, generally based on an analysis of discounted cash flows, publicly traded comparable companies and comparable transactions, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, and (v) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Adviser considers whether the pricing indicated by the external event corroborates its valuation.

We have and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of our portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Adviser and we may reasonably rely on that assistance. However, the Adviser is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to our valuation policy, the Board’s oversight and a consistently applied valuation process.

Regulation as a Business Development Company 

General 

We have elected to be regulated as a BDC under the 1940 Act. A BDC is a specialized investment vehicle that elects to be regulated under the 1940 Act as an investment company but is generally subject to less onerous requirements than other registered investment companies under a regime designed to encourage lending to U.S.-based small and mid-sized businesses. Unlike many similar types of investment vehicles that are restricted to being private entities, the stock of a BDC is permitted to trade in the public equity markets (although at least initially, we do not currently intend to list shares of our Common Stock to allow for such trading). BDCs are also eligible to elect to be treated as a RIC under Subchapter M of the Code. A RIC typically does not incur significant entity-level income taxes, because it is generally entitled to deduct distributions made to its stockholders. We intend to be treated, and comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code, beginning with the taxable year ended December 31, 2023 (or as soon thereafter as is reasonably practicable). See “Item 1. Business — Certain U.S. Federal Income Tax Considerations.” 

Potential Advantages of a BDC Compared to Other Institutional Investment Vehicles 

We believe the advantages of the BDC structure derive primarily from two characteristics: 

First, as a BDC, we intend to elect to be treated as a RIC under the Code. A RIC typically does not incur significant entity-level income taxes, because it is entitled to deduct distributions made to its stockholders in computing its income subject to entity-level taxation. As a result, a BDC that has elected to be a RIC does not incur any U.S. federal income tax

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so long as the BDC continuously maintains its registration in accordance with the 1940 Act, at least 90% of the BDC’s gross income each taxable year consists of certain types of qualifying investment income, the BDC satisfies certain asset diversification requirements at the close of each quarter of its taxable year, and the BDC distributes substantially all of its taxable income to its stockholders on a current basis. The rules applicable to our qualification as a RIC for tax purposes are complex and involve significant practical and technical considerations. If we fail to qualify as a RIC for U.S. federal income tax purposes or are unable to maintain our qualification for any reason, then we would become subject to regular corporate income tax, which would have a material adverse effect on the amount of after-tax income available for distribution to our stockholders. See “Item 1. Business — Certain U.S. Federal Income Tax Considerations.” 

Distributions by a BDC generally are treated as dividends for U.S. tax purposes, and generally are subject to U.S. income or withholding tax unless the stockholder receiving the dividend qualifies for an exemption from U.S. tax, or the distribution is subject to one of the special look-through rules. Distributions paid out of net capital gains can qualify for a reduced rate of taxation in the hands of an individual U.S. stockholder and an exemption from U.S. tax in the hands of a non-U.S. stockholder. Additionally, a U.S. pension fund that owns shares in a BDC generally is not required to take account of indebtedness incurred at the level of the BDC in determining whether dividends received from a BDC constitute “unrelated debt-financed income.” Finally, a non-U.S. investor in a BDC generally does not need to take account of activities conducted by the BDC in determining whether such non-U.S. investor is engaged in the conduct of a trade or business in the United States. See “Item 1. Business — Certain U.S. Federal Income Tax Considerations.” 

Second, a BDC is permitted to become a publicly traded company. This provides a BDC with access to an additional source of capital and offers investors the potential to monetize their investment through the sale of shares in an active public stock market. Many BDCs trade on either the New York Stock Exchange or the Nasdaq Stock Market. However, we do not intend to list shares of our Common Stock, at least initially, on any national securities exchange and no public market for our shares may ever develop. 

The timing and pricing of a Liquidity Event, if any, and subsequent trading price of shares of our Common Stock will depend on market conditions and our investment performance. Prior to any Liquidity Event, shares of our Common Stock will be subject to certain transfer restrictions. Following a Liquidity Event, our investors may be restricted from selling or disposing of their shares of Common Stock by applicable securities laws, contractually by a lock-up agreement with the underwriters of the Liquidity Event and contractually through restrictions contained in the subscription agreement in respect of shares of our Common Stock.

The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates (including any investment advisers or investment sub-advisers), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors of a BDC be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that a BDC may not change the nature of its business so as to cease to be, or to withdraw its election as, a BDC unless approved by a majority of its outstanding voting securities as defined by the 1940 Act. 

Qualifying Assets 

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. The principal categories of qualifying assets relevant to our business are the following: 

(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which: 

(a) is organized under the laws of, and has its principal place of business in, the United States; 

(b) is not an investment company (other than a small business investment company wholly-owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and 

(c) satisfies either of the following: 

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(i) does not have any class of securities listed on a national securities exchange or has any class of securities listed on a national securities exchange subject to a $250 million market capitalization maximum; or 

(ii) is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result, the BDC has an affiliated person who is a director of the eligible portfolio company. 

(2) Securities of any eligible portfolio company which we control. 

(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements. 

(4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company. 

(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities. 

(6) Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. 

We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. We intend to primarily make investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act. From time to time, including at or near the end of each fiscal quarter, we may consider using various temporary investment strategies for our business, including taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from time-to-time we may draw down our credit facilities, as deemed appropriate, and repay such borrowings subsequent to quarter end. We may also purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end.  

Managerial Assistance to Portfolio Companies 

In addition, a BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities significant managerial assistance. However, when a BDC purchases securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company. We may receive fees for these services and will reimburse our Administrator for its allocated costs in providing such assistance, subject to review and approval by our board. 

Temporary Investments 

Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. 

Senior Securities 

As a BDC, we will be permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to shares of our Common Stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% or

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150%, subject to receipt of certain approvals and compliance with certain disclosure requirements, immediately after each such issuance. Section 61(a) of the 1940 Act reduces the asset coverage requirements applicable to BDCs from 200% to 150% so long as the BDC meets certain disclosure requirements and obtains certain approvals. In April 2021, our Board and initial stockholder approved the reduced asset coverage ratio. The reduced asset coverage requirements permits us to double the maximum amount of leverage that we are permitted to incur by reducing the asset coverage requirements applicable to us from 200% to 150%. As defined in the 1940 Act, asset coverage of 150% means that for every $100 of net assets we hold, we may raise $200 from borrowing and issuing senior securities as compared to $100 from borrowing and issuing senior securities for every $100 of net assets under 200% asset coverage. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. Regulations governing our operations as a BDC will affect our ability to raise, and the method of raising, additional capital, which may expose us to risks. 

Code of Ethics 

We and our Adviser have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the joint code of ethics may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code of ethics’ requirements. Our code of ethics is available on our website at www.lafayettesquarebdc.com. 

Proxy Voting Policies and Procedures

We have delegated our proxy voting responsibility to our Adviser. A summary of the Proxy Voting Policies and Procedures of our Adviser are set forth below. These policies and procedures will be reviewed periodically by our Adviser and, subsequent to our election to be regulated as a BDC, our non-interested directors, and, accordingly, are subject to change. For purposes of these Proxy Voting Policies and Procedures described below, “we” “our” and “us” refers to our Adviser. 

An investment adviser registered under the Advisers Act has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, we recognize that we must vote our securities in a timely manner free of conflicts of interest and in our best interests and the best interests of our stockholders. 

These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act. 

We will vote proxies relating to our portfolio securities in what we believe to be the best interest of our stockholders. To ensure that our vote is not the product of a conflict of interest, we will require that: (1) anyone involved in the decision making process disclose to our chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (2) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties. 

A copy of our policies and procedures with respect to the voting of proxies relating to our portfolio securities is available without charge, upon request. Stockholders may obtain information regarding how we voted proxies by making a written request for proxy voting information to: Lafayette Square USA, Inc. c/o Lafayette Square, PO Box 25250, PMB 13941, Miami, Florida 33102, Attn: Chief Compliance Officer. 

Privacy Principles 

The Adviser has established policies with respect to nonpublic personal information provided to it with respect to individuals who are investors in the Company, which policies also apply to the Administrator. We have adopted the privacy policies of the Adviser as applicable to us. 

We and the Adviser each recognizes the importance of maintaining the privacy of any nonpublic personal information it receives with respect to each investor. In the course of providing management services to us, the Adviser collects nonpublic personal information about investors from the Subscription Agreements and the certificates and exhibits thereto

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that each investor submits. We and the Adviser may also collect nonpublic personal information about each investor from conversations and correspondence between each investor and us or the Adviser, both prior to and during the course of each investor’s investment in the Company. 

We and the Adviser each treat all of the nonpublic personal information it receives with respect to each investor as confidential. We and the Adviser restrict access to such information to those employees, affiliates and agents who need to know the information in order for us and the Adviser to determine whether each investor meets the regulatory requirements for an investment in the Company and, in the case of the Adviser, to provide ongoing management services to us. The Adviser maintains physical, electronic, and procedural safeguards to comply with U.S. federal standards to guard each investor’s nonpublic personal information. 

The Adviser does not disclose any nonpublic personal information about any investor to any third parties, other than the Adviser’s agents, representatives and/or affiliates, or as permitted or required by law. Among other things, the law permits the Adviser to disclose such information for purposes of making investments on our behalf, complying with anti-money laundering laws, preparing tax returns and reports for each investor and determining whether each investor meets the regulatory requirements for investing in us. 

Other 

We will be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our independent directors and, in some cases, prior approval by the SEC. 

We will be periodically examined by the SEC for compliance with the 1940 Act. 

We will be required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we will be prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office. 

We and our Adviser will each be required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review these policies and procedures annually for their adequacy and the effectiveness of their implementation, and designate a chief compliance officer to be responsible for administering the policies and procedures. 

Regulation as a Small Business Investment Company 

On February 1, 2023, our wholly-owned subsidiary, SBIC LP, received an SBIC license from the SBA which was deemed effective as of January 27, 2023. The SBIC license allows SBIC LP to obtain leverage by issuing SBA-guaranteed debentures, subject to the satisfaction of certain customary procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi- annually and have a ten-year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity, but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed at the time of issuance at a market-driven spread over U.S. Treasury Notes with 10-year maturities.

SBICs are designed to stimulate the flow of capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses generally include businesses (together with their affiliates) that have a tangible net worth not exceeding $24.0 million and have average annual net income after U.S federal income taxes not exceeding $8.0 million (average net income to be computed without benefit of any carryover loss) for the two most recent fiscal years. In addition, an SBIC must invest at least 25.0% of its investment capital in “smaller enterprises” as defined by the SBA. A smaller enterprise is a business (including its affiliates) that has a tangible net worth not exceeding $6.0 million and has average annual net income after U.S. federal income taxes not exceeding $2.0 million (average net income to be computed without benefit of any net carryover loss) for the two most recent fiscal years. SBA regulations also provide alternative industry size standard criteria to determine eligibility for designation as an eligible small business or a smaller enterprise, which criteria depend on the primary industry in which the business is engaged and is based on the number of employees or gross revenue of the business and its affiliates. Once an SBIC has invested in a company, it may continue to make follow-on investments in the company, regardless of the size of the business at the time of the follow-on investment, up and until the time a business offers its securities in a public market through an initial public offering, if any. According to

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SBA regulations, SBICs may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services. The SBA generally prohibits an SBIC from providing funds to small businesses for certain purposes, such as relending, real estate or investing in companies outside of the United States, and from providing funds to businesses engaged in certain prohibited industries and to certain “passive” (i.e., non-operating) companies. In addition, without prior SBA approval, an SBIC may not invest an amount equal to more than approximately 30% of the SBIC’s regulatory capital in any one company and its affiliates. The SBA also limits fees, prepayment terms and other economic arrangements that are typically charged in lending arrangements.

SBIC LP is subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and other covenants. Receipt of an SBIC license does not assure that SBIC LP will receive SBA-guaranteed debenture funding, which is dependent upon SBIC LP continuing to be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to SBIC LP’s assets over our stockholders and debt holders in the event we liquidate SBIC LP or the SBA exercises its remedies under the SBA-guaranteed debentures issued by SBIC LP upon an event of default.

We have applied for exemptive relief from the SEC to permit it to exclude the senior securities of SBIC LP from the definition of senior securities in the asset coverage requirement under the 1940 Act. Pursuant to the 150% asset coverage ratio limitation, we are permitted to borrow two dollars for every dollar we have in assets less all liabilities and indebtedness not represented by debt securities we issued or loans we obtain. If we receive this exemptive relief, we will have increased capacity to fund up to $175 million (the maximum amount of SBA-guaranteed debentures an SBIC may currently have outstanding once certain conditions have been met) of investments with SBA-guaranteed debentures in addition to being able to fund investments with borrowings up to the maximum amount of debt that the 150% asset coverage ratio limitation would allow us to incur. There can be no assurances that such exemptive relief will be granted.

As of December 31, 2023, the SBIC has $36.9M in SBA-guaranteed commitments, of which $31.0m has been drawn. SBA regulations currently permit the SBIC to borrow up to $175.0 million in SBA-guaranteed debentures to the extent the SBIC has at least $87.5 million in regulatory capital (as defined by SBA regulations). As of December 31, 2023, we have funded SBIC LP with an aggregate total of $82.5 million of regulatory capital. Leverage through SBA-guaranteed debentures is subject to required capitalization thresholds. SBA current regulations limit the amount that SBIC LP may borrow to a maximum of $175.0 million. SBICs under common control may borrow up to a maximum of $350.0 million. Receipt of an SBIC license does not assure that SBIC LP will receive SBA-guaranteed debenture funding, which is dependent upon SBIC LP continuing to be in compliance with SBA regulations and policies. See “Item 1. Business—Small Business Investment Company Regulations.”

JOBS Act 

We currently are and expect to remain an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), until the earliest of: 

•the last day of our fiscal year in which the fifth anniversary of a Liquidity Event occurs; 

•the end of the fiscal year in which our total annual gross revenues first exceed $1.235 billion; 

•the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt; and 

•the last day of a fiscal year in which we (1) have an aggregate worldwide market value of shares of our Common Stock held by non-affiliates of $700 million or more, computed at the end of the last business day of the second fiscal quarter in such fiscal year and (2) have been an Exchange Act reporting company for at least one year (and filed at least one annual report under the Exchange Act).  

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have made an irrevocable election not to take advantage of this exemption from new or revised accounting standards. We therefore are subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. 

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Sarbanes-Oxley Act 

The Sarbanes-Oxley Act imposes a variety of regulatory requirements on companies with a class of securities registered under the Exchange Act and their insiders. Many of these requirements affect us. For example: 

•pursuant to Rule 13a-14 under the Exchange Act our principal executive officer and principal financial officer must certify the accuracy of the financial statements contained in our periodic reports; 

•pursuant to Item 307 under Regulation S-K under the Securities Act our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; 

•pursuant to Rule 13a-15 under the Exchange Act, our management must prepare an annual report regarding its assessment of our internal control over financial reporting, which must be audited by our independent registered public accounting firm once the Company can no longer avail itself of the exemption under the JOBS Act; and 

•pursuant to Item 308 of Regulation S-K under the Securities Act and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 

The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated under such act. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we comply with that act in the future. 

Commodity Exchange Act 

The U.S. Commodity Futures Trading Commission (the “CFTC”) and the SEC have issued final rules establishing that certain swap transactions are subject to CFTC regulation. Engaging in such swap transactions may cause the Adviser, acting on the Company’s behalf, to fall within the definition of “commodity pool” under the Commodity Exchange Act (“CEA”), and related regulations promulgated by the CFTC. Prior to the Effective Date, the Adviser intends to claim an exclusion from the definition of the term “commodity pool operator” under the CEA and the CFTC regulations in connection with its management of the Company and, therefore, is not subject to CFTC registration or regulation under the CEA as a commodity pool operator with respect to its management of the Company. 

Reporting Obligations 

We are required to file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. This information will be available from us at www.lafayettesquarebdc.com and on the SEC’s website at www.sec.gov.  

Certain U.S. Federal Income Tax Considerations  

The following discussion is a general summary of the material U.S. federal income tax considerations applicable to us and to an investment in shares of our Common Stock upon our qualification as a RIC commencing with our taxable year ending December 31, 2023 (or as soon thereafter as is reasonably practicable).

This summary does not purport to be a complete description of the income tax considerations applicable to such an investment. For example, we have not described certain considerations that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws, including stockholders subject to the alternative minimum tax (the “AMT”), tax-exempt organizations, insurance companies, dealers in securities, traders in securities that elect to mark-to-market their securities holdings, pension plans and trusts, persons that have a functional currency (as defined in Section 985 of the Code) other than the U.S. dollar and financial institutions. This summary assumes that investors hold shares of our Common Stock as capital assets (within the meaning of Section 1221 of the Code). The discussion is based upon the Code, Treasury regulations, and administrative and judicial interpretations, each as of the date of the filing of

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this Registration Statement and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion. We have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”), regarding any offering of our securities. This summary does not discuss any aspects of U.S. estate or gift tax or foreign, state or local tax. It does not discuss the special treatment under U.S. federal income tax laws that could result if we invested in tax-exempt securities or certain other investment assets. For purposes of this discussion, references to “dividends” are to dividends within the meaning of the U.S. federal income tax laws and associated regulations and may include amounts subject to treatment as a return of capital under section 19(a) of the 1940 Act. 

A “U.S. stockholder” is a beneficial owner of shares of our Common Stock that is for U.S. federal income tax purposes: 

•a citizen or individual resident of the United States; 

•a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia; 

•an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or 

•a trust if either a U.S. court can exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or the trust was in existence on August 20, 1996, was treated as a U.S. person prior to that date, and has made a valid election to be treated as a U.S. person. 

A “non-U.S. stockholder” is a beneficial owner of shares of our Common Stock that is not a U.S. stockholder. 

If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds shares of Common Stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A prospective investor that is a partner in a partnership that will hold shares of Common Stock should consult its tax advisors with respect to the purchase, ownership and disposition of shares of Common Stock. 

Tax matters are very complicated and the tax consequences to an investor of an investment in shares of our Common Stock will depend on the facts of his, her or its particular situation. We encourage investors to consult their own tax advisors regarding the specific consequences of such an investment, including tax reporting requirements, the applicability of U.S. federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty, and the effect of any possible changes in the tax laws. 

Election to Be Taxed as a RIC  

We currently intend to elect to be treated as a RIC under Subchapter M of the Code commencing with our taxable year ended December 31, 2023 and for future years; however, no assurance can be provided that we will qualify as a RIC for any taxable year. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, we must distribute to our stockholders, for each taxable year, dividends of an amount at least equal to 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses and determined without regard to any deduction for dividends paid (the “Annual Distribution Requirement”). Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute to our stockholders in respect of each calendar year dividends of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of the excess (if any) of our realized capital gains over our realized capital losses, or capital gain net income (adjusted for certain ordinary losses), generally for the one-year period ending on October 31 of the calendar year and (3) the sum of any net ordinary income plus capital gains net income for preceding years that were not distributed during such years and on which we paid no federal income tax (the “Excise Tax Avoidance Requirement”).

We may be subject to regular federal and state corporate income tax on any net built-in gains with respect to certain of our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that we elect to recognize upon our election to be taxed as a RIC or when recognized over the next five taxable years. Upon qualification as a RIC, we would have to distribute to our shareholders, earnings and profits accumulated during the period we were taxed as a regular corporation. 

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Taxation as a RIC  

If we: 

•       qualify as a RIC; and  

•       satisfy the Annual Distribution Requirement; 

then we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain, defined as net long-term capital gains in excess of net short-term capital losses, we distribute to stockholders. As a RIC, we will be subject to U.S. federal income tax at regular corporate rates on any net income or net capital gain not distributed as dividends to our stockholders. 

In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: 

•       qualify to be regulated as a BDC under the 1940 Act at all times during each taxable year; 

•     derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities, or other income derived with respect to our business of investing in such stock or securities, and net income derived from interests in “qualified publicly traded partnerships” (partnerships that are traded on an established securities market or tradable on a secondary market, other than partnerships that derive 90% of their income from interest, dividends and other permitted RIC income) (the “90% Income Test”); and 

•       diversify our holdings so that at the end of each quarter of the taxable year: 

•      at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and 

•      no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in the securities of one or more qualified publicly traded partnerships. 

We may invest in partnerships, including qualified publicly traded partnerships, which may result in our being subject to state, local or foreign income, franchise or other tax liabilities. 

In addition, as a RIC we are subject to ordinary income and capital gain distribution requirements under U.S. federal excise tax rules for each calendar year, or the Excise Tax Avoidance Requirement. If we do not meet the required distributions we will be subject to a 4% nondeductible federal excise tax on the undistributed amount. The failure to meet the Excise Tax Avoidance Requirement will not cause us to lose our RIC status. Although we currently intend to make sufficient distributions each taxable year to satisfy the Excise Tax Avoidance Requirement, under certain circumstances, we may choose to retain taxable income or capital gains in excess of current year distributions into the next tax year in an amount less than what would trigger payments of federal income tax under Subchapter M of the Code. We may then be required to pay a 4% excise tax on such income or capital gains. 

A RIC is limited in its ability to deduct expenses in excess of its investment company taxable income. If our deductible expenses in a given taxable year exceed our investment company taxable income, we may incur a net operating loss for that taxable year. However, a RIC is not permitted to carry forward net operating losses to subsequent taxable years and such net operating losses do not pass through to its stockholders. In addition, deductible expenses can be used only to offset investment company taxable income (which includes net short term capital gains), not net capital gain. A RIC may not use any net capital losses (that is, the excess of realized capital losses over realized capital gains) to offset its investment company taxable income, but may carry forward such net capital losses, and use them to offset future capital gains, indefinitely. Due to these limits on deductibility of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several taxable years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the net income we actually earn during those taxable years. 

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Any underwriting fees paid by us are not deductible. We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having OID (such as debt instruments with PIK interest or, in certain cases, with increasing interest rates or issued with warrants), we must include in income each year a portion of the OID that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Because any OID accrued will be included in our investment company taxable income for the taxable year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. Furthermore, a portfolio company in which we hold equity or debt instruments may face financial difficulty that requires us to work out, modify, or otherwise restructure such equity or debt instruments. Any such restructuring could, depending upon the terms of the restructuring, cause us to incur unusable or nondeductible losses or recognize future non-cash taxable income. 

Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (1) treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income, (2) treat dividends that would otherwise be eligible for the corporate dividends received deduction as ineligible for such treatment, (3) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (4) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (5) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (6) cause us to recognize income or gain without a corresponding receipt of cash, (7) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (8) adversely alter the characterization of certain complex financial transactions and (9) produce income that will not be qualifying income for purposes of the 90% Income Test. We intend to monitor our transactions and may make certain tax elections to mitigate the effect of these provisions and prevent our ability to be subject to tax as a RIC. 

Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long term or short term, depending on how long we held a particular warrant. 

Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. See “Item 1. Business — Regulation as a Business Development Company — Senior Securities.” Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification as a RIC, including certain diversification tests in order to qualify as a RIC for U.S. federal income tax purposes (the “Diversification Tests”). If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous. 

Some of the income and fees that we may recognize, such as fees for providing managerial assistance, certain fees earned with respect to our investments, income recognized in a work-out or restructuring of a portfolio investment, or income recognized from an equity investment in an operating partnership, may be considered non-qualifying for purposes of the 90% Income Test. In order to manage the risk that such income and fees might disqualify us as a RIC for a failure to satisfy the 90% Income Test, we may be required to recognize such income and fees indirectly through one or more entities treated as corporations for U.S. federal income tax purposes. Such corporations will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce our return on such income and fees. 

A portfolio company in which we invest may face financial difficulties that require us to work-out, modify or otherwise restructure its investment in the portfolio company. Any such transaction could, depending upon the specific terms of the transaction, result in unusable capital losses and future non-cash income. Any such transaction could also result in our receiving assets that give rise to income that is not qualifying income for purposes of the 90% Income Test. 

There may be uncertainty as to the appropriate treatment of certain of our investments for U.S. federal income tax purposes. In particular, we may invest a portion of our net assets in below investment grade instruments. U.S. federal income tax rules with respect to such instruments are not entirely clear about issues such as if an instrument is treated as debt or equity, whether and to what extent we should recognize interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a bankruptcy or workout context

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are taxable. These and other issues will be addressed by us, to the extent necessary, in order to seek to ensure that we distribute sufficient income to qualify, and maintain our qualification as, a RIC and to ensure that we do not become subject to U.S. federal income or excise tax. 

Income received by us from sources outside the United States may be subject to withholding and other taxes imposed by such countries, thereby reducing income available to us. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. We generally intend to conduct our investment activities to minimize the impact of foreign taxation, but there is no guarantee that we will be successful in this regard. 

We may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies (“PFICs”). In general, a foreign company is classified as a PFIC if at least 50% of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income. In general under the PFIC rules, an “excess distribution” received with respect to PFIC stock is treated as having been realized ratably over the period during which we held the PFIC stock. We will be subject to tax on the portion, if any, of the excess distribution that is allocated to our holding period in prior taxable years (and an interest factor will be added to the tax, as if the tax had actually been payable in such prior taxable years) even though we distribute the corresponding income to stockholders. Excess distributions include any gain from the sale of PFIC stock as well as certain distributions from a PFIC. All excess distributions are taxable as ordinary income. 

We may be eligible to elect alternative tax treatment with respect to PFIC stock. Under such an election, we generally would be required to include in our gross income its share of the earnings of a PFIC on a current basis, regardless of whether any distributions are received from the PFIC. If this election is made, the special rules, discussed above, relating to the taxation of excess distributions, would not apply. Alternatively, we may be able to elect to mark to market our PFIC stock, resulting in any unrealized gains at year end being treated as though they were realized and reported as ordinary income. Any mark-to-market losses and any loss from an actual disposition of the PFIC’s shares would be deductible as ordinary losses to the extent of any net mark-to-market gains included in income in prior years with respect to stock in the same PFIC. 

Because the application of the PFIC rules may affect, among other things, the character of gains, the amount of gain or loss and the timing of the recognition of income with respect to PFIC stock, as well as subject us to tax on certain income from PFIC stock, the amount that must be distributed to stockholders, and which will be taxed to stockholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to a fund that did not invest in PFIC stock. 

Under the Code, gains or losses attributable to fluctuations in foreign currency exchange rates that occur between the time we accrue interest income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time we actually collect such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of some investments, including debt securities and certain forward contracts denominated in a foreign currency, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. These gains and losses, referred to under the Code as “section 988” gains and losses, may increase or decrease the amount of our investment company taxable income to be distributed to stockholders as ordinary income. For example, fluctuations in exchange rates may increase the amount of income that we must distribute in order to qualify for treatment as a RIC and to prevent application of an excise tax on undistributed income. Alternatively, fluctuations in exchange rates may decrease or eliminate income available for distribution. If section 988 losses exceed other investment company taxable income during a taxable year, we would not be able to make ordinary distributions, or distributions made before the losses were realized would be re-characterized as a return of capital to stockholders for U.S. federal income tax purposes, rather than as ordinary dividend income, and would reduce each stockholder’s basis in Shares. 

Failure to Qualify as a RIC  

Once we qualify for RIC status, if we were unable to continue to qualify for treatment as a RIC and were unable to cure the failure, for example, by disposing of certain investments before quarter/year end or in the 30 days after quarter/year end, or raising additional capital to prevent the loss of RIC status, we would be subject to tax on all of our taxable income at regular corporate rates. The Code provides some relief from RIC disqualification due to failures to comply with the 90% Income Test and the Diversification Tests, although there may be additional taxes due in such cases. We cannot assure you that we would qualify for any such relief should we fail the 90% Income Test or the Diversification Tests. 

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In taxable years (such as 2021) in which we were taxable as a corporation or if failure to continue to qualify for treatment as a RIC occurs, all of our taxable income would be subject to tax at regular corporate rates and we would not be able to deduct our dividend distributions to stockholders. Additionally we would no longer be required to distribute our income and gains. Distributions, including distributions of net long-term capital gain, would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, certain corporate stockholders would be eligible to claim a dividends received deduction with respect to such dividends and non-corporate stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. If we fail to qualify as a RIC, we may be subject to regular corporate tax on any net built-in gains with respect to certain of our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that we elect to recognize on requalification or when recognized over the next five taxable years. 

The remainder of this discussion assumes that we qualify as a RIC and have satisfied the Annual Distribution Requirement. 

Taxation of U.S. Stockholders (Applicable to Taxable Years in which we are a RIC) 

Distributions by us generally are taxable to U.S. stockholders as ordinary income or capital gains. Distributions of our “investment company taxable income” (which is, generally, our net ordinary income plus net short-term capital gains in excess of net long-term capital losses) will be taxable as ordinary income to U.S. stockholders to the extent of our current or accumulated earnings and profits, whether paid in cash or reinvested in additional shares of Common Stock. To the extent such distributions paid by us to non-corporate stockholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations and if certain holding period requirements are met, such distributions generally will be treated as qualified dividend income and generally eligible for a maximum U.S. federal tax rate of either 15% or 20%, depending on whether the individual stockholder’s income exceeds certain threshold amounts, and if other applicable requirements are met, such distributions generally will be eligible for the corporate dividends received deduction to the extent such dividends have been paid by a U.S. corporation. In this regard, it is anticipated that distributions paid by us will generally not be attributable to dividends and, therefore, generally will not qualify for the preferential maximum U.S. federal tax rate applicable to non-corporate stockholders as well as will not be eligible for the corporate dividends received deduction. 

Distributions of our net capital gains (which is generally our realized net long-term capital gains in excess of realized net short-term capital losses) properly reported by us as “capital gain dividends” will be taxable to a U.S. stockholder as long-term capital gains (currently generally at a maximum rate of either 15% or 20%, depending on whether the individual stockholder’s income exceeds certain threshold amounts) in the case of individuals, trusts or estates, regardless of the U.S. stockholder’s holding period for his, her or its shares of Common Stock and regardless of whether paid in cash or reinvested in additional shares of Common Stock. Distributions in excess of our earnings and profits first will reduce a U.S. stockholder’s adjusted tax basis in such stockholder’s shares of Common Stock and, after the adjusted basis is reduced to zero, will constitute capital gains to such U.S. stockholder. Stockholders receiving dividends or distributions in the form of additional shares of Common Stock purchased in the market should be treated for U.S. federal income tax purposes as receiving a distribution in an amount equal to the amount of money that the stockholders receiving cash dividends or distributions will receive, and should have a cost basis in the shares received equal to such amount. Stockholders receiving dividends in newly issued shares of Common Stock will be treated as receiving a distribution equal to the value of the shares received, and should have a cost basis of such amount. 

Although we currently intend to distribute any net capital gains at least annually, we may in the future decide to retain some or all of our net capital gains but designate the retained amount as a “deemed distribution.” In that case, among other consequences, we will pay tax on the retained amount, each U.S. stockholder will be required to include their share of the deemed distribution in income as if it had been distributed to the U.S. stockholder, and the U.S. stockholder will be entitled to claim a credit equal to their allocable share of the tax paid on the deemed distribution by us. The amount of the deemed distribution net of such tax will be added to the U.S. stockholder’s tax basis for their shares of Common Stock. Since we expect to pay tax on any retained net capital gains at our regular corporate tax rate, and since that rate is in excess of the maximum rate currently payable by individuals on long-term capital gains, the amount of tax that individual stockholders will be treated as having paid and for which they will receive a credit will exceed the tax they owe on the

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retained net capital gain. Such excess generally may be claimed as a credit against the U.S. stockholder’s other U.S. federal income tax obligations or may be refunded to the extent it exceeds a stockholder’s liability for U.S. federal income tax. A stockholder that is not subject to U.S. federal income tax or otherwise required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes we paid. In order to utilize the deemed distribution approach, we must provide written notice to our stockholders prior to the expiration of 60 days after the close of the relevant taxable year. We cannot treat any of our investment company taxable income as a “deemed distribution.” 

For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any tax year and (2) the amount of capital gain dividends paid for that tax year, we may, under certain circumstances, elect to treat a dividend that is paid during the following tax year as if it had been paid during the tax year in question. If we make such an election, the U.S. stockholder will still be treated as receiving the dividend in the tax year in which the distribution is made. However, any dividend declared by us in October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been received by our U.S. stockholders on December 31 of the calendar year in which the dividend was declared. 

If an investor purchases shares of Common Stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the investor will be subject to tax on the distribution even though it represents a return of their investment. 

A stockholder generally will recognize taxable gain or loss if the stockholder sells or otherwise disposes of their shares of Common Stock. Any gain arising from such sale or disposition generally will be treated as long-term capital gain or loss if the stockholder has held their shares of Common Stock for more than one year. Otherwise, it would be classified as short-term capital gain or loss. However, any capital loss arising from the sale or disposition of shares of Common Stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such shares. In addition, all or a portion of any loss recognized upon a disposition of shares of Common Stock may be disallowed if other shares of Common Stock are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the disposition. In such a case, the basis of shares of Common Stock acquired will be increased to reflect the disallowed loss. 

In general, individual U.S. stockholders are subject to a maximum U.S. federal income tax rate of either 15% or 20% (depending on whether the individual U.S. stockholder’s income exceeds certain threshold amounts) on their net capital gain, i.e., the excess of realized net long-term capital gain over realized net short-term capital loss for a taxable year, including a long-term capital gain derived from an investment in shares of our Common Stock. Such rate is lower than the maximum federal income tax rate on ordinary taxable income currently payable by individuals. Corporate U.S. stockholders currently are subject to U.S. federal income tax on net capital gain at the maximum 21% rate also applied to ordinary income. Non-corporate stockholders incurring net capital losses for a tax year (i.e., net capital losses in excess of net capital gains) generally may deduct up to $3,000 of such losses against their ordinary income each tax year; any net capital losses of a non-corporate stockholder in excess of $3,000 generally may be carried forward and used in subsequent tax years as provided in the Code. Corporate stockholders generally may not deduct any net capital losses for a tax year, but may carry back such losses for three tax years or carry forward such losses for five tax years. 

The Code and the related U.S. Treasury Regulations require us (or the applicable intermediary) to annually report the adjusted cost basis information of covered securities, which generally include shares of a RIC, to the IRS and to taxpayers. Stockholders should contact their financial intermediaries with respect to reporting of cost basis and available elections for their accounts. 

We will send to each of our U.S. stockholders, as promptly as possible after the end of each calendar year, a notice detailing, on a per share and per distribution basis, the amounts includible in such U.S. stockholder’s taxable income for such year as ordinary income and as long-term capital gain. In addition, the U.S. federal tax status of each calendar year’s distributions generally will be reported to the IRS. Distributions may also be subject to additional state, local and foreign taxes depending on a U.S. stockholder’s particular situation. Dividends distributed by us generally will not be eligible for the dividends-received deduction or the lower tax rates applicable to certain qualified dividends. 

Until and unless we are treated as a “publicly offered regulated investment company” (within the meaning of Section 67 of the Code) as a result of either (1) shares of Common Stock and our preferred stock collectively being held by at least 500 persons at all times during a taxable year or (2) shares of Common Stock being treated as regularly traded on an

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established securities market for any taxable year, for purposes of computing the taxable income of U.S. stockholders that are individuals, trusts or estates, (1) our earnings will be computed without taking into account such U.S. stockholders’ allocable shares of the management and incentive fees paid to our investment adviser and certain of our other expenses, (2) each such U.S. stockholder will be treated as having received or accrued a dividend from us in the amount of such U.S. stockholder’s allocable share of these fees and expenses for such taxable year, (3) each such U.S. stockholder will be treated as having paid or incurred such U.S. stockholder’s allocable share of these fees and expenses for the calendar year and (4) each such U.S. stockholder’s allocable share of these fees and expenses will be treated as miscellaneous itemized deductions by such U.S. stockholder. For taxable years beginning before 2026, miscellaneous itemized deductions generally are not deductible by a U.S. stockholder that is an individual, trust or estate. For taxable years beginning in 2026 or later, miscellaneous itemized deductions generally are deductible by a U.S. stockholder that is an individual, trust or estate only to the extent that the aggregate of such U.S. stockholder’s miscellaneous itemized deductions exceeds 2% of such U.S. stockholder’s adjusted gross income for U.S. federal income tax purposes, are not deductible for purposes of the AMT and are subject to the overall limitation on itemized deductions under Section 68 of the Code. 

Backup withholding, currently at a rate of 24%, may be applicable to all taxable distributions to any non-corporate U.S. stockholder (1) who fails to furnish us with a correct taxpayer identification number or a certificate that such stockholder is exempt from backup withholding or (2) with respect to whom the IRS notifies us that such stockholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect. An individual’s taxpayer identification number is his or her social security number. Any amount withheld under backup withholding is allowed as a credit against the U.S. stockholder’s U.S. federal income tax liability and may entitle such stockholder to a refund, provided that proper information is timely provided to the IRS. 

If a U.S. stockholder recognizes a loss with respect to shares of Common Stock of $2 million or more for an individual stockholder or $10 million or more for a corporate stockholder, the stockholder must file with the IRS a disclosure statement on Form 8886. Direct stockholders of portfolio securities are in many cases exempted from this reporting requirement, but under current guidance, stockholders of a RIC are not exempted. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. U.S. stockholders should consult their tax advisors to determine the applicability of these regulations in light of their specific circumstances. 

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from us and net gains from redemptions or other taxable dispositions of our shares) of U.S. individuals, estates and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceed certain threshold amounts.

A U.S. Stockholder that is a tax-exempt organization for U.S. federal income tax purposes and therefore generally exempt from U.S. federal income taxation may nevertheless be subject to taxation to the extent that it is considered to derive unrelated business taxable income ("UBTI"). The direct conduct by a tax-exempt U.S. stockholder of the activities that we propose to conduct could give rise to UBTI. However, a BDC is a corporation for U.S. federal income tax purposes and its business activities generally will not be attributed to its stockholders for purposes of determining their treatment under current law. Therefore, a tax-exempt U.S. stockholder should not be subject to U.S. taxation solely as a result of the holder’s ownership of the Shares and receipt of dividends that we pay. Moreover, under current law, if we incur indebtedness, such indebtedness will not be attributed to portfolio investors in our stock. Therefore, a tax-exempt U.S. stockholder should not be treated as earning income from “debt-financed property” and dividends we pay should not be treated as “unrelated debt-financed income” solely as a result of indebtedness that we incur. Proposals periodically are made to change the treatment of “blocker” investment vehicles interposed between tax-exempt investors and non-qualifying investments. In the event that any such proposals were to be adopted and applied to BDCs, the treatment of dividends payable to tax-exempt investors could be adversely affected.

Taxation of Non-U.S. Stockholders  

Whether an investment in the shares of Common Stock is appropriate for a non-U.S. stockholder will depend upon that person’s particular circumstances. An investment in the shares of Common Stock by a non-U.S. stockholder may have adverse tax consequences. Non-U.S. stockholders should consult their tax advisors before investing in shares of our Common Stock. 

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Subject to the discussion below, distributions of our “investment company taxable income” to non-U.S. stockholders (including interest income, net short-term capital gain or foreign-source dividend and interest income, which generally would be free of withholding if paid to non-U.S. stockholders directly) will be subject to withholding of U.S. federal tax at a 30% rate (or lower rate provided by an applicable treaty, assuming the non-U.S. stockholder provides the required documentation evidencing its eligibility for such lower rate) to the extent of our current and accumulated earnings and profits unless the distributions are effectively connected with a U.S. trade or business of the non-U.S. stockholder, in which case the distributions will generally be subject to U.S. federal income tax at the rates applicable to U.S. persons. In that case, we will not be required to withhold U.S. federal tax if the non-U.S. stockholder complies with applicable certification and disclosure requirements. Special certification requirements apply to a non-U.S. stockholder that is a foreign partnership or a foreign trust, and such entities are urged to consult their own tax advisors. 

Certain properly reported dividends received by a non-U.S. stockholder generally are exempt from U.S. federal withholding tax when they (1) are paid in respect of our “qualified net interest income” (generally, our U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which we are at least a 10% stockholder, reduced by expenses that are allocable to such income), or (2) are paid in connection with our “qualified short-term capital gains” (generally, the excess of our net short-term capital gain over our long-term capital loss for a tax year) as well as if certain other requirements are satisfied. Nevertheless, it should be noted that in the case of shares of our stock held through an intermediary, the intermediary may have withheld U.S. federal income tax even if we reported the payment as an interest-related dividend or short-term capital gain dividend. Moreover, depending on the circumstances, we may report all, some or none of our potentially eligible dividends as derived from such qualified net interest income or as qualified short-term capital gains, or treat such dividends, in whole or in part, as ineligible for this exemption from withholding. 

Actual or deemed distributions of our net capital gains to a non-U.S. stockholder, and gains realized by a non-U.S. stockholder upon the sale of shares of our Common Stock, will not be subject to federal withholding tax and generally will not be subject to U.S. federal income tax unless the distributions or gains, as the case may be, are effectively connected with a U.S. trade or business of the non-U.S. stockholder and, if an income tax treaty applies, are attributable to a permanent establishment maintained by the non-U.S. stockholder in the United States or, in the case of an individual non-U.S. stockholder, the stockholder is present in the United States for 183 days or more during the year of the sale or capital gain dividend and certain other conditions are met. 

If we distribute our net capital gains in the form of deemed rather than actual distributions (which we may do in the future), a non-U.S. stockholder will be entitled to a U.S. federal income tax credit or tax refund equal to the stockholder’s allocable share of the tax we pay on the capital gains deemed to have been distributed. In order to obtain the refund, the non-U.S. stockholder must obtain a U.S. taxpayer identification number and file a U.S. federal income tax return even if the non-U.S. stockholder would not otherwise be required to obtain a U.S. taxpayer identification number or file a U.S. federal income tax return. For a corporate non-U.S. stockholder, distributions (both actual and deemed), and gains realized upon the sale of shares of our Common Stock that are effectively connected with a U.S. trade or business may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate (or at a lower rate if provided for by an applicable treaty). 

A non-U.S. stockholder who is a non-resident alien individual, and who is otherwise subject to withholding of U.S. federal income tax, may be subject to information reporting and backup withholding of U.S. federal income tax on dividends unless the non-U.S. stockholder provides us or the dividend paying agent with a U.S. nonresident withholding tax certification (e.g., an IRS Form W-8BEN, IRS Form W-8BEN-E, or an acceptable substitute form) or otherwise meets documentary evidence requirements for establishing that it is a non-U.S. stockholder or otherwise establishes an exemption from backup withholding. 

Withholding of U.S. tax (at a 30% rate) is required by the Foreign Account Tax Compliance Act, provisions of the Code with respect to payments of dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive new reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Stockholders may be requested to provide additional information to enable the applicable withholding agent to determine whether withholding is required. 

An investment in shares by a non-U.S. person may also be subject to U.S. federal estate tax. Non-U.S. persons should consult their own tax advisors with respect to the U.S. federal income tax, U.S. federal estate tax, withholding tax, and state, local and foreign tax consequences of acquiring, owning or disposing of shares of our Common Stock. 

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Other Taxes 

Stockholders may be subject to state, local and non-U.S. taxes applicable to their investment in shares. Stockholders are advised to consult their tax advisors with respect to the particular tax consequences to them of an investment in our shares.

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ITEM 1A. RISK FACTORS

Investing in shares of our Common Stock involves a number of significant risks. Before you invest in shares of our Common Stock, you should be aware of various risks, including those described below. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected. In such case, our net asset value could decline, and you may lose all or part of your investment. The risk factors described below are the principal risk factors associated with an investment in us as well as those factors generally associated with an investment company with investment objectives, investment policies, capital structure or trading markets similar to ours.

SUMMARY OF RISK FACTORS 

The following is a summary of the principal risk factors associated with an investment in us: 

We are subject to risks and conflicts relating to our business and structure which may make it more difficult for you to sell your shares of the Company or cause you to lose all or part of your investment:

•Operating as a BDC imposes numerous constraints and costs on us, reducing our operating flexibility. In addition, if we fail to maintain our status as a BDC (including if we do not invest a sufficient amount in qualifying assets), we might be regulated as a closed-end investment company, which would subject us to additional regulatory restrictions.

•The Company’s focus on economic growth and job creation may result in the Company underperforming compared to broadly focused ESG funds or the market as a whole.

•Our financial condition and results of operation depend on our ability to manage future growth effectively. We depend upon our Adviser and Administrator (each as defined below) for our success and upon their access to the investment professionals and partners of Lafayette Square and its affiliates.

•Each of the Adviser and the Administrator can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, which could adversely affect our financial condition, business, and results of operations.

•There are significant potential conflicts of interest that could affect our investment returns, including conflicts related to obligations that the Adviser or its affiliates have to, and fees paid by, other investment accounts.

•Our management and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.

•We will be subject to corporate-level income tax if we are unable to qualify as a RIC under the Code.

•We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.

•If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, U.S. stockholders that are individuals, trusts or estates will be taxed as though they received a distribution of some of our expenses.

•We intend to finance a portion of our investments with borrowed money, which will magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.

•We will be subject to risks associated with any credit facility, and any inability to renew or replace a credit facility could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.

•Our Shareholders may fail to fund their Capital Commitments when due.

•Our Board may change our investment objective and operating policies without prior notice or stockholder approval.

•We do not currently have comprehensive documentation of our internal controls and have not yet tested our internal controls in accordance with Section 404 of the Sarbanes-Oxley Act, and failure to develop such controls in accordance with Section 404 could have a material adverse effect on our business and the value of our Common Stock.

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•We depend on information systems, and systems failures could significantly disrupt our business, which may, in turn, negatively affect the value of our Common Stock and our ability to pay distributions.

•SBIC LP is subject to SBA regulations and risks associated with SBA-guaranteed debentures.

We are subject to risks relating to our investments, which could cause you to lose all or part of your investment:

•We may invest in distressed or highly leveraged companies, which could be risky and may enter into bankruptcy proceedings, causing you to lose all or part of your investment.

•Subordinated liens on collateral securing debt investments that we make in our portfolio companies may be subject to control by senior creditors with first priority liens.

•Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.

•We have not yet identified all of the portfolio company investments we will acquire, and there is no certainty how long it will take to identify such investments or if we will be able to find a sufficient number of such businesses.

•Our portfolio may initially be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.

•Because we generally do not hold controlling equity interests in our portfolio companies, we cannot control such companies or prevent decisions by their management that could decrease the value of our investments.

•The liability of each of the Adviser and the Administrator is limited, and we have agreed to indemnify each against certain liabilities, which may lead them to act in a riskier manner than each would when acting for its own account.

•We may be subject to risks under hedging transactions.

•There can be no guarantee of our ability to coordinate with the human resources and personnel departments of our portfolio companies through our Worker Solutions services platform.

There are risks relating to your investment in our Common Stock:

•There is no public market for shares of our Common Stock, no ability for shareholders to redeem, and restrictions on the ability of holders of our Common Stock to transfer. 

•Our stockholders may experience dilution in their ownership percentage, including if they do not opt-in to our dividend reinvestment plan.

•Our stockholders may receive shares of our Common Stock as distributions, which could result in adverse tax consequences to them.

•We may, in the future, issue preferred stock, which could adversely affect the value of shares of Common Stock.

General risk factors

•The impact of economic recessions or downturns may impair our portfolio companies and lead to defaults by our portfolio companies, which could harm our operating results.

•We are subject to risks associated with the current interest rate environment, and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.

•Terrorist attacks, acts of war, natural disasters, outbreaks, or pandemics may impact our portfolio companies and our Adviser and harm our business, operating results, and financial condition.

•A shareholder may be subject to filing requirements and the short-swing profits rules under the Exchange Act as a result of an investment in us.

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Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition and/or operating results. For a more detailed discussion of the risks that you should consider prior to investing in our securities, see the section below entitled “Risk Factors.” 

Risks Relating to Our Business and Structure 

Operating as a BDC imposes numerous constraints on us and significantly reduces our operating flexibility. In addition, if we fail to maintain our status as a BDC (including if we do not invest a sufficient portion of our assets in qualifying assets), we might be regulated as a closed-end investment company, which would subject us to additional regulatory restrictions. 

The 1940 Act imposes numerous constraints on the operations of BDCs that do not apply to other investment vehicles managed by our Adviser and its affiliates. BDCs are required, for example, to invest at least 70% of their total assets primarily in "qualifying assets", such as securities of U.S. private or thinly traded public companies, cash, cash equivalents, U.S. government securities, and other high-quality debt instruments that mature in one year or less from the date of investment. These constraints and our Adviser’s limited operating history under these constraints may hinder our ability to take advantage of attractive investment opportunities and to achieve our investment objective. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants. 

We may be precluded from investing in what our Adviser believes are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we will be prohibited from making any additional investment that is not a qualifying asset and could be forced to forgo attractive investment opportunities. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position). 

If we fail to maintain our status as a BDC, we might be regulated as a closed-end investment company that is required to register under the 1940 Act, which would subject us to additional regulatory restrictions and significantly decrease our operating flexibility. In addition, any such failure could cause an event of default under any outstanding indebtedness we might have, which could have a material adverse effect on our business, financial condition or results of operations.

The Company’s focus on economic growth and job creation may result in the Company underperforming compared to broadly focused ESG funds or the market as a whole. 

The Company intends to make investments that stimulate economic growth and create jobs in the United States; however, there is no guarantee that the Company's investments will have the intended results. This focus limits the types and number of investment opportunities available to the Company and, as a result, the Company may underperform compared to other funds that do not have this focus. The Company may base its determination to invest in certain portfolio companies on such companies’ alignment with Lafayette Square’s mission and values and, in doing so, the Company may forgo other investment opportunities that would have generated greater returns for the Company. Unlike socially responsible investment funds that invest broadly in companies with favorable environmental, social and corporate governance (“ESG”) characteristics, the Company is focused on benefiting society through economic growth and job creation. Accordingly, this focus may result in the Company investing in securities or industry sectors that underperform the market as a whole or underperform other funds that screen broadly for positive ESG characteristics. 

Insured depository institution shareholders that are subject to regulatory examination for CRA compliance may fail to obtain favorable regulatory consideration of their investment under the CRA.

The CRA requires the three U.S. federal bank supervisory agencies (the FRB, the OCC, and the FDIC) to encourage certain FDIC-insured financial institutions to help meet the credit needs of their local communities, including LMI neighborhoods, consistent with the safe and sound operation of such institutions. Each agency operates under substantially similar rules and regulatory guidance for evaluating and rating an institution’s CRA performance. These rules vary according to an institution’s asset size and business strategy.

In October 2023, the three federal banking agencies adopted a new unified set of CRA regulations (the “New CRA Final Rule”) that, among other changes, implemented a tiered framework with separate evaluations for retail lending, retail services and products, community development financing, and community development services for banks with over $2 billion in total assets. It is anticipated that banks will be required to begin complying with most of the provisions of the

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New CRA Final Rule on January 1, 2026, with certain other requirements becoming applicable on January 1, 2027. Until these regulations become effective, the current state of CRA regulations is unsettled, and may continue to be so even after the new regulations are effective. As such, this changing state of laws, regulations or the interpretation of laws and regulations related to the CRA may result in a failure of insured depository institution shareholders that are subject to regulatory examination for CRA compliance to obtain favorable regulatory consideration of their investment under the CRA.

Investment in the Company is not currently deemed a CRA eligible investment by any of the U.S. federal bank supervisory agencies, and the OCC declined to prospectively confirm that an investment in the Company would qualify as a CRA activity when the Company sought clarity on the question from the OCC (which was prior to the adoption of the New CRA Final Rule). Investments are not typically designated as CRA-qualifying by any governmental agency at the time of issuance. The final determinations that investments are CRA-qualifying are made by the federal and, where applicable, state bank supervisory agencies during their periodic examinations of financial institutions. We plan to require our borrowers, both during the underwriting process and on an ongoing basis throughout the term of the loan, to deliver data to allow an insured depository institution to apply for credit for the investment under the CRA with the appropriate banking regulator. These data are expected to include statistics regarding the borrowers’ composition and growth as well as their impact on the communities where they operate, and who and from where such borrower hires, as well as other information that could be used to validate CRA eligibility such as the borrower’s employment of LMI workers and the borrower’s locations and/or operations in Working Class Areas. This information is designed to be helpful in substantiating the CRA eligibility of the investment. We can offer no assurance, however, that an investor in the Company subject to CRA requirements will receive CRA credit for such investment, and insured depository institution investors interested in applying for CRA credit must make their own assessment as to the likelihood that their banking regulator will grant CRA credit. Whether investments in the Company will qualify in whole or in part for CRA credit will depend on the composition of the Company’s investment portfolio over time and other factors, including changing regulatory criteria for granting CRA credit for particular categories of investments. 

Our financial condition and results of operation depend on our ability to manage future growth effectively. 

Our ability to achieve our investment objective depends on our ability to grow, which depends, in turn, on the Adviser’s ability to identify, invest in and monitor companies that meet our investment criteria. Accomplishing this result on a cost-effective basis will depend on the Adviser’s structuring of the investment process, its ability to provide competent, attentive, and efficient services to us, and our access to financing on acceptable terms. The management team of the Adviser has substantial responsibilities under our Investment Advisory Agreement. We can offer no assurance that any current or future employees of the Adviser will contribute effectively to the work of, or remain associated with, the Adviser. We caution you that the principals of our Adviser or Administrator will also be called upon to provide managerial assistance to our portfolio companies and those of other investment vehicles which are managed by the Adviser. Such demands on their time may distract them or slow our rate of investment. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and results of operations. 

We depend upon our Adviser and Administrator for our success and upon their access to the investment professionals and partners of Lafayette Square and its affiliates. 

We do not have any internal management capacity or employees. We depend on the diligence, skill, and network of business contacts of the senior investment professionals of our Adviser and Administrator to achieve our investment objective. We expect that the Adviser will evaluate, negotiate, structure, close, and monitor our investments in accordance with the terms of the Investment Advisory Agreement. We can offer no assurance, however, that the senior investment professionals of the Adviser will continue to provide investment advice to us. The loss of any member of the Adviser’s Investment Committee or of other senior investment professionals of the Adviser and its affiliates would limit our ability to achieve our investment objective and operate as we anticipate. In addition, we can offer no assurance that the resources, relationships, and expertise of Lafayette Square will be available for every transaction or generally during the term of the Company. This could have a material adverse effect on our financial condition, results of operations, and cash flows. 

We depend on the diligence, skill, and network of business contacts of the professionals available to our Administrator to carry out the administrative functions necessary for us to operate, including the ability to select and engage sub-administrators and third-party service providers. We can offer no assurance, however, that the professionals of the Administrator will continue to provide administrative services to us. In addition, we can offer no assurance that the

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resources, relationships, and expertise of Lafayette Square will be available to the Administrator throughout the term of the Company. This could have a material adverse effect on our financial condition, results of operations, and cash flows. 

We depend on the Adviser’s key personnel in seeking to achieve our investment objectives. 

The Company does not have any internal management capacity or employees. Through staffing agreements, the Adviser depends on the investment professionals of affiliates of Lafayette Square and such investment professionals’ diligence, skill, and network of business contacts. Our success will depend to a significant extent on the continued service and coordination of senior management professionals of our Adviser pursuant to the staffing agreements. The diversion of time by, or departure of, any of these individuals could have a material adverse effect on our ability to achieve our investment objectives. 

The Adviser's personnel primarily work from home.

The Adviser's personnel primarily work from home as a result of a technology-first business model, among other things. To the extent that such personnel, as a result of working remotely, rely more heavily on technology systems for their business-related communications and information sharing, the Adviser could be more vulnerable to cybersecurity incidents and cyberattacks and could have more difficulty resuming normal operations in the event it is the target of such incident or attack.

The Adviser's dependence on technology.

Our operations are highly dependent on technology which is comprised of proprietary software and systems that work with third-party tools to strengthen origination, underwriting, and monitoring processes. There is a risk that software or other technology malfunctions or programming inaccuracies may impair the performance of these systems. System impairment may negatively impact one or more of such processes, which could impact performance, potentially materially.

The Adviser may frequently be required to make investment analyses and decisions on an expedited basis in order to take advantage of investment opportunities, and our Adviser may not have knowledge of all circumstances that could impact an investment by the Company. 

Investment analyses and decisions by the Adviser may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities. In such cases, the information available to the Adviser at the time of making an investment decision may be limited. Therefore, we can offer no assurance that the Adviser will have knowledge of all circumstances that may adversely affect a portfolio investment, and the Adviser may make portfolio investments which it would not have made if more extensive due diligence had been undertaken. In addition, the Adviser may rely upon independent consultants and advisors in connection with its evaluation of proposed investments, and we can offer no assurance as to the accuracy or completeness of the information provided by such independent consultants and advisors or to the Adviser’s right of recourse against them in the event errors or omissions do occur. 

Each of the Adviser and the Administrator can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business, and results of operations.

The Adviser has the right to resign under the Investment Advisory Agreement at any time upon not less than 60 days’ written notice, and the Administrator has the right to resign under the Administration Agreement at any time upon not less than 60 days’ written notice, in each case whether we have found a replacement or not. An affiliate of the Adviser is the borrower under a credit facility and pledged its ownership interests in the Adviser as collateral for that facility. In the event of a default under such credit facility, the foreclosure of these ownership interests would cause a change of control of the Adviser, which would effect an automatic termination of the Investment Advisory Agreement. If the Adviser or Administrator resigns or the Investment Advisory Agreement is terminated, we may not be able to find a new investment adviser or administrator or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our business, financial condition, results of operations and cash flows as well as our ability to pay distributions are likely to be adversely affected, and the value of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Adviser or Administrator and their respective affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of

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such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.

There are significant potential conflicts of interest that could affect our investment returns, including conflicts related to obligations that the Adviser’s Investment Committee, the Adviser or its affiliates have to other investment accounts and conflicts related to fees and expenses of such other investment accounts. 

As a result of our arrangements with the Adviser and its affiliates and the Adviser’s Investment Committee, there may be times when the Adviser or such persons have interests that differ from those of our stockholders, giving rise to a conflict of interest.  Lafayette Square and/or the Adviser are expected to provide investment advisory services for other Affiliated Investment Accounts with a wide variety of investment objectives that in some instances may overlap or conflict with the investment objectives of the Company and present conflicts of interest. In addition, Lafayette Square may also, from time to time, create new or successor Affiliated Investment Accounts that may compete with the Company and present similar conflicts of interest. See “Item 7. Certain Relationships and Related Transactions, and Director Independence.” In serving in these multiple capacities, Lafayette Square, including the Adviser, the Investment Committee, and the investment team, may have obligations to Other Clients, or investors in Affiliated Investment Accounts, the fulfillment of which may not be in the best interests of us or our stockholders. Our investment objective may overlap with the investment objectives of certain Affiliated Investment Accounts. As a result, the members of the Investment Committee may face conflicts in the allocation of investment opportunities among us and other investment funds, programs, accounts, and businesses advised by or affiliated with the Adviser. Certain Affiliated Investment Accounts may provide for higher management or incentive fees, greater expense reimbursements or overhead allocations, or permit the Adviser and its affiliates to receive higher origination and other transaction fees, all of which may contribute to this conflict of interest and create an incentive for the Adviser to favor such other accounts. For example, the 1940 Act restricts the Adviser from receiving more than a 1% fee in connection with loans that we acquire or “originate,” a limitation that does not exist for certain other accounts. 

Lafayette Square expects to invest on its own behalf and on behalf of its Affiliated Investment Accounts in a wide variety of investment opportunities. Lafayette Square and, to the extent consistent with applicable law and/or exemptive relief and the Adviser’s allocation policies and procedures, its Affiliated Investment Accounts will be permitted to invest in investment opportunities without making such opportunities available to the Company beforehand. Subject to the requirements of an applicable exemptive relief, Lafayette Square may offer investments that fall into the investment objectives of an Affiliated Investment Account to such account or make such investment on its own behalf, even though such investment also falls within the investment objectives of the Company. The Company may invest in opportunities that Lafayette Square and/or one or more Affiliated Investment Accounts have declined, and vice versa. These developments may reduce the number of investment opportunities available to the Company and may create conflicts of interest in allocating investment opportunities among the Adviser, the Company, and the Affiliated Investment Accounts. Lafayette Square and its affiliates will allocate opportunities among one or more of the Company, other affiliated funds and such Affiliated Investment Accounts in accordance with the terms of its allocation policies and procedures. Shareholders should note that the conflicts inherent in making such allocation decisions may not always be resolved to the advantage of the Company. We can offer no assurance that the Company will have an opportunity to participate in certain opportunities that fall within the Company’s investment objectives. To the extent the Company does not obtain a co-investment exemptive order, or if the granting of such order is delayed, the Company may only be able to participate in certain negotiated investment opportunities on a rotational basis. 

It is possible that Lafayette Square or an Affiliated Investment Account will invest in a company that is or becomes a competitor of a portfolio company of the Company. Such investment could create a conflict between the Company, on the one hand, and Lafayette Square or the Affiliated Investment Account, on the other hand. In such a situation, Lafayette Square may also have a conflict in the allocation of its own resources to the portfolio company. In addition, certain Affiliated Investment Accounts will be focused primarily on investing in other funds, which may have strategies that overlap and/or directly conflict and compete with the Company. 

The Adviser’s investment professionals are engaged in other investment activities on behalf of Other Clients. 

Certain investment professionals who are involved in our activities remain responsible for the investment activities of other Affiliated Investment Accounts managed by the Adviser and its affiliates, and they will devote time to the management of such investments and other newly created Affiliated Investment Accounts (whether in the form of funds, separate accounts or other vehicles), as well as their own investments. In addition, in connection with the management of investments for other Affiliated Investment Accounts, members of Lafayette Square and its affiliates may serve on the boards of directors

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of or advise companies that may compete with our portfolio investments. Moreover, these Affiliated Investment Accounts managed by Lafayette Square and its affiliates may pursue investment opportunities that may also be suitable for us. 

The Adviser’s Investment Committee, the Adviser or its affiliates may possess material non-public information, limiting our investment discretion. 

Principals of the Adviser and its affiliates and members of the Adviser’s Investment Committee may serve as directors of, or in a similar capacity with, companies in which we invest, the securities of which are purchased or sold on our behalf. In the event that material nonpublic information is obtained with respect to such companies, or we become subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations, we could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on us. 

Our management and incentive fee structure may create incentives for the Adviser and Administrator that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments. 

In the course of our investing activities, we pay management and incentive fees to the Adviser. The base management fee is based on our average gross assets, and the incentive fee is computed and paid on income, both of which include leverage. As a result, our shareholders will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than one might achieve through direct investments. Because these fees are based on our average gross assets, the Adviser benefits when we incur debt or use leverage. Under certain circumstances, the use of leverage may increase the likelihood of default on our debt, which would disfavor us or our stockholders. 

Additionally, the incentive fee payable by us to the Adviser may create an incentive for the Adviser to cause us to realize capital gains or losses that may not be in the best interests of us or our stockholders. Under the incentive fee structure, the Adviser benefits when we recognize capital gains and, because the Adviser determines when an investment is sold, the Adviser controls the timing of the recognition of such capital gains. Our Board is charged with protecting our stockholders’ interests by monitoring how the Adviser addresses these and other conflicts of interest associated with its management services and compensation. 

The part of the management and incentive fees payable to Adviser that relates to our net investment income is computed and paid on income that may include interest income that has been accrued but not yet received in cash, such as a market discount, debt instruments with PIK interest, preferred stock with PIK dividends, zero-coupon securities, and other deferred interest instruments and may create an incentive for the Adviser to make investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. This fee structure may be considered to give rise to a conflict of interest for the Adviser to the extent that it may encourage the Adviser to favor debt financings that provide for deferred interest, rather than current cash payments of interest. Under these investments, we will accrue the interest over the life of the investment, but we will not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our investment fee, however, includes accrued interest. The Adviser may have an incentive to invest in deferred interest securities in circumstances where it would not have done so but for the opportunity to continue to earn the fees even when the issuers of the deferred interest securities would not be able to make actual cash payments to us on such securities. This risk could be increased because the Adviser is not obligated to reimburse us for any fees received even if we subsequently incur losses or never receive in cash the deferred income that was previously accrued. 

In addition, we pay to the Administrator our allocable portion of certain expenses incurred by the Administrator in performing its obligations under the Administration Agreement, such as our allocable portion of the cost of our chief financial officer and chief compliance officer. These arrangements create conflicts of interest that our Board must monitor.

Our ability to enter into transactions with our affiliates will be restricted. 

We will be prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of a majority of our independent directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act. As such we will generally be prohibited from buying or selling any securities from or to such affiliate on a principal basis, absent the prior approval of our Board and, in some cases, the SEC. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which in certain circumstances could include investments in the same portfolio company (whether

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at the same or different times to the extent the transaction involves a joint investment), without prior approval of our Board and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates. 

The SEC has interpreted the BDC regulations governing transactions with affiliates to prohibit certain joint transactions involving entities that share a common investment adviser. As a result of these restrictions, we may be prohibited from buying or selling any security from or to any portfolio company that is controlled by a fund managed by the Adviser or their respective affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us. 

We may, however, invest alongside our Adviser’s and/or its affiliates’ Other Clients in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations, guidance, and exemptive relief orders. However, although the Adviser seeks to allocate investment opportunities fairly in the long-run, we can offer no assurance that investment opportunities will be allocated to us fairly or equitably in the short-term or over time. We have applied for and received exemptive relief to co-invest with affiliates of our Adviser in privately negotiated transactions.

In situations when co-investment with affiliates’ Other Clients is not permitted under the 1940 Act and related rules, existing or future staff guidance, or the terms and conditions of exemptive relief granted to us by the SEC (as discussed above), our Adviser will need to decide which client or clients will proceed with the investment. Generally, we will not be entitled to make a co-investment in these circumstances and, to the extent that another client elects to proceed with the investment, we will not be permitted to participate. Moreover, except in certain circumstances, we will not invest in any issuer in which an affiliate’s other client holds a controlling interest. 

Shares of our Common Stock are illiquid investments for which there is not a secondary market. 

We do not know at this time what circumstances will exist in the future, and therefore we do not know what factors our Board will consider in contemplating an Exchange Listing or other Liquidity Event in the future. As a result, even if we do complete a Liquidity Event to establish a secondary market for shares of our Common Stock, you may not receive a return of all of your invested capital. If we do not successfully complete a Liquidity Event, liquidity for your shares of Common Stock may be limited to participation in any repurchase offers that our Board may determine to conduct, which we do not currently intend to conduct. In addition, in any repurchase offer, if the amount requested to be repurchased in any repurchase offer exceeds the repurchase offer amount, repurchases of shares of Common Stock would generally be made on a pro-rata basis (based on the number of shares of Common Stock put to us for repurchases), not on a first-come, first-served basis. 

Even if we undertake a Liquidity Event, we cannot assure you a public trading market will develop or, if one develops, that such trading market can be sustained. Shares of companies offered in an initial public offering or a Liquidity Event often trade at a discount to the initial offering price due to underwriting discounts and related offering expenses. In addition, following a Liquidity Event, shareholders may be restricted from selling or disposing of their shares of Common Stock by applicable securities laws, contractually by a lock-up agreement with the underwriters of a Liquidity Event and contractually through restrictions contained in the subscription agreement in respect of shares of our Common Stock. Also, shares of closed-end investment companies and BDCs frequently trade at a discount from their net asset value. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per Share may decline. We cannot predict whether shares of our Common Stock, if listed on a national securities exchange, will trade at, above, or below net asset value. 

We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses. 

The business of identifying and structuring investments of the types contemplated by the Company is competitive and involves a high degree of uncertainty. The Company will be competing for investments with other investment funds, as well as more traditional lending institutions and private credit-focused competitors. Over the past several years, an increasing number of funds have been formed, with investment objectives similar to, or overlapping with, those of the Company (and many such existing funds have grown substantially in size). In addition, other firms and institutions are seeking to capitalize on the perceived opportunities with vehicles, funds, and other products that are expected to compete

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with the Company for investments. Other shareholders may make competing offers for investment opportunities that we identify. Even after an agreement in principle has been reached with the board of directors or owners of an acquisition target, consummating the transaction is subject to a myriad of uncertainties, only some of which are foreseeable or within the control of the Adviser. Some of our competitors may have access to greater amounts of capital and to capital that may be committed for longer periods of time or may have different return thresholds than the Company, and thus these competitors may have advantages over the Company. In addition, issuers may prefer to take advantage of favorable high-yield markets and issue subordinated debt in those markets, which could result in fewer credit investment opportunities for the Company. In addition to competition from other shareholders, the availability of investment opportunities generally will be subject to market conditions as well as, in many cases, the prevailing regulatory or political climate. There may also be insufficient or inconsistent demand from middle market businesses for capital investment and managerial assistance. We can offer no assurance that the Company will be successful in obtaining suitable investments, or that if we make such investments, the objectives of the Company will be achieved. 

We will be subject to corporate-level income tax if we are unable to qualify as a RIC. 

In order to qualify as a RIC under the Code, we must meet certain source-of-income, asset diversification, and distribution requirements. The distribution requirement for a RIC is satisfied if we distribute to our stockholders distributions for U.S. federal income tax purposes of an amount generally at least equal to 90% of our investment company taxable income, which is generally our net ordinary income plus the excess of our net short-term capital gains in excess of our net long-term capital losses, determined without regard to any deduction for distributions paid, to our stockholders on an annual basis. We are subject, to the extent we use debt financing, to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to qualify as a RIC. If we are unable to obtain cash from other sources, we may fail to be subject to tax as a RIC, in which case we will be subject to corporate-level income tax. To qualify as a RIC, we must also meet certain asset diversification requirements at the end of each quarter of our taxable year. Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to continue to qualify as a RIC. Because most of our investments are in private or thinly traded public companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses. If we fail to qualify as a RIC for any reason and become subject to corporate-level income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distributions to stockholders, the amount of our distributions, and the amount of funds available for new investments. Such a failure would have a material adverse effect on our stockholders and us. See “Item 1. Material U.S. Federal Income Tax Considerations — Taxation as a RIC.” 

We will need to raise additional capital to grow because we must distribute most of our income. 

We will need additional capital to fund new investments and grow our portfolio of investments. We intend to access the capital markets periodically to issue debt or equity securities (although we do not intend to issue preferred stock within one year of the Effective Date) or borrow from financial institutions in order to obtain such additional capital. Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets, or result in a decision by lenders not to extend credit to us. A reduction in the availability of new capital could limit our ability to grow. In addition, we will be required to distribute each taxable year an amount at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, or investment company taxable income, determined without regard to any deduction for distributions paid as distributions for U.S. federal income tax purposes, to our stockholders to maintain our ability to be subject to tax as a RIC. As a result, these earnings are not available to fund new investments. An inability to access the capital markets successfully could limit our ability to grow our business and execute our business strategy fully and could decrease our earnings if any. This would have an adverse effect on the value of our securities. If we are not able to raise capital and are at or near our targeted leverage ratios, we may receive smaller allocations, if any, on new investment opportunities under the Adviser’s allocation policies and procedures. 

We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income. 

For U.S. federal income tax purposes, we include in income certain amounts that we have not yet received in cash, such as the accretion of OID. This may arise if we receive warrants in connection with the making of a loan and in other circumstances, or through contracted PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such OID, which could be significant relative to our overall investment activities, or increases

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in loan balances as a result of contracted PIK arrangements, is included in our income before we receive any corresponding cash payments. We also may be required to include in income certain other amounts that we do not receive in cash. 

That part of the incentive fee payable by us that relates to our net investment income is computed and paid on income that may include interest that has been accrued but not yet received in cash, such as a market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero-coupon securities. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible, and the Adviser will have no obligation to refund any fees it received in respect of such accrued income. 

The higher interest rates of PIK loans reflect the payment deferral and increased credit risk associated with these instruments, and PIK instruments generally represent a significantly higher credit risk than coupon loans. PIK loans may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. Market prices of zero-coupon or PIK securities are affected to a greater extent by interest rate changes and may be more volatile than securities that pay interest periodically and in cash. PIKs are usually less volatile than zero-coupon bonds, but more volatile than cash pay securities. Because original issue discount income is accrued without any cash being received by us, required cash distributions may have to be paid from offering proceeds or the sale of our assets without investors being given any notice of this fact. The deferral of PIK interest increases the loan-to-value ratio, which is a measure of the riskiness of a loan. Even if the accounting conditions for income accrual are met, the borrower could still default when our actual payment is due at the maturity of the loan. 

Since in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement in a given taxable year to distribute to our stockholders distributions for U.S. federal income tax purposes an amount at least equal to 90% of our investment company taxable income, determined without regard to any deduction for distributions paid, to our stockholders to qualify and maintain our ability to be subject to tax as a RIC. In such a case, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital, or reduce new investment originations to meet these distribution requirements. If we are not able to obtain such cash from other sources, we may fail to qualify as a RIC and thus be subject to corporate-level income tax. See “Item 1. Material U.S. Federal Income Tax Considerations — Taxation as a RIC.” 

If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, U.S. stockholders that are individuals, trusts or estates will be taxed as though they received a distribution of some of our expenses. 

We do not expect to be treated initially as a “publicly offered regulated investment company.” Until and unless we are treated as a “publicly offered regulated investment company” as a result of either (1) shares of our Common Stock and our preferred stock collectively being held by at least 500 persons at all times during a taxable year, (2) shares of our Common Stock being continuously offered pursuant to a public offering (within the meaning of Section 4 of the Securities Act) or (3) shares of our Common Stock being treated as regularly traded on an established securities market, each U.S. stockholder that is an individual, trust or estate will be treated as having received a dividend for U.S. federal income tax purposes from us in the amount of such U.S. stockholder’s allocable share of the management and incentive fees paid to our investment adviser and certain of our other expenses for the calendar year, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S. stockholder. For taxable years beginning before 2026, miscellaneous itemized deductions generally are not deductible by a U.S. stockholder that is an individual, trust, or estate. For taxable years beginning in 2026 or later, miscellaneous itemized deductions generally are deductible by a U.S. stockholder that is an individual, trust or estate only to the extent that the aggregate of such U.S. stockholder’s miscellaneous itemized deductions exceeds 2% of such U.S. stockholder’s adjusted gross income for U.S. federal income tax purposes, are not deductible for purposes of the alternative minimum tax and are subject to the overall limitation on itemized deductions under Section 68 of the Code. See “Item 1. Material U.S. Federal Income Tax Considerations — Taxation as a RIC.” 

Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. As a BDC, our need to raise additional capital (because we must distribute most of our income) exposes us to risks, including the typical risks associated with leverage. 

We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we are currently permitted to issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150%

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(equivalent to $2 of debt outstanding for each $1 of equity) of total assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If we fail to comply with certain disclosure requirements, our asset coverage ratio under the 1940 Act would be 200%, which would decrease the amount of leverage we are able to incur. If the value of our assets declines, we may be unable to satisfy the applicable asset coverage ratio. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to holders of shares of our Common Stock. If we issue senior securities, we will be exposed to typical risks associated with leverage, including an increased risk of loss. 

In the absence of an event of default, no person or entity from which we borrow money has a veto right or voting power over our ability to set policy, make investment decisions, or adopt investment strategies. If we issue preferred stock, which is another form of leverage, the preferred stock would rank “senior” to Common Stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our Common Stock or otherwise be in the best interest of our common stockholders. Holders of our Common Stock will directly or indirectly bear all of the costs associated with offering and servicing any preferred stock that we issue. In addition, any interests of preferred stockholders may not necessarily align with the interests of holders of our Common Stock, and the rights of holders of shares of preferred stock to receive distributions would be senior to those of holders of shares of Common Stock. We do not, however, anticipate issuing preferred stock in the next 12 months. 

We are not generally able to issue and sell our Common Stock at a price below net asset value per share. We may, however, sell our Common Stock, or warrants, options or rights to acquire our Common Stock, at a price below the then-current net asset value per share of our Common Stock if our Board determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing Common Stock or senior securities convertible into, or exchangeable for, our Common Stock, then the percentage ownership of our stockholders at that time will decrease, and holders of our Common Stock might experience dilution. 

We intend to finance a portion of our investments with borrowed money, which will magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us. 

The use of leverage magnifies the potential for gain or loss on amounts invested. The use of leverage is generally considered a speculative investment technique and increases the risks associated with investing in our securities. The amount of leverage that we employ will be subject to the restrictions of the 1940 Act and the supervision of our Board. At the time of any proposed borrowing, the amount of leverage we employ will also depend on our Adviser’s assessment of the market and other factors. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us. For example, due to the interplay of the 1940 Act restrictions on principal and joint transactions and the U.S. risk retention rules adopted pursuant to Section 941 of the Dodd-Frank Act, as a BDC, we are limited in our ability to enter into any securitization transactions. We cannot assure you that the SEC or any other regulatory authority will modify such regulations or provide administrative guidance that would give us greater flexibility to enter into securitizations. We may issue senior debt securities to banks, insurance companies, and other lenders. Lenders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. We may pledge up to 100% of our assets, may grant a security interest in all of our assets, and may pledge the right to make capital calls of stockholders under the terms of any debt instruments we may enter into with lenders. Under the terms of any credit facility or debt instrument we enter into, we are likely to be required to comply with certain financial and operational covenants. Failure to comply with such covenants could result in a default under the applicable credit facility or debt instrument if we are unable to obtain a waiver from the applicable lender or holder, and such lender or holder could accelerate repayment under such indebtedness and negatively affect our business, financial condition, results of operations and cash flows. In addition, under the terms of any credit facility or other debt instrument we enter into, we are likely to be required by its terms to use the net proceeds of any investments that we sell to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses. If the value of our assets decreases, leveraging would cause our net asset value to decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses or eliminating our equity stake in a leveraged investment. Similarly, any decrease in our net investment income will cause our net income to decline more sharply than it would have had we not borrowed. Such a decline would also negatively affect our ability to make

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distributions on our Common Stock or any outstanding preferred stock. Our ability to service our debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. Our common stockholders bear the burden of any increase in our expenses as a result of our use of leverage, including interest expenses and any increase in the base management fee payable to the Adviser. 

We will be subject to risks associated with any credit facility. 

We anticipate that we or a direct subsidiary of ours may enter into one or more credit facilities, including subscription-based and asset-based revolving credit facilities. Under any credit facility, we will be subject to a variety of risks, including those set forth below. 

Our interests in any subsidiary that enters into a credit facility would be subordinated, and we may not receive cash on our equity interests from any such subsidiary. 

We would consolidate the financial statements of any such subsidiary in our consolidated financial statements and treat the indebtedness of any such subsidiary as our leverage. Our interests in any wholly-owned direct or indirect subsidiary of ours would be subordinated in priority of payment to every other obligation of any such subsidiary and would be subject to certain payment restrictions set forth in the credit facility. We would receive cash distributions on our equity interests in any such subsidiary only if such a subsidiary had made all required cash interest payments to the lenders, and no default exists under the credit facility. We cannot assure you that distributions on the assets held by any such subsidiary would be sufficient to make any distributions to us or that such distributions would meet our expectations. 

We would receive cash from any such subsidiary only to the extent that we would receive distributions on our equity interests in such subsidiary. Any such subsidiary would be able to make distributions on its equity interests only to the extent permitted by the payment priority provisions of the credit facility. We expect that the credit facility would generally provide that payments on such interests may not be made on any payment date unless all amounts owing to the lenders and other secured parties are paid in full. In addition, if such a subsidiary would not meet the borrowing base test set forth in the credit facility documents, a default would occur. In the event of a default under the credit facility, cash would be diverted from us to pay the lender and other secured parties until they are paid in full. In the event that we fail to receive cash from such subsidiary, we would be unable to make distributions to our stockholders in amounts sufficient to maintain our status as a RIC, or at all. We also could be forced to sell investments in portfolio companies at less than their fair value in order to continue making such distributions. 

Our equity interests in any such subsidiary would rank behind all of the secured and unsecured creditors, known or unknown, of such subsidiary, including the lenders in the credit facility. Consequently, to the extent that the value of such subsidiary’s portfolio of loan investments would have been reduced as a result of conditions in the credit markets, defaulted loans, capital gains, and losses on the underlying assets, prepayment, or changes in interest rates, the return on our investment in such subsidiary could be reduced. Accordingly, our investment in such subsidiary may be subject to up to a complete loss. 

Our ability to sell investments held by any subsidiary that enters into a credit facility would be limited. 

We expect that a credit facility would place significant restrictions on our ability, as servicer, to sell investments. As a result, there may be times or circumstances during which we would be unable to sell investments or take other actions that might be in our best interests. 

Any inability to renew, extend, or replace a credit facility could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders. 

There can be no assurance that we would be able to renew, extend, or replace any credit facility upon its maturity on terms that are favorable to us, if at all. Our ability to renew, extend, or replace the credit facility would be constrained by then-current economic conditions affecting the credit markets. In the event that we were not able to renew, extend or replace the credit facility at the time of its maturity, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders, and our ability to qualify as a RIC. 

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Our Shareholders may fail to fund their Capital Commitments when due. 

We call only a limited amount of Capital Commitments from shareholders in the Private Offering of shares of our Common Stock upon each drawdown notice. The timing of drawdowns may be difficult to predict, requiring each shareholder to maintain sufficient liquidity until its Capital Commitments to purchase shares of Common Stock are fully funded. We may not call a shareholder’s entire Capital Commitment prior to the end of our Investment Period. 

Although the Adviser will seek to manage our cash balances so that they are appropriate for our investments and other obligations, the Adviser’s ability to manage cash balances may be affected by changes in the timing of investment closings, our access to leverage, defaults by our shareholders, late payments of drawdown purchases and other factors. 

In addition, we can offer no assurance that all shareholders will satisfy their respective Capital Commitments. To the extent that one or more shareholders does not satisfy its or their Capital Commitments when due or at all, there could be a material adverse effect on our business, financial condition and results of operations, including an inability to fund our investment obligations, make appropriate distributions to our stockholders or to satisfy applicable regulatory requirements under the 1940 Act. If a shareholder fails to satisfy any part of its Capital Commitment when due, other stockholders who have an outstanding Capital Commitment may be required to fund such Capital Commitment sooner than they otherwise would have absent such default. We cannot assure you that we will recover the full amount of the Capital Commitment of any defaulting shareholder. 

If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current business strategy. 

As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Item 1. Regulation as a Business Development Company — Qualifying Assets.” 

In the future, we believe that most of our investments will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could violate the 1940 Act provisions applicable to BDCs. As a result of such violation, specific rules under the 1940 Act could prevent us, for example, from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to come into compliance with the 1940 Act. If we need to dispose of such investments quickly, it could be difficult to dispose of such investments on favorable terms. We may not be able to find a buyer for such investments, and even if we do find a buyer, we may have to sell the investments at a substantial loss. Any such outcomes would have a material adverse effect on our business, financial condition, results of operations, and cash flows. 

Failure to qualify as a BDC would decrease our operating flexibility. 

If we do not maintain our status as a BDC, we would be subject to regulation as a registered closed-end investment company under the 1940 Act. As a registered closed-end investment company, we would be subject to substantially more regulatory restrictions under the 1940 Act, which would significantly decrease our operating flexibility. 

There may be uncertainty as to the value of our portfolio investments. 

The majority of our portfolio investments take the form of securities for which no market quotations are readily available. The fair value of securities and other investments that are not publicly traded may not be readily determinable, and we value these securities at fair value as determined by our Adviser's Valuation Committee, including to reflect significant events affecting the value of our securities. Most, if not all, of our investments (other than cash and cash equivalents) are classified as Level 3 under ASC 820. This means that our portfolio valuations are based on unobservable inputs and our own assumptions about how market participants would price the asset or liability in question. Inputs into the determination of the fair value of our portfolio investments require significant management judgment or estimation. Even if observable market data are available, such information may be the result of consensus pricing information or broker quotes, which may include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability of such information. 

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In connection with the determination of the fair value of our investments, investment professionals from the Adviser may provide our Board with portfolio company valuations based upon the most recent portfolio company financial statements available and projected financial results of each portfolio company. The participation of the Adviser’s investment professionals in our valuation process could result in a conflict of interest as the Adviser’s base management fee is based, in part, on our average adjusted gross assets, and our incentive fees will be based, in part, on unrealized losses. 

The valuation for each portfolio investment for which a market quote is not readily available will be reviewed by an independent valuation firm on a quarterly basis. Investments that have been completed within the past three months will be fair valued approximating cost unless there has been a material event. The types of factors that the Adviser may take into account in determining the fair value of our investments generally include, as appropriate, comparison to publicly traded securities, including such factors as yield, maturity, and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time, and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities. 

The Adviser adjusts quarterly (or as otherwise may be required by the 1940 Act in connection with the issuance of our shares) the valuation of our portfolio to reflect its determination of the fair value of each investment in our portfolio. Any changes in fair value are recorded in the aggregate in our consolidated statement of operations as a net change in unrealized appreciation or depreciation. 

Our Board may change our investment objective and operating policies without prior notice or stockholder approval. 

Our Board has the authority, except as otherwise provided in the 1940 Act, to modify or waive our investment objective and certain of our operating policies and strategies without prior notice and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be or withdraw our election as a BDC. We cannot predict the effect any changes to our current investment objective, operating policies, and strategies would have on our business, operating results, and the value of our Common Stock. Nevertheless, any such changes could adversely affect our business and impair our ability to make distributions. 

Provisions of the DGCL and of our Charter and Bylaws could deter takeover attempts and have an adverse effect on the price of shares of Common Stock. 

The DGCL contains provisions that may discourage, delay, or make more difficult a change in control of us or the removal of our directors. Our Charter and Bylaws contain provisions that limit liability and provide for indemnification of our directors and officers. These provisions and others which we may adopt also may have the effect of deterring hostile takeovers or delaying changes in control or management. We are subject to Section 203 of the DGCL, the application of which is subject to any applicable requirements of the 1940 Act. This section generally prohibits us from engaging in mergers and other business combinations with stockholders that beneficially own 15% or more of our voting stock, either individually or together with their affiliates, unless our directors or stockholders approve the business combination in the prescribed manner. Our Board will adopt a resolution exempting from Section 203 of the DGCL any business combination between us and any other person, subject to prior approval of such business combination by our Board, including approval by a majority of our directors who are not “interested persons.” If our Board does not adopt or adopts but later repeals such resolution exempting business combinations, or if our Board does not approve a business combination, Section 203 of the DGCL may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. 

We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our Charter that classify our Board in three classes serving staggered three-year terms, and provisions of our Charter authorizing our Board to classify or reclassify shares of our preferred stock in one or more classes or series, to cause the issuance of additional shares of our stock, and to amend our Charter, without stockholder approval, to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions we have adopted in our Charter and Bylaws, may delay, defer or prevent a transaction or a change in control in circumstances that could give our stockholders the opportunity to realize a premium of the net asset value of shares of our Common Stock. 

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We do not currently have comprehensive documentation of our internal controls and have not yet tested our internal controls in accordance with Section 404 of the Sarbanes-Oxley Act, and failure by us to develop effective internal controls over financial reporting in accordance with Section 404 could have a material adverse effect on our business and the value of our Common Stock. 

We have not previously been required to maintain proper and effective internal control over financial reporting, including the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act. We will not be required to comply with all of the requirements under Section 404 until we have been subject to the reporting requirements of the Exchange Act for a specified period of time. Accordingly, our internal controls over financial reporting may not currently meet all of the standards contemplated by Section 404 that we will eventually be required to meet. We are in the process of addressing our internal controls over financial reporting and will establish formal procedures, policies, processes, and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact, and linkage of those risks to specific areas and activities within our organization. 

Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until the year following our first annual report required to be filed with the SEC. Because we do not currently have comprehensive documentation of our internal control and have not yet tested our internal control in accordance with Section 404 of the Sarbanes-Oxley Act, we cannot conclude, as required by Section 404, that we do not have a material weakness in our internal control or a combination of significant deficiencies that could result in the conclusion that we have a material weakness in our internal control. As a public entity, we will be required to complete our initial assessment in a timely manner. If we are not able to implement the applicable requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our operations, financial reporting, or financial results could be adversely affected. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC, and result in a breach of the covenants under the agreements governing any of our financing arrangements. There could also be a negative reaction in the financial markets due to a loss of shareholder confidence in us and the reliability of our consolidated financial statements. Confidence in the reliability of our consolidated financial statements could also suffer if our independent registered public accounting firm or we were to report a material weakness in our internal controls over financial reporting. This could materially adversely affect us. 

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, and we could fail to meet our financial reporting obligations. 

We depend on information systems, and systems failures could significantly disrupt our business, which may, in turn, negatively affect the value of our Common Stock and our ability to pay distributions. 

The operations of the Company, the Adviser, the Administrator, and any third-party service provider to any of the foregoing are susceptible to risks from cybersecurity attacks and incidents due to reliance on the secure processing, storage, and transmission of confidential and other information in the relevant computer systems and networks. In particular, cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. These attacks could involve gaining unauthorized access to information systems for purposes of misappropriating assets, stealing confidential information, corrupting data, or causing operational disruption and result in disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection, and insurance costs, litigation, and damage to our business relationships, any of which could have a material adverse effect on our business, financial condition and results of operations. We, the Adviser and the Administrator, must each continuously monitor and innovate our cybersecurity to protect our technology and data from corruption or unauthorized access. In addition, due to the use of third-party vendors, agents, exchanges, clearinghouses, and other financial institutions and service providers, we, the Adviser, and the Administrator could be adversely impacted if any of us are subject to a successful cyber-attack or another breach of our information. Although we, the Adviser and the Administrator, have developed protocols, processes, internal controls, and other protective measures to help mitigate cybersecurity risks and cyber intrusions, these measures, as well as our increased awareness of the nature and extent of the risk of a cyber incident, may be ineffective and do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident. If any of the foregoing

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events occur, the confidential and other information of the Company, the Adviser, and the Administrator could be compromised. Such events could also cause interruptions or malfunctions in the operations of the Company, the Adviser or the Administrator, and in particular, the Adviser’s investment activities on our behalf and the provision of administrative services to us by the Administrator. The increased use of mobile and cloud technologies can heighten these and other operational risks. 

We, the Adviser and the Administrator currently or in the future are expected to routinely transmit and receive personal, confidential, and proprietary information by email and other electronic means. We, the Adviser and the Administrator, have discussed and worked with clients, vendors, service providers, counterparties, and other third parties to develop secure transmission capabilities and protect against cyber-attacks. However, we, the Adviser, and the Administrator may not be able to ensure secure capabilities with all of our clients, vendors, service providers, counterparties, and other third parties to protect the confidentiality of the information. 

In addition, the systems and technology resources used by us, our Adviser, our Administrator, and our and their respective affiliates could be strained by extended periods of remote working by our Adviser, our Administrator, and their affiliate’s employees and such extended remote working could introduce operational risks, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts. 

Risks relating to compliance with the AIFMD. 

The European Union Directive on Alternative Investment Fund Managers (the “AIFMD” or the “Directive”) regulates and imposes regulatory obligations in respect of the marketing in the European Economic Area (the “EEA”) by alternative investment fund managers (each an “AIFM”) (whether established in the EEA or elsewhere) of alternative investment funds (each an “AIF”) (whether established in the EEA or elsewhere). For these purposes, the Adviser is a non-EEA AIFM, and we are a non-EEA AIF. Each European jurisdiction that has implemented the Directive has implemented a new and, in most cases, a more restrictive private placement regime in connection with the implementation of the Directive. 

The AIFMD could have an adverse effect on the Adviser and us by, among other things, increasing the regulatory burden and costs of doing business in EEA member states. Except in limited circumstances, a non-EEA AIFM marketing its AIF to prospective EEA investors will be required to satisfy extensive disclosure obligations, including periodic disclosures to EEA regulators. The AIFMD could also limit the Adviser’s operating flexibility and our investment opportunities.  

There is little guidance and limited market practice that has developed in respect to the AIFMD. Many of the provisions of the AIFMD require the adoption of delegated acts and regulatory technical standards, as well as the establishment of guidelines. Some, but not all, EEA member states have published the relevant acts, standards, and guidelines. Where these acts, standards, and guidelines have been implemented, their practical application is still uncertain. As such, it is difficult to predict the precise impact of the AIFMD on the Adviser and us. Any regulatory changes arising from the transposition of the AIFMD into national law that impair the ability of the Adviser to manage us or our investments, or limit the Adviser’s ability to market the Common Stock in the future, may materially adversely affect our ability to carry out our investment approach and achieve our investment objectives. 

The Adviser is not subject to the requirements of the Directive to have additional funds of its own and/or professional indemnity insurance to cover potential liability risks arising from the professional negligence of the Adviser. 

We cannot guarantee our ability to obtain new or maintain existing SBIC licenses.

We cannot guarantee our ability of any of our subsidiaries (in existence now or which may be formed in the future) to obtain or maintain a SBIC license from the SBA nor can we anticipate changes in regulatory policies with respect to SBICs.

We will be subject to risks associated with any SBA-guaranteed debentures.

In the future, we may issue, as permitted under SBA regulations and through our wholly-owned subsidiary, SBIC LP, and any future SBIC subsidiary, SBA-guaranteed debentures to generate cash for funding new investments. To issue SBA-guaranteed debentures, we may request commitments for debt capital from the SBA. SBIC LP is, and any future SBIC subsidiary may be, exposed to any losses on its portfolio of loans; however, such debentures are non-recourse to us.

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Receipt of an SBIC license does not assure that SBIC LP will receive SBA-guaranteed debenture funding, which is dependent upon SBIC LP continuing to be in compliance with SBA regulations and policies.

SBIC LP is licensed by the SBA and is subject to SBA regulations.

SBIC LP, our wholly-owned subsidiary, received a license to operate as a SBIC under the Investment Act and is subject to regulation and oversight regulated by the SBA. The SBA places certain limitations on the financing terms of investments by SBICs in portfolio companies and regulates the types of financings and prohibits investing in certain industries. Compliance with SBIC requirements may cause SBIC LP to make investments at lower rates in order to qualify investments under the SBA regulations.

Further, SBA regulations require that a licensed SBIC be periodically examined and audited by the SBA to determine its compliance with the relevant regulations. If SBIC LP fails to comply with applicable regulations, the SBA could, depending on the severity of the violation, limit or prohibit its use of debentures, declare any outstanding debentures immediately due and payable, and/or limit it from making new investments. In addition, the SBA could revoke or suspend SBIC LP’s license for willful or repeated violation of, or willful or repeated failure to observe, any provision of the Investment Act or any rule or regulation promulgated thereunder. These actions by the SBA would, in turn, negatively affect us because SBIC LP is our wholly-owned subsidiary.

SBA-guaranteed debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed at the time of issuance at a market-driven spread over 10-year U.S. Treasury Notes. Leverage through SBA-guaranteed debentures is subject to required capitalization thresholds. Current SBA regulations limit the amount that any single SBIC may borrow to a maximum of $175.0 million, which is up to twice its regulatory capital, and a maximum of $350.0 million as part of a group of SBICs under common control; however, there is no guarantee that we will receive such amounts.

The SBA also limits an SBIC’s ability to invest idle funds to the following types of securities:

•direct obligations of, or obligations guaranteed as to principal and interest by, the U.S. government, which mature within 15 months from the date of the investment;

•repurchase agreements with federally insured institutions with a maturity of seven days or less (and the securities underlying the repurchase obligations must be direct obligations of or guaranteed by the federal government);

•mutual funds, securities or other instruments that exclusively consist of, or represent pooled assets of, investments described in the first and second bulleted paragraphs above;

•certificates of deposit with a maturity of one year or less, issued by a federally insured institution;

•a deposit account in a federally insured institution that is subject to a withdrawal restriction of one year or less;

•a checking account in a federally insured institution; or

•a reasonable petty cash fund.

Our ability to adhere to or meet our goals, including our 2030 Goals, and our ability to create and preserve jobs and stimulate the economy may be limited.

When setting our goals we sought guidance from outside regulatory frameworks, including the Investment Act, CRA, and Incentive Act. We can offer no assurances that we will be able to adhere to or meet our goals, including our 2030 Goals, and nor can we guarantee that such goals will have their intended consequences. While we will strive to (1) increase employment opportunities, (2) provide significant managerial assistance to small and middle-market companies and (3) encourage economic growth in working class communities, we can offer no assurances that our goals and actions in pursuits of these goals will have their intended effects.

Risks Relating to Our Investments 

Economic recessions or downturns could impair our portfolio companies, and defaults by our portfolio companies will harm our operating results. 

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Many of our portfolio companies are susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets are likely to increase and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income, and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets, or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing our investments and harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by other lenders or us could lead to defaults and, potentially, termination of its loans and foreclosure on its assets, which could trigger cross-defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, lenders in certain cases can be subject to lender liability claims for actions taken by them when they become too involved in the borrower’s business or exercise control over a borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken if we render managerial assistance to the borrower. 

Limitations of investment due diligence expose us to investment risk. 

Our due diligence may not reveal all of a portfolio company’s liabilities and may not reveal other weaknesses in its business. We can offer no assurance that our due diligence processes will uncover all relevant facts that would be material to an investment decision. Before making an investment in, or a loan to, a company, our Adviser will assess the strength and skills of the company’s management and other factors that it believes are material to the performance of the investment. 

In making the assessment and otherwise conducting customary due diligence, our Adviser will rely on the resources available to it and, in some cases, an investigation by third parties. This process is particularly important and highly subjective with respect to newly organized entities because there may be little or no information publicly available about the entities. 

We may make investments in or loans to companies that are not subject to public company reporting requirements, including requirements regarding the preparation of consolidated financial statements, and our portfolio companies may utilize divergent reporting standards that may make it difficult for the Adviser to accurately assess the prior performance of a portfolio company. We will, therefore, depend upon the compliance by investment companies with their contractual reporting obligations. As a result, the evaluation of potential investments and our ability to perform due diligence on and effectively monitor investments may be impeded, and we may not realize the returns which we expect on any particular investment. In the event of fraud by any company in which we invest or with respect to which we make a loan, we may suffer a partial or total loss of the amounts invested in that company. 

We may invest in distressed or highly leveraged companies, which could cause you to lose all or part of your investment. 

We may make investments in restructurings that involve, or otherwise invest in, the debt securities of portfolio companies that are experiencing or are expected to experience severe financial difficulties. These severe financial difficulties may never be overcome and may cause such portfolio companies to become subject to bankruptcy proceedings. As such, these investments could subject us to certain additional potential liabilities that may exceed the value of our original investment. Under certain circumstances, payments to us may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance, a preferential payment, or a similar transaction under the applicable bankruptcy and insolvency laws. In addition, under certain circumstances, a lender that has inappropriately exercised control of the management and policies of a debtor may have its claims subordinated or disallowed or may be found liable for damages suffered by parties as a result of such actions. 

We may also invest in highly leveraged companies. Investments in leveraged companies involves a number of significant risks. Leveraged companies in which we invest may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold. Such developments may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of our realizing any guarantees that we may have obtained in connection

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with our investment. Smaller leveraged companies also may have less predictable operating results and may require substantial additional capital to support their operations, finance their expansion, or maintain their competitive position. 

Our debt investments may be risky, and we could lose all or part of our investments. 

The debt instruments in which we invest are typically not initially rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB-” by Fitch Ratings or lower than “BBB-” by Standard & Poor’s Ratings Services), which under the guidelines established by these entities is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. Bonds that are rated below investment grade are sometimes referred to as “high yield bonds” or “junk bonds.” Therefore, our investments may result in an above-average amount of risk and volatility or loss of principal. 

Defaults by our portfolio companies will harm our operating results. 

A portfolio company’s failure to satisfy financial or operating covenants imposed by other lenders or us could lead to defaults and, potentially, termination of its debt financing and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.

We may hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, enter into bankruptcy proceedings. 

Leveraged companies may experience bankruptcy or similar financial distress. The bankruptcy process has a number of significant inherent risks. Many events in a bankruptcy proceeding are the product of contested matters and adversary proceedings and are beyond the control of the creditors. A bankruptcy filing by an issuer may adversely and permanently affect the issuer. If the proceeding is converted to a liquidation, the value of the issuer may not equal the liquidation value that was believed to exist at the time of the investment. The duration of a bankruptcy proceeding is also difficult to predict, and a creditor’s return on investment can be adversely affected by delays until the plan of reorganization or liquidation ultimately becomes effective. The administrative costs of a bankruptcy proceeding are frequently high and would be paid out of the debtor’s estate prior to any return to creditors. Because the standards for the classification of claims under bankruptcy law are vague, our influence with respect to the class of securities or other obligations we own may be lost by increases in the number and amount of claims in the same class or by different classification and treatment. In the early stages of the bankruptcy process, it is often difficult to estimate the extent of, or even to identify, any contingent claims that might be made. In addition, certain claims that have priority by law (for example, claims for taxes) may be substantial. 

Depending on the facts and circumstances of our investments and the extent of our involvement in the management of a portfolio company, upon the bankruptcy of a portfolio company, a bankruptcy court may recharacterize our debt investments as equity interests and subordinate all or a portion of our claim to that of other creditors. This could occur even though we may have structured our investment as senior debt. 

Our investments in private and middle market portfolio companies are risky, and you could lose all or part of your investment. 

Investments in private and middle market companies involve a number of significant risks. Generally, little public information exists about these companies, and we rely on the ability of the Adviser’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If the Adviser is unable to uncover all material information about these companies, it may not make a fully informed investment decision, and we may lose money on our investments. Middle market companies generally have less predictable operating results and may require substantial additional capital to support their operations, finance expansion, or maintain their competitive position. Middle market companies may have limited financial resources, may have difficulty accessing the capital markets to meet future capital needs, and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of our realizing any guarantees we may have obtained in connection with our investment. In addition, such companies typically have shorter operating histories, narrower product lines, and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. Additionally,

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middle market companies are more likely to depend on the management talents and efforts of a small group of persons. Therefore, the death, disability, resignation, or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us. Middle market companies also may be parties to litigation and may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence. In addition, our executive officers, directors, and the Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies.

Subordinated liens on collateral securing debt investments that we make in our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of such collateral may not be sufficient to repay in full both the first priority creditors and us. 

Certain debt investments that we make in portfolio companies will be secured on a second priority basis by the same collateral securing the senior debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the debt. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers, and other factors. We can offer no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any. Similarly, investments in “last out” pieces of tranched first-lien loans will be similar to second lien loans in that such investments will be junior in priority to the “first-out” piece of the same tranched loan with respect to payment of principal, interest, and other amounts. 

We may also make unsecured debt investments in portfolio companies, meaning that such investments will not benefit from any interest in collateral of such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of and be entitled to receive proceeds from any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers, and other factors. We can offer no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any. 

The rights we may have with respect to the collateral securing the debt investments we make in our portfolio companies with senior debt outstanding, or first-out pieces of tranched first-lien debt, may also be limited pursuant to the terms of one or more inter-creditor agreements that we enter into with the holders of senior debt. Under such an inter-creditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected. 

The lack of liquidity in our investments may adversely affect our business. 

Our investments will be illiquid in most cases, and we can offer no assurance that we will be able to realize on such investments in a timely manner. A substantial portion of our investments in leveraged companies are and will be subject to legal and other restrictions on resale or will otherwise be less liquid than more broadly traded public securities. The illiquidity of these investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. We may also face other restrictions on our ability to liquidate an investment in a

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portfolio company to the extent that we, the Adviser, or any of its affiliates have material nonpublic information regarding such portfolio company. 

In addition, we generally expect to invest in securities, instruments, and assets that are not and are not expected to become publicly traded. We will generally not be able to sell securities publicly unless the sale is registered under applicable securities laws or unless an exemption from such registration requirements is available. 

Investments may be illiquid and long-term. Illiquidity may result from the absence of an established or liquid market for investments as well as legal and contractual restrictions on their resale by us. It is generally expected that we will hold assets to maturity, and the amount of “discretionary sales” of investments generally will be limited. Our investment in illiquid investments may restrict its ability to dispose of investments in a timely fashion and for a fair price. Furthermore, we likely will be limited in our ability to sell investments because Lafayette Square and its affiliates may have material, non-public information regarding the issuers of such loans or investments or as a result of other Lafayette Square policies. This limited ability to sell investments could materially adversely affect our investment results. As a result, our exposure to losses, including a potential loss of principal, as a result of which you could potentially lose all or a portion of your investment in the Company, may be increased due to the illiquidity of our investments generally. 

In certain cases, we may also be prohibited by contract from selling our investments for a period of time or otherwise be restricted from disposing of our investments. Furthermore, certain types of investments expected to be made may require a substantial length of time to realize a return or fully liquidate. We may exit some investments through distributions in kind to the stockholders, after which such exit you will still bear the risks associated with holding the securities and must make your own disposition decisions. 

Given the nature of the investments contemplated by the Company, there is a material risk that we will be unable to realize our investment objectives by sale or other disposition at attractive prices or will otherwise be unable to complete any exit strategy. In particular, this risk could arise from changes in the financial condition or prospects of the portfolio company in which the investment is made, changes in national or international economic conditions, changes in debt and equity capital markets, and changes in laws, regulations, fiscal policies or political conditions of countries in which investments are made. 

In connection with the disposition of an investment in a portfolio company, we may be required to make representations about the business and financial affairs of the portfolio company or may be responsible for the contents of disclosure documents under applicable securities laws. We may also be required to indemnify the purchasers of such investment or underwriters to the extent that any such representations or disclosure documents turn out to be incorrect, inaccurate, or misleading. These arrangements may result in contingent liabilities, for which we may establish reserves or escrows. However, we can offer no assurance that we will adequately reserve for our contingent liabilities and that such liabilities will not have an adverse effect on us. Such contingent liabilities might ultimately have to be funded by proceeds, including the return of capital, from our other investments. 

Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation. 

As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined by our Adviser. As part of the valuation process, our Adviser may take into account the following types of factors, if relevant, in determining the fair value of our investments:

•a comparison of the portfolio company’s securities to publicly traded securities;

•the enterprise value of the portfolio company;

•the nature and realizable value of any collateral;

•the portfolio company’s ability to make payments and its earnings and discounted cash flow;

•the markets in which the portfolio company does business; and

•changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors.

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When an external event such as a purchase transaction, public offering, or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation. We record decreases in the market values or fair values of our investments as unrealized depreciation. Declines in prices and liquidity in the corporate debt markets may result in significant net unrealized depreciation in our portfolio. The effect of all of these factors on our portfolio may reduce our net asset value by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer additional unrealized losses in future periods, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. 

Our prospective portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity, and rising interest rates may make it more difficult for portfolio companies to make periodic payments on their loans. 

The portfolio companies in which we expect to invest may be unable to repay or refinance outstanding principal on their loans at or prior to maturity. This risk and the risk of default is increased to the extent that the loan documents do not require the portfolio companies to pay down the outstanding principal of such debt prior to maturity. In addition, if general interest rates rise, there is a risk that our portfolio companies will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. Any failure of one or more portfolio companies to repay or refinance its debt at or prior to maturity or the inability of one or more portfolio companies to make ongoing payments following an increase in contractual interest rates could have a material adverse effect on our business, financial condition, results of operations and cash flows. 

Our prospective portfolio companies may prepay loans, which may reduce our yields if capital returned to us cannot be invested in transactions with equal or greater expected yields. 

The loans in our investment portfolio may be prepaid at any time, generally with little advance notice. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that allow such a company the ability to replace existing financing with less expensive capital. As market conditions change, we do not know when, and if, prepayment may be possible for each portfolio company. In some cases, the prepayment of a loan may reduce our achievable yield if the capital returned to us cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition, and results of operations. 

Our investments in portfolio companies may expose us to environmental risks. 

We may invest in portfolio entities that are subject to changing and increasingly stringent environmental and health and safety laws, regulations, and permit requirements and environmental costs that could place increasing financial burdens on such portfolio entities. Required expenditures for environmental compliance may adversely impact investment returns on portfolio entities. The imposition of new environmental and other laws, regulations, and initiatives could adversely affect the business operations and financial stability of portfolio entities. 

There can be no guarantee that all costs and risks regarding compliance with environmental laws and regulations can be identified. New and more stringent environmental and health and safety laws, regulations and permit requirements, or stricter interpretations of current laws or regulations could impose substantial additional costs on portfolio investment or potential investments. President Biden has publicly endorsed greater environmental regulation which may impose significant compliance costs and complicate existing operations. In addition, state governments located in specific regions in which we invest may impose more stringent environmental regulations than other state governments. Compliance with such current or future environmental requirements does not ensure that the operations of the portfolio investments will not cause injury to the environment or to people under all circumstances or that the portfolio investments will not be required to incur additional unforeseen environmental expenditures. Moreover, failure to comply with any such requirements could have a material adverse effect on an investment, and we can offer no assurance that the portfolio investments will at all times comply with all applicable environmental laws, regulations and permit requirements.

We have not yet identified all of the portfolio company investments we will acquire, and there is no certainty how long it will take to identify such investments or whether we will be able to find a sufficient number of such businesses to meaningfully populate our portfolio. 

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We have not yet identified all of the potential investments for our portfolio that we will acquire with the proceeds of any sales of our securities or repayments of investments currently in our portfolio. Privately negotiated investments in illiquid securities or private middle market companies require substantial due diligence and structuring (particularly to identify and underwrite non-sponsored businesses), and we cannot assure you that we will achieve our anticipated investment pace or be able to find a sufficient number of such businesses to meaningfully populate our portfolio. The Adviser selects all of our investments, and our stockholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk of investing in our securities. Until such appropriate investment opportunities can be found, we may also invest the net proceeds in cash, cash equivalents, U.S. government securities, and high-quality debt investments that mature in one year or less from the date of investment. We expect these temporary investments to earn yields substantially lower than the income that we expect to receive in respect of our targeted investment types. As a result, any distributions we make during this period may be substantially smaller than the distributions that we expect to pay when our portfolio is fully invested. 

We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer. 

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our asset diversification requirements as a RIC under the Code, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies. Although we are classified as a non-diversified investment company within the meaning of the 1940 Act, we maintain the flexibility to operate as a diversified investment company. To the extent that we operate as a non-diversified investment company, we may be subject to greater risk.  

Our portfolio may initially be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry. 

During the period of time in which we are deploying our initial capital, our portfolio may be concentrated in a limited number of portfolio companies and industries. As a result, the aggregate returns we realize may be significantly and adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Additionally, while we are not targeting any specific industries, our investments may be concentrated in relatively few industries. For example, although we may classify the industries of our portfolio companies by end-market (such as health market or business services) and not by the products or services (such as software) directed to those end-markets, some of our portfolio companies may principally provide software products or services, which exposes us to downturns in that sector. As a result, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns we realize. 

Our portfolio may initially lack geographic diversification across Target Regions.

While our goal is to invest at least 5% of our assets in each of our Target Regions over time, we anticipate that it could take time to invest substantially all of the capital we expect to raise in a geographically diverse manner due to general market conditions, the time necessary to identify, evaluate, structure, negotiate and close suitable in-vestments in private middle market companies, and the potential for allocations to other affiliated investment vehicles which focus their investments on a specific region. As a result, at any point in time, we may invest a disproportionate amount in certain regions, and there can be no assurance that we will achieve geographic diversification across all ten regions.

Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio. 

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in seeking to:

•increase or maintain in whole or in part our position as a creditor or equity ownership percentage in a portfolio company;

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•exercise warrants, options, or convertible securities that were acquired in the original or subsequent financing; or

•preserve or enhance the value of our investment.

We have the discretion to make follow-on investments, subject to the availability of capital resources, and certain limitations on co-investment with affiliates under the 1940 Act. Failure on our part to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful portfolio company. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our level of risk because we prefer other opportunities, or because of regulatory or other considerations. Our ability to make follow-on investments may also be limited by the Adviser’s allocation policies and procedures.

Because we generally do not hold controlling equity interests in our portfolio companies, we may not be able to control our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments. 

To the extent that we do not hold controlling equity interests in portfolio companies, we will have a limited ability to protect our position in such portfolio companies. We may also co-invest with third parties through partnerships, joint ventures, or other entities. Such investments may involve risks in connection with such third-party involvement, including the possibility that a third-party co-investor may have economic or business interests or goals that are inconsistent with ours or may be in a position to take (or block) action in a manner contrary to our investment objective. In those circumstances where such third parties involve a management group, such third parties may receive compensation arrangements relating to such investments, including incentive compensation arrangements. 

We can offer no assurance that portfolio company management will be able to operate their companies in accordance with our expectations. 

The day-to-day operations of each portfolio company in which we invest will be the responsibility of that portfolio company’s management team. Although we will be responsible for monitoring the performance of each investment and generally intend to invest in portfolio companies operated by strong management, we can offer no assurance that the existing management team, or any successor, will be able to operate any such portfolio company in accordance with our expectations. We can offer no assurance that a portfolio company will be successful in retaining key members of its management team, the loss of whom could have a material adverse effect on us. Although we generally intend to invest in companies with strong management teams and defensible market positions, we can offer no assurance that the existing management of such companies will continue to operate a company successfully. 

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies, and such portfolio companies may not generate sufficient cash flow to service their debt obligations to us. 

We may invest a portion of our capital in second lien and subordinated loans issued by our portfolio companies. Our portfolio companies may have, or be permitted to incur, other debt that ranks equally with, or senior to, the debt securities in which we invest. Such subordinated investments are subject to a greater risk of default than senior obligations as a result of adverse changes in the financial condition of the obligor or in general economic conditions. If we make a subordinated investment in a portfolio company, the portfolio company may be highly leveraged, and its relatively high debt-to-equity ratio may create increased risks that its operations might not generate sufficient cash flow to service all of its debt obligations. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the securities in which we invest. These debt instruments would usually prohibit the portfolio companies from paying interest on or repaying our investments in the event of and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization, or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying senior creditors, the portfolio company may not have any remaining assets to use for repaying its obligation to us where we are the junior creditor. In the case of debt ranking equally with debt securities in which we invest, we would have to share any distributions on an equal and ratable basis with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization, or bankruptcy of the relevant portfolio company. 

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Additionally, certain loans that we make to portfolio companies may be secured on a second priority basis by the same collateral securing the senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the loans. The holders of obligations secured by first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers, and other factors. Similarly, investments in “last out” pieces of tranched first-lien loans will be similar to second lien loans in that such investments will be junior in priority to the “first-out” piece of the same tranched first-lien loan with respect to payment of principal, interest, and other amounts. We can offer no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens or the “last out” pieces of the tranched first-lien loans after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds were not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens or the “last out” pieces of unitranche loans, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any. 

We may make unsecured loans to portfolio companies, meaning that such loans will not benefit from any interest in collateral of such companies. Liens on a portfolio company’s collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured loan agreements. The holders of obligations secured by such liens will generally control the liquidation of and be entitled to receive proceeds from any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers, and other factors. We can offer no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured loan obligations after payment in full of all loans secured by collateral. If such proceeds were not sufficient to repay the outstanding secured loan obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any. 

The rights we may have with respect to the collateral securing any junior priority loans, including any “last out” pieces of tranched first-lien loans, we make to our portfolio companies may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into (or the absence of an intercreditor agreement) with the holders of senior debt. Under a typical intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens:

•the ability to cause the commencement of enforcement proceedings against the collateral;

•the ability to control the conduct of such proceedings;

•the approval of amendments to collateral documents;

•releases of liens on the collateral; and

•waivers of past defaults under collateral documents.

•we may not have the ability to control or direct such actions, even if our rights as junior lenders are adversely affected. 

The liability of each of the Adviser and the Administrator is limited, and we have agreed to indemnify each against certain liabilities, which may lead them to act in a riskier manner on our behalf than each would when acting for its own account. 

Under the Investment Advisory Agreement, the Adviser does not assume any responsibility to us other than to render the services called for under that agreement, and it is not responsible for any action of our Board in following or declining to follow the Adviser’s advice or recommendations. Under the terms of the Investment Advisory Agreement, the Adviser, its officers, members, personnel, and any person controlling or controlled by the Adviser are not liable to us, any subsidiary of ours, our directors, our stockholders, or any subsidiary’s stockholders or partners for acts or omissions performed in accordance with and pursuant to the Investment Advisory Agreement, except those resulting from acts constituting gross

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negligence, willful misconduct, bad faith or reckless disregard of the Adviser’s duties under the Investment Advisory Agreement. In addition, we have agreed to indemnify the Adviser and each of its officers, directors, members, managers, and employees from and against any claims or liabilities, including reasonable legal fees and other expenses, reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement, except where attributable to gross negligence, willful misconduct, bad faith or reckless disregard of such person’s duties under the Investment Advisory Agreement. Under the Administration Agreement, the Administrator and certain specified parties providing administrative services pursuant to that agreement are not liable to our stockholders for or us, and we have agreed to indemnify them for any claims or losses arising out of the good faith performance of their duties or obligations under the Administration Agreement, except those liabilities resulting primarily attributable to gross negligence, willful misconduct, bad faith or reckless disregard of the Administrator’s duties under the Administration Agreement. These protections may lead the Adviser or the Administrator to act in a riskier manner when acting on our behalf than it would when acting for its own account. 

We may be subject to risks under hedging transactions. 

We may engage in hedging transactions to the limited extent such transactions are permitted under the 1940 Act and applicable commodities laws. Engaging in hedging transactions would entail additional risks to our stockholders. We could, for example, use instruments such as interest rate swaps, caps, collars, and floors. In each such case, we generally would seek to hedge against fluctuations of the relative values of our portfolio positions from changes in market interest rates. Hedging against a decline in the values of our portfolio positions would not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of the positions declined. However, such hedging could establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions could also limit the opportunity for gain if the values of the underlying portfolio positions increased. Moreover, it might not be possible to hedge against an interest rate fluctuation that was so generally anticipated that we would not be able to enter into a hedging transaction at an acceptable price. The use of a hedging transaction could involve counterparty credit risk. 

The success of any hedging transactions we may enter into will depend on our ability to correctly predict movements in interest rates. Therefore, while we may enter into hedging transactions to seek to reduce interest rate risks, unanticipated changes in interest rates could result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged could vary. Moreover, for a variety of reasons, we might not seek to (or be able to) establish a perfect correlation between the hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation could prevent us from achieving the intended hedge and expose us to the risk of loss. Our ability to engage in hedging transactions may also be adversely affected by rules adopted by the CFTC. 

We may not realize gains from our equity investments. 

When we invest in unitranche, second lien, and subordinated loans, we may acquire warrants or other equity securities of portfolio companies as well. We may also invest in equity securities directly. To the extent we hold equity investments, we will seek to dispose of them and realize gains upon our disposition of them. However, the equity interests we receive may not appreciate in value and may decline in value. As a result, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. 

We may be subject to risks to the extent we provide substantial managerial assistance to our portfolio companies. 

To the extent we participate substantially in the conduct of the management of certain of our portfolio companies, such as designating directors to serve on the boards of directors of certain portfolio companies, such designation of representatives and other measures contemplated could expose our assets to claims by a portfolio company in which we invest, its security-holders and its creditors, including claims that we are a controlling person and thus are liable for securities laws violations of a portfolio company. These measures also could result in certain liabilities in the event of the bankruptcy or reorganization of a portfolio company, could result in claims against us if a designated director violates their fiduciary or other duties to a portfolio company or fail to exercise appropriate levels of care under applicable corporate or securities laws, environmental laws or other legal principles, and could expose us to claims that we have interfered in management to the detriment of a portfolio company. 

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There can be no guarantee of our ability to coordinate with the human resources and personnel departments of our portfolio companies through our Worker Solutions services platform.

There can be no guarantee of our ability to coordinate with the human resources and personnel departments of our portfolio companies through our Worker Solutions services platform and nor can we guarantee our ability to properly or effectively analyze health insurance and retirement benefits participation and recommend ways to improve employee uptake. We can offer no assurances that services provided through our Worker Solutions services platform will have their intended effect or that they will be widely utilized by the employees of our portfolio companies.

Risks Relating to Our Common Stock 

There is no public market for shares of our Common Stock, and we do not expect there to be a market for our shares. 

There is no existing trading market for shares of our Common Stock, and no market for our shares may develop in the future. If developed, any such market may not be sustained. In the absence of a trading market, holders of shares of our Common Stock may be unable to liquidate an investment in our shares. 

The shares of our Common Stock have not been registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. 

There are restrictions on the ability of holders of our Common Stock to transfer shares in excess of the restrictions typically associated with a private offering of securities under Regulation D and other exemptions from registration under the Securities Act, and these restrictions could limit the liquidity of an investment in shares of our Common Stock and the price at which holders may be able to sell the shares. 

We are relying on an exemption from registration under the Securities Act and state securities laws in offering shares of our Common Stock pursuant to the Subscription Agreements. As such, absent an effective Registration Statement covering our Common Stock, such shares may be resold only in transactions that are exempt from the registration requirements of the Securities Act and with our prior consent. Our Common Stock will have limited transferability, which could delay, defer or prevent a transaction or a change of control of the Company that might involve a premium price for our securities or otherwise be in the best interest of our stockholders. 

During periods of capital markets disruption and economic uncertainty, there is a risk that you may not receive distributions or that our distributions may not grow over time, and a portion of our distributions may be a return of capital. 

We intend to make periodic distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this Registration Statement, especially if there are reduced cash flows to us from our portfolio companies, which could reduce cash available for distribution to our stockholders. Due to the asset coverage test applicable to us under the 1940 Act as a BDC, we may be limited in our ability to make distributions. To the extent we make distributions to stockholders that include a return of capital, such a portion of the distribution essentially constitutes a return of the stockholder’s investment. Although such return of capital may not be taxable, such distributions may increase a shareholder’s tax liability for capital gains upon the future sale of our Common Stock. A return of capital distribution may cause a stockholder to recognize a capital gain from the sale of our Common Stock even if the stockholder sells its shares for less than the original purchase price. 

Investing in our Common Stock may involve an above-average degree of risk. 

The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk, and therefore, an investment in our shares may not be suitable for someone with lower risk tolerance. In addition, our Common Stock is intended for long-term shareholders who can accept the risks of investing primarily in illiquid loans and other debt or debt-like instruments and should not be treated as a trading vehicle. 

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Our stockholders may experience dilution in their ownership percentage. 

Our stockholders do not have preemptive rights to any shares of our Common Stock we issue in the future. To the extent that we issue additional equity interests at or below net asset value, your percentage ownership interest in us may be diluted. In addition, depending upon the terms and pricing of any future sales of Common Stock and the value of our investments, you may also experience dilution in the book value and fair value of your shares. 

Under the 1940 Act, we generally are prohibited from issuing or selling shares of our Common Stock at a price below net asset value per share, which may be a disadvantage as compared with certain public companies. We may, however, sell shares of our Common Stock, or warrants, options, or rights to acquire shares of our Common Stock, at a price below the current net asset value of shares of our Common Stock if our Board determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders, including a majority of those stockholders that are not affiliated with us, approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board, closely approximates the fair value of such securities (less any distributing commission or discount). If we raise additional funds by issuing shares of our Common Stock or senior securities convertible into, or exchangeable for, shares of our Common Stock, then the percentage ownership of our stockholders at that time will decrease, and you will experience dilution. 

Purchases of Common Stock pursuant to the Subscription Agreements will generally be made pro-rata in accordance with the remaining capital commitments of all shareholders. However, we may request capital contributions on a non-pro rata basis in accordance with the terms of the Subscription Agreement. To the extent a shareholder is required to purchase less than its pro-rata share of a drawdown of subscriber capital commitments, such stockholders will experience dilution in their percentage ownership of the Company. 

In the event that we enter into a Subscription Agreement with one or more shareholders after the Initial Drawdown, each such shareholder will be required to make Catch-up Purchases on one or more dates to be determined by us. Each Catch-up Purchase will dilute the ownership percentage of all shareholders whose subscriptions were accepted at previous closings. As a result, each subsequent closing after the Initial Closing will result in existing stockholders in the Company experiencing dilution as a result of Catch-up Purchases. 

Our stockholders will experience dilution in their ownership percentage if they do not opt-in to our dividend reinvestment plan. 

We have an “opt-out” DRIP pursuant to which all distributions declared will be payable in shares of our Common Stock unless stockholders elect to receive their distributions in cash. As a result, our stockholders that do “opt-out” to our DRIP will experience dilution in their ownership percentage of our Common Stock over time. See “Item 9 – Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters–Distribution Policy” and “—Dividend Reinvestment Plan” for a description of our dividend policy and obligations. 

Our stockholders may receive shares of our Common Stock as distributions, which could result in adverse tax consequences to them. 

In order to satisfy the annual distribution requirement applicable to RICs, we will have the ability to declare a large portion of a dividend in shares of our Common Stock instead of in cash. Revenue Procedures issued by the IRS allow a publicly offered regulated investment company (as defined above) to distribute its own stock as a dividend for the purpose of fulfilling its distribution requirements if certain conditions are satisfied. As long as a portion of such dividend is paid in cash (which portion may be as low as 10% of such dividend, for distributions declared by June 30, 2022, and 20% of such dividends, for distributions declared on or after July 1, 2022) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder generally would be subject to tax on 100% of the fair market value of the dividend on the date the dividend is received by the stockholder in the same manner as a cash dividend, even though most of the dividend was paid in shares of our Common Stock. We currently do not intend to pay distributions in shares of our Common Stock. 

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We may, in the future, determine to issue preferred stock, which could adversely affect the value of shares of Common Stock. 

The issuance of preferred stock with dividend or conversion rights, liquidation preferences, or other economic terms favorable to the holders of preferred stock could make an investment in shares of Common Stock less attractive. In addition, the distributions on any preferred stock we issue must be cumulative. Payment of distributions and repayment of the liquidation preference of preferred stock must take preference over any distributions or other payments to holders of Common Stock, and holders of preferred stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than convertible preferred stock that converts into shares of Common Stock). In addition, under the 1940 Act, the preferred stock would constitute a “senior security” for purposes of the 150% asset coverage test. 

Shareholders will not have any redemption rights in respect of the Common Stock, and there is no meaningful liquidity risk to manage. 

To the extent required by laws implementing the Directive in any relevant EEA member state, the information in respect of the Company required to be disclosed pursuant to Article 23(4) and (5) of the Directive will be made available to each investor as follows:

a)Any new arrangements for managing our liquidity, without undue delay in a disclosure notice delivered to each investor.

b)Our current risk profile and the risk management systems employed by the Adviser to manage those risks, in each annual report.

c)Any changes to the maximum level of leverage which the Adviser may employ on our behalf as well as any right of the reuse of collateral or any guarantee granted under the leveraging arrangement, without undue delay in a disclosure notice delivered to each investor. Please note, we do not intend to employ collateral and asset reuse arrangements.

d)The total amount of leverage employed by us, in each annual report. 

General Risk Factors 

Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks. 

Social, political, economic and other conditions and events will occur that create uncertainty and have significant impacts on issuers, industries, governments and other systems, including the financial markets, to which the Company and its investments are exposed. In addition, global economies and financial markets are increasingly interconnected, and political, economic and other conditions and events in one country, region, or financial market may adversely impact issuers in a different country, region or financial market. Furthermore, the occurrence of, among other events, natural or man-made disasters, severe weather or geological events, fires, floods, earthquakes, outbreaks of disease (such as COVID-19, avian influenza or H1N1/09), epidemics, pandemics, malicious acts, cyber-attacks, terrorist acts or the occurrence of climate change, may also adversely impact our performance from time to time. Such events may result in, and have resulted in, closing borders, securities exchange closures, health screenings, healthcare service delays, quarantines, cancellations, supply chain disruptions, lower consumer demand, market volatility and general uncertainty. We may be negatively impacted if the value of our portfolio company holdings were harmed by such political or economic conditions or events. Moreover, such negative political and economic conditions may disrupt the processes necessary for our operations. This may create widespread business continuity issues for us and our portfolio companies and heightened cybersecurity, information security and operational risks as a result of, among other things, remote work arrangements. 

Outbreaks such as the severe acute respiratory syndrome, avian influenza, H1N1/09, and, most recently, the coronavirus (COVID-19), or other similarly infectious diseases may have material adverse impacts on the Company, the Adviser, their respective affiliates and portfolio companies. Actual pandemics, or fear of pandemics, can trigger market disruptions or economic turn-downs with the consequences described above. The Adviser cannot predict the likelihood of disease outbreaks occurring in the future nor how such outbreaks may affect the Company’s investments.

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The outbreak of disease epidemics may result in the closure of the Adviser’s and/or a portfolio company’s offices or other businesses, including office buildings, retail stores and other commercial venues and could also result in (a) the lack of availability or price volatility of raw materials or component parts necessary to a portfolio company’s business which may adversely affect the ability of a portfolio company to perform its obligations, (b) disruption of regional or global trade markets and/or the availability of capital, (c) the availability of leverage, including an inability to obtain indebtedness at all or to the Company’s desired degree, and less favorable timing of repayment and other terms with respect to such leverage, (d) trade or travel restrictions which impact a portfolio company’s business and/or (e) a general economic decline and have an adverse impact on the Company’s value, the Company’s investments, or the Company’s ability to make new investments. If a future pandemic occurs (including a recurrence of COVID-19) during a period when the Company expects to be harvesting its investments, the Company may not achieve its investment objective or may not be able to realize its investments within the Company’s term.

Ongoing international events have increased global political and economic uncertainty, which may have a material impact on the Company’s portfolio and the value of your investment in the Company.

The ongoing invasion of Ukraine by Russia and related sanctions placed on certain Russian entities and individuals by the United States and other countries, as well as the ongoing military conflict between Israel and Hamas, have increased global political and economic uncertainty. Because Russia is a major exporter of oil and natural gas, the invasion and related sanctions have reduced the supply, and increased the price, of energy, which has impacted inflation and may exacerbate ongoing supply chain issues. There is also the risk of retaliatory actions by Russia against countries which have enacted sanctions, including cyberattacks against financial and governmental institutions, which could result in business disruptions and further economic turbulence. Although the Company has no direct exposure to Russia, Ukraine or the Middle East, the broader consequences of these events may have a material adverse impact on the Company’s portfolio and the value of your investment in the Company. Because this is an uncertain and evolving situation, its full impact is unknown at this time. Additionally, the impact of election cycles in the upcoming year in the U.S. and internationally, including in the UK, South Africa, India, Taiwan, and Russia, may result in unpredictability and uncertainty in U.S. and global markets. In the U.S. in particular, concerns over government debt sustainability and the fiscal path forward may build in the run up to the presidential election, and diverging outcomes based on the outcome of the election may introduce additional uncertainty in the markets.

Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.

The United States is currently experiencing an inflationary environment, and certain of our portfolio companies are in industries that may be impacted by inflation. If such portfolio companies are unable to pass any increases in their costs of operations along to their customers, it could adversely affect their operating results and impact their ability to pay interest and principal on our loans, particularly if interest rates rise in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized or unrealized losses and therefore reduce our net assets resulting from operations.

The impact of economic recessions or downturns may impair our portfolio companies and lead to defaults by our portfolio companies, which could harm our operating results.

Our portfolio companies may be susceptible to economic downturns or recessions and may be unable to repay our loans during these periods. During these periods our non-performing assets may increase and the value of our portfolio may decrease if we are required to write down the values of our investments. Adverse economic conditions may also decrease the value of collateral securing some of our loans. Economic slowdowns or recessions could lead to financial losses in our portfolio investments and a decrease in revenues, net income and assets. A prolonged reduction in interest rates due to economic downturns or recessions will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in SOFR are not offset by a corresponding increase in the spread over SOFR that we earn on any portfolio investments, a decrease in in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to SOFR. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results.

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We are subject to risks associated with the current interest rate environment, and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income. 

To the extent we borrow money or issue debt securities or preferred stock to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds or pay interest or distributions on such debt securities or preferred stock and the rate at which we invest these funds. In addition, we anticipate that many of our debt investments and borrowings will have floating interest rates that reset on a periodic basis, and many of our investments will be subject to interest rate floors. As a result, a significant change in market interest rates could have a material adverse effect on our net investment income. Rising interest rates on floating-rate loans we make to portfolio companies could drive an increase in defaults or accelerated refinancings. Some portfolio companies may be unable to refinance into fixed-rate loans or repay outstanding amounts, leading to a gradual decline in the credit quality of our portfolio. In periods of rising interest rates, our cost of funds will increase because we expect that the interest rates on the majority of amounts we borrow will be floating. This change could reduce our net investment income to the extent any debt investments have fixed interest rates. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act and applicable commodities laws. These activities may limit our ability to benefit from lower interest rates with respect to hedged borrowings. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition, and results of operations. 

You should also be aware that a rise in the general level of interest rates typically will lead to higher interest rates applicable to our debt investments, which may increase the amount of incentive fees payable to our Adviser. Also, an increase in interest rates available to shareholders could make an investment in shares of our Common Stock less attractive if we are not able to increase our distribution rate, which could reduce the value of shares of our Common Stock. 

Changes in LIBOR, or its discontinuation, may adversely affect our business and results of operations. 

Many financial instruments use or may use a floating rate based on the LIBOR, which is the interbank offered rate for short-term Eurodollar deposits. For several years, LIBOR has been the subject of national and international regulatory scrutiny. Following their publication on June 30, 2023, no settings of LIBOR continue to be published on a representative basis and publication of many non-U.S. dollar LIBOR settings has been entirely discontinued. On July 29, 2021, the U.S. Federal Reserve System, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, formally recommended replacing U.S.-dollar LIBOR with SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. In April 2018, the Bank of England began publishing its proposed alternative rate, the Sterling Overnight Index Average (“SONIA”). Each of SOFR and SONIA significantly differ from LIBOR, both in the actual rate and how it is calculated. Further, on March 15, 2022, the Consolidation Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”), was signed into law in the United States. This legislation establishes a uniform benchmark replacement process for certain financial contracts that mature after June 30, 2023 that do not contain clearly defined or practicable LIBOR fallback provisions. The legislation also creates a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the Federal Reserve. In addition, the U.K. Financial Conduct Authority (“FCA”), which regulates the publisher of LIBOR (ICE Benchmark Administration) has announced that it will require the continued publication of the one-, three- and six-month tenors of U.S.-dollar LIBOR on a non-representative synthetic basis until the end of September 2024, which may result in certain non-U.S. law-governed contracts and U.S. law-governed contracts not covered by the federal legislation remaining on synthetic U.S.-dollar LIBOR until the end of this period. Although the transition process away from LIBOR has become increasingly well-defined (e.g. the LIBOR Act now provides a uniform benchmark replacement for certain LIBOR-based instruments in the United States), the transition process is complex and it could cause a disruption in the credit markets generally and could have a range of adverse impacts on our business, financial condition, and results of operations. In particular, any such transition or reform could:

•Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any LIBOR-linked securities, loans, and derivatives that are included in our assets and liabilities;

•Require extensive changes to documentation that governs or references LIBOR or LIBOR-based products, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding investments and hedging transactions;

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•Result in a population of products with documentation that governs or references LIBOR or LIBOR-based products, but that cannot be amended due to an inability to obtain sufficient consent from counterparties or product owners;

•Result in inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with one or more alternative reference rates;

•Result in disputes, litigation, or other actions with portfolio companies, or other counterparties, regarding the interpretation and enforceability of provisions in our LIBOR-based investments, such as fallback language or other related provisions, including, in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between LIBOR and the various alternative reference rates;

•Require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on one or more alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and

•Cause us to incur additional costs in relation to any of the above factors. 

Alteration of the terms of a debt instrument or a modification of the terms of other types of contracts to replace an interbank offered rate with a new reference rate could result in a taxable exchange and the realization of income and gain/loss for U.S. federal income tax purposes. The Internal Revenue Service (the “IRS”) has issued proposed regulations regarding the tax consequences of the transition from interbank offered rates to new reference rates in debt instruments and non-debt contracts. Under the proposed regulations, to avoid such alteration or modification of the terms of a debt instrument being treated as a taxable exchange, the fair market value of the modified instrument or contract must be substantially equivalent to its fair market value before the qualifying change was made. The IRS may withdraw, amend or finalize, in whole or part, these proposed regulations and/or provide additional guidance, with potential retroactive effect. 

Depending on several factors, including those set forth above, our business, financial condition, and results of operations could be materially adversely impacted by the market transition or reform of certain reference rates and benchmarks. Other factors include the pace of the transition to a replacement or reformed rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate systems and analytics for one or more alternative reference rates. 

We may be the target of litigation. 

We may be the target of securities litigation in the future, particularly if the value of shares of our Common Stock fluctuates significantly. We could also generally be subject to litigation, including derivative actions by our stockholders. Any litigation could result in substantial costs and divert management’s attention and resources from our business and cause a material adverse effect on our business, financial condition and results of operations. 

We may experience fluctuations in our quarterly operating results. 

We could experience fluctuations in our quarterly operating results due to a number of factors, including the interest rate payable on the debt securities we acquire, the default rate on such securities, the number and size of investments we originate or acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. In light of these factors, results for any period should not be relied upon as being indicative of our performance in future periods. 

New or modified laws or regulations governing our operations may adversely affect our business. 

Our portfolio companies and we are subject to regulation by-laws at the U.S. federal, state, and local levels. These laws and regulations, as well as their interpretation, may change from time to time, including as the result of interpretive guidance or other directives from the U.S. President and others in the executive branch, and new laws, regulations, and interpretations may also come into effect. Any such new or changed laws or regulations could have a material adverse effect on our

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business. The effects of such laws and regulations on the financial services industry will depend, in large part, upon the extent to which regulators exercise the authority granted to them and the approaches taken in implementing regulations. President Biden may support an enhanced regulatory agenda that imposes greater costs on all sectors and on financial services companies in particular. 

Future legislative and regulatory proposals directed at the financial services industry that are proposed or pending in the U.S. Congress may negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on our portfolio companies or us, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. Laws that apply to us, either now or in the future, are often highly complex and may include licensing requirements. The licensing process can be lengthy and can be expected to subject us to increased regulatory oversight. Failure, even if unintentional, to comply fully with applicable laws may result in sanctions, fines, or limitations on the ability of the Company or the Adviser to do business in the relevant jurisdiction or to procure required licenses in other jurisdictions, all of which could have a material adverse effect on us. In addition, if we do not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties. 

Additionally, changes to the laws and regulations governing our operations, including those associated with RICs, may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities or result in the imposition of corporate-level taxes on us. Such changes could result in material differences to our strategies and plans and may shift our investment focus from the areas of expertise of the Adviser to other types of investments in which the Adviser may have little or no expertise or experience. Any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment. If we invest in commodity interests in the future, the Adviser may determine not to use investment strategies that trigger additional regulation by CFTC or may determine to operate subject to CFTC regulation, if applicable. If the Adviser or we were to operate subject to CFTC regulation, we may incur additional expenses and would be subject to additional regulation. 

In addition, certain regulations applicable to debt securitizations implementing credit risk retention requirements that have taken effect in both the U.S. and in Europe may adversely affect or prevent us from entering into securitization transactions. These risk retention rules will increase our cost of funds under, or may prevent us from completing, future securitization transactions. In particular, the U.S. Risk Retention Rules require the sponsor (directly or through a majority-owned affiliate) of a debt securitization, such as CLOs, in the absence of an exemption, to retain an economic interest in the credit risk of the assets being securitized in the form of an eligible horizontal residual interest, an eligible vertical interest, or a combination thereof, in accordance with the requirements of the U.S. Risk Retention Rules. Given the more attractive financing costs associated with these types of debt securitizations as opposed to other types of financing available (such as traditional senior secured facilities), this increases our financing costs, which increases the financing costs ultimately be borne by our common stockholders. 

Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension by the Biden Administration could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations. 

Uncertainty resulting from the overall political climate could negatively impact our business, financial condition, and results of operations. 

The recent political climate has created uncertainty with respect to legal, tax, and regulatory regimes in which the Company and its portfolio entities, as well as the Adviser, the Administrator, Lafayette Square, and their affiliates operate. President Biden and the Democratic Party have endorsed substantial tax increases for corporations and individuals and advocated for significant new regulation of the financial services industry. Any significant changes in economic or tax policy and/or government programs, as well as any future such changes, could have a material adverse impact on the Company and on its investments. 

We will incur significant costs as a result of being registered under the Exchange Act. 

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We will incur legal, accounting, and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act and other rules implemented by the SEC. 

Efforts to comply with the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act would adversely affect us and the value of shares of our Common Stock. 

We are required to comply with certain requirements of the Sarbanes-Oxley Act and the related rules and regulations promulgated by the SEC, but will not have to comply with certain requirements until we have been registered under the Exchange Act for a specified period of time or cease to be an “emerging growth company.” Because shares of our Common Stock are registered under the Exchange Act, we are subject to the Sarbanes-Oxley Act and the related rules and regulations promulgated by the SEC, and our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are required to review on an annual basis, our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. As a result, we expect to incur significant additional expenses that may negatively impact our financial performance and our ability to make distributions. This process will also result in a diversion of management’s time and attention. We do not know when our evaluation, testing and remediation actions will be completed or its impact on our operations. In addition, we may be unable to ensure that the process is effective or that our internal control over financial reporting is or will be effective. In the event that we are unable to come into and maintain compliance with the Sarbanes-Oxley Act and related rules, we and the value of our securities would be adversely affected. 

Terrorist attacks, acts of war, natural disasters, outbreaks, or pandemics, such as the Coronavirus pandemic, may impact our portfolio companies and our Adviser and harm our business, operating results, and financial condition. 

Terrorist acts, acts of war, natural disasters, disease outbreaks, pandemics, or other similar events may disrupt our operations, as well as the operations of our portfolio companies and our Adviser. Such acts have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability. For example, the conflict between Russia and Ukraine and resulting market volatility, could adversely affect our business, financial condition or results of operations. In response to the conflict between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our common shares and/or debt securities to decline. In addition, many countries have experienced outbreaks of infectious illnesses in recent decades, including swine flu, avian influenza, SARS, and COVID-19. In addition, future terrorist activities, military or security operations, natural disasters, disease outbreaks, pandemics, or other similar events could weaken the domestic/global economies and create additional uncertainties, which may negatively impact our portfolio companies and, in turn, could have a material adverse impact on our business, operating results and financial condition.

A shareholder may be subject to filing requirements under the Exchange Act as a result of an investment in us. 

Because our Common Stock is registered under the Exchange Act, ownership information for any person who beneficially owns 5% or more of our Common Stock must be disclosed in a Schedule 13G or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC and includes having voting or investment power over the securities. Although we will provide in our quarterly consolidated financial statements the amount of outstanding stock and the amount of the shareholder’s stock, the responsibility for determining the filing obligation and preparing the filing remains with the shareholder. In addition, owners of 10% or more of our Common Stock are subject to reporting obligations under Section 16(a) of the Exchange Act. 

A shareholder may be subject to the short-swing profits rules under the Exchange Act as a result of an investment in us. 

Persons with the right to appoint a director or who hold 10% or more of a class of our shares may be subject to Section 16(b) of the Exchange Act, which recaptures for the benefit of the issuer profits from the purchase and sale of registered stock within a six-month period.

ITEM 1B. Unresolved Staff Comments

None.

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ITEM 1C. Cybersecurity

Lafayette Square maintains a cybersecurity program which includes processes for assessing, identifying, and managing material risks from cybersecurity threats in the form of unauthorized occurrences that could result in adverse effects on the confidentiality, integrity, or availability of the Company’s information systems (any such occurrence, a “Cybersecurity Incident”). The Company’s business is dependent on the communications and information systems of the Adviser and other third-party service providers. The Adviser manages the Company’s day-to-day operations and has implemented a cybersecurity program that applies to the Company and its operations.

Cybersecurity Program Overview

The Adviser has instituted a cybersecurity program designed to identify, assess, and mitigate cyber risks applicable to the Company. The cyber risk management program involves risk assessments, implementation of security measures, and ongoing monitoring of systems and networks, including networks on which the Company relies. The Adviser actively monitors the current threat landscape in an effort to identify material risks arising from new and evolving cybersecurity threats, including material risks faced by the Company. The Adviser maintains a comprehensive information security policy to manage risk which details procedures such as incident response, business continuity and disaster recovery management plans, penetration testing and quarterly cybersecurity training for all employees. The Adviser (through the Staffing Agreement with the Administrator) employs a Chief Technology Officer ("CTO"), Bobby Patnaik. Mr. Patnaik has more than twenty years of experience, including fourteen years in financial services. Prior to joining Lafayette, Mr. Patnaik worked at Goldman Sachs Asset Management rising to the Global Head of Institutional/Fund Reporting and Reference Data Technology after spending several years developing and leading middle and back-office technologies. Mr. Patnaik began his career working for several technology and telecommunication companies, including AT&T and Verizon.

The Company relies on the Adviser to engage external experts, including cybersecurity assessors, consultants, and auditors to evaluate cybersecurity measures and risk management processes, including those applicable to the Company. The Adviser has contracted with Salt Cybersecurity, LLC to serve as a virtual Chief Information Security Officer ("vCISO") and perform an annual information security program risk assessment and gap analysis based on the International Organization for Standardization (ISO) and International Electrotechnical Commission (IEC) standard (ISO/IEC 27001:2013). In addition, our vCISO conducts due diligence on each vendor we utilize to assess their levels of security when working with Lafayette Square data. The Adviser has also engaged a third-party cybersecurity firm, AG1, Inc. (dba AgileBlue), to act as Lafayette Square’s outsourced security operation center (“SOC”) and provide continuous monitoring of Lafayette Square issued devices for potential vulnerabilities with any threats escalated to the CTO.

Management's Role in Cybersecurity Risk Management

The Company’s management, including the Company’s CCO, is responsible for assessing and managing material risks from cybersecurity threats. Lafayette Square’s information security policy includes an incident response plan which specifies procedures for elevating, remediating, monitoring and communicating about Cybersecurity Incidents. A dedicated team of executive level leaders at the Adviser (the “Incident Response Team”) including the Chief Risk Officer, Chief People Officer, Chief Compliance Officer and led by the Chief Technology Officer ensure Cybersecurity Incident containment, eradication, recovery and notification that is integrated in Lafayette Square’s overall risk management. If a Cybersecurity Incident is detected, whether by way of penetration testing, a vulnerability scan conducted by the SOC, or otherwise, it will be reported to the Chief Technology Officer and Chief Compliance Officer who mobilize the Incident Response Team. The Incident Response Team will prepare the communications including alerting the Board of any material risks and any additional required reporting. The Chief Technology Officer is designated as the leader of the Incident Response Team and is designated to interface with key stakeholders including the Board.

Board Oversight of Cybersecurity Risks

The Board provides strategic oversight on cybersecurity matters, including risks associated with cybersecurity threats. The Board receives periodic updates from the Company’s Chief Compliance Officer regarding the overall state of the Adviser’s cybersecurity program, information on the current threat landscape, and risks from cybersecurity threats and cybersecurity incidents impacting the Company.

Assessment of Cybersecurity Risk

The potential impact of risks from cybersecurity threats on the Company are assessed on an ongoing basis, and how such risks could materially affect the Company’s business strategy, operational results, and financial condition are regularly evaluated. See “Item 1.A Risk Factors – We depend on information systems, and systems failures could significantly disrupt our business, which may, in turn, negatively affect the value of our Common Stock and our ability to pay distributions.” for

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more details on how cybersecurity threats are reasonably likely to materially affect the Company including its business strategy, results of operations, or financial condition. During the reporting period, the Company has not identified any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that the Company believes have materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, operational results, and financial condition.

ITEM 2. PROPERTIES

Our headquarters are located at 175 SW 7th Street, Unit 1911, Miami, Florida 33130 and are provided by our Administrator. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted. We do not own any real estate or other physical properties materially important to our operations.

ITEM 3. LEGAL PROCEEDINGS

Neither we nor our Adviser or Administrator is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding that would affect our business threatened against us, or against our Adviser or Administrator. 

From time to time, we, our Adviser or Administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information 

Until the completion of a Liquidity Event, if any, our outstanding shares of Common Stock will be offered and sold in private offerings exempt from registration under the Securities Act under Section 4(a)(2) and Regulation D. There is no public market for shares of our Common Stock currently, nor can we give any assurance that one will develop. 

Because shares of Common Stock are being acquired by investors in one or more transactions “not involving a public offering,” they are “restricted securities” and may be required to be held indefinitely. Shares of our Common Stock may not be sold, transferred, assigned, pledged or otherwise disposed of unless (1) our consent is granted, and (2) the shares of Common Stock are registered under applicable securities laws or specifically exempted from registration (in which case the stockholder may, at our option, be required to provide us with a legal opinion, in form and substance satisfactory to us, that registration is not required). Accordingly, an investor must be willing to bear the economic risk of investment in the shares of Common Stock until we are liquidated. No sale, transfer, assignment, pledge or other disposition, whether voluntary or involuntary, of shares of Common Stock may be made except by registration of the transfer on our books. Each transferee will be required to execute an instrument agreeing to be bound by these restrictions and the other restrictions imposed on the shares of Common Stock and to execute such other instruments or certifications as are reasonably required by us. 

Holders 

As of March 20, 2024, we had 101 stockholders of record. 

Distribution Policy 

To the extent that we have income available, we intend to make quarterly distributions to our stockholders. We intend to elect to be taxed as a RIC under Subchapter M of the Code commencing from our taxable year ending December 31, 2023 (or as soon thereafter as is reasonably practical) and for future taxable years. To obtain and maintain our RIC tax status, we intend to distribute at least 90% of our investment company taxable income (as defined by the Code, which generally includes net ordinary income and net short-term taxable gains) to our stockholders in respect of each taxable year and to distribute net capital gains (that is, net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions as well as satisfy other applicable requirements under the Code. See Item 1. Business — “Certain U.S. Federal Income Tax Considerations.” 

We may be subject to a nondeductible 4% U.S. federal excise tax if we do not distribute (or are treated as distributing) in each calendar year an amount at least equal to the sum of:

•98% of our net ordinary income, excluding certain ordinary gains and losses, recognized during a calendar year;

•98.2% of our capital gain net income, adjusted for certain ordinary gains and losses, recognized for the twelve-month period ending on October 31 of such calendar year; and

•100% of any income or gains recognized, but not distributed, in preceding years.

We can be expected to incur in the future, such excise tax on a portion of our income and gains. While we intend to distribute income and capital gains to minimize exposure to the 4% excise tax, we may not be able to, or may not choose to, distribute amounts sufficient to avoid the imposition of the tax entirely. In that event, we will be liable for the tax only on the amount by which we do not meet the foregoing distribution requirement. See “ITEM 1A. RISK FACTORS - Risks Related to U.S. Federal Income Tax - We will be subject to U.S federal income tax at corporate rates if we are unable to qualify and maintain our tax treatment as a RIC under Subchapter M of the Code or if we make investments through taxable subsidiaries.”

We cannot assure you that we will achieve results that will permit us to pay any cash distributions and we will be prohibited from making distributions if doing so would cause us to fail to maintain the asset coverage ratios stipulated by the 1940 Act. 

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Dividend Reinvestment Plan 

We have adopted an “opt out” dividend reinvestment plan (“DRIP”) pursuant to which we will reinvest all Distributions declared by our Board on behalf of investors who do not elect to receive their Distributions in cash as described below. As a result, if our Board declares a Distribution, then stockholders who have not elected to “opt out” of the DRIP will have their Distributions automatically reinvested in additional Shares, as described below. The timing and amount of any future Distributions to stockholders are subject to applicable legal restrictions and the sole discretion of the Board. 

No action will be required on the part of a stockholder to have its Distributions reinvested in Shares. A registered stockholder will be able to elect to receive an entire Distribution in cash by notifying SS&C Global Investor & Distribution Solutions, Inc., the DRIP administrator (the “Plan Administrator”), in writing, so that notice is received by the Plan Administrator no later than 10 days prior to the record date for a Distribution. Those stockholders whose shares are held by a broker or other financial intermediary may be able to receive Distributions in cash by notifying their broker or other financial intermediary of their election. Administrator will set up an account for shares acquired through the DRIP for each stockholder who has not elected to receive Distributions in cash. 

Prior to a Liquidity Event, we will use newly issued shares of Common Stock to implement the DRIP, with such shares to be issued at a per-share price as determined by our Board (including any committee thereof), which price will be determined prior to the issuance of shares of Common Stock and in accordance with the limitations under Section 23 of the 1940 Act. The number of shares of Common Stock to be issued to a stockholder is determined by dividing the total dollar amount of the distribution payable to such stockholder by the price per share of Common Stock. The number of shares to be outstanding after giving effect to the payment of a distribution cannot be established until the value per share at which additional shares of Common Stock will be issued has been determined, and the elections of our stockholders have been tabulated. 

There will be no brokerage or other charges to stockholders who participate in the plan. The DRIP administrator’s fees under the plan will be paid by us. Following a Liquidity Event, if a participant elects to sell part or all of his, her or its shares of Common Stock held by the plan administrator and have the proceeds remitted to the participant, such request must first be submitted to the participant’s broker, who will coordinate with the plan administrator and is authorized to deduct a per-share brokerage commission from the sale proceeds. 

Stockholders who elect to receive distributions in the form of shares of Common Stock are generally subject to the same U.S. federal, state, and local tax consequences as are stockholders who receive their distributions in cash. However, since a participating stockholder’s cash distributions would be reinvested in Shares, such stockholder will not receive cash with which to pay applicable taxes on reinvested distributions. A stockholder’s basis for determining gain or loss upon the sale of shares of Common Stock received in a distribution from us will generally be equal to the cash that would have been received if the stockholder had received the distribution in cash. Any shares of Common Stock received in a distribution will have a new holding period for tax purposes commencing on the day following the day on which such shares are credited to the U.S. holder’s account.

We may terminate or suspend the DRIP upon notice by filing on a current report on Form 8-K, posting upon the Company’s website, or upon notice in writing mailed to each participant at least 30 days prior to any record date for the payment of any distribution by us.

The following table summarizes the distributions declared on shares of the Company’s common stock and shares distributed pursuant to the DRIP to stockholders who had not opted out of the DRIP:

Date Declared	Record Date	Payment Date	Amount	Amount Per Share	DRIP Shares Issued
April 21, 2023	April 21, 2023	May 15, 2023	$1,292	$0.15	30,168
June 23, 2023	June 23, 2023	August 14, 2023	$1,297	$0.15	29,859
September 29, 2023	September 29, 2023	November 13, 2023	$2,614	$0.20	53,904
December 13, 2023	December 12, 2023	January 04, 2024	$3,936	$0.30	81,573

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Unregistered Sales of Equity Securities

All sales of unregistered securities during the year ended December 31, 2023 were reported in our current reports on Form 8-K filed with the SEC.

ITEM 6. RESERVED

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(dollar amounts in thousands, except per share data, unless otherwise indicated)

The following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. References to “we,” “us,” “our,” and the “Company,” means Lafayette Square USA, Inc., unless otherwise specified. The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. Please see “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with this discussion and analysis. Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Cautionary Statements Regarding Forward-Looking Statements” appearing elsewhere in this report.

Business Overview

The Company is an externally managed, non-diversified, closed-end investment company focused on lending to middle market businesses while offering them significant managerial assistance to strengthen their workforce, with the goal of creating and preserving jobs and stimulating economic growth in each of ten Target Regions across the United States. The Company believes that demand for capital investment and managerial assistance is particularly acute among middle market companies headquartered in overlooked places, given that business development companies primarily focus on businesses located in high income places. We believe inflationary pressures and the increasing employee benefits gap exacerbate this demand, enabling us to utilize our investment approach to select favorable risk-adjusted return opportunities.

Our investment objective is to generate favorable risk-adjusted returns, including current income and capital appreciation, principally from investments in "non-sponsored" middle market businesses that are primarily domiciled, headquartered and/or have a significant operating presence in the United States. We define middle market businesses as companies having annual revenues between $10 million and $1 billion and annual EBITDA of between $10 million and $100 million, although we may invest in larger or smaller companies. We expect to invest primarily in first and second lien loans and, to a lesser extent, in subordinated and mezzanine loans and equity and equity-like securities, including common stock, preferred stock, and warrants.

We will primarily focus our origination efforts on “non-sponsored” businesses, which we define as companies substantially owned by people rather than funds or financial institutions where we can establish a direct lending relationship without the involvement or backing of a traditional buyout fund sponsor. We believe this focus will enable us to source investments through a less competitive lending process, allowing us to achieve favorable economic and structural terms for our investments. We intend to complement this investment strategy with robust risk management practices and rigorous ongoing portfolio monitoring. For a discussion of the risks inherent in our portfolio investments, please see the discussion under “Item 1A. Risk Factors.”

We were formed as a Delaware limited liability company on February 19, 2021. Prior to the Effective Date, we elected to be regulated as a BDC under the 1940 Act. For U.S. federal income tax purposes, we were taxed as a corporation for the period from February 19, 2021 (date of inception) through December 31, 2022. The Company intends to elect to be treated, and qualify annually thereafter, as a RIC under Subchapter M of the Code. As a result, the company generally does not expect to be subject to U.S. federal income taxes. However, there is no guarantee that the company will qualify to make such an election for any taxable year. Prior to the Effective Date and to our election to be regulated as a BDC, we

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completed a conversion under which Lafayette Square USA, Inc. (then known as Lafayette Square Empire BDC, Inc.) succeeded to the business of Lafayette Square Empire BDC, LLC, and the sole member of Lafayette Square Empire BDC, LLC became the stockholder of Lafayette Square Empire BDC, Inc. On May 16, 2022, Lafayette Square Empire BDC, Inc. filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to change its corporate name from “Lafayette Square Empire BDC, Inc.” to “Lafayette Square USA, Inc.,” effective May 16, 2022. As a BDC, we must comply with certain regulatory requirements. When we qualify as a RIC there will be additional regulatory requirements we must comply with as well. See “Item 1. Business — Regulation as a Business Development Company” and “Item1. Business — Certain U.S. Federal Income Tax Considerations.”

We are managed by our Adviser, a Delaware limited liability company and an affiliate of Lafayette Square. The Adviser is a limited liability company that is registered as an investment adviser under the Advisers Act. The Adviser oversees the management of the Company’s activities and is responsible for making investment decisions with respect to the Company’s portfolio.

We generally expect to hold our investments until maturity or until such investments are refinanced by the portfolio company. From time to time, we may invest in loans with other lenders, or “club loans,” and may serve as agent in connection with any such loans. In our capacity as agent, we act as the servicer of the loan. We may also participate in loans in the broadly syndicated loan market. Our debt investments in our portfolio companies typically have principal amounts of up to $50 million, bear interest at floating rates of interest tied to a widely available risk-free rate such as the U.S. Prime Rate or SOFR, and generally are not guaranteed by the federal government or otherwise. The debt instruments in which we invest are typically not rated by any rating agency, but we believe that if they were, they would be rated below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB–” by Fitch Ratings or lower than “BBB–” by Standard & Poor’s Ratings Services). Under the guidelines established by these rating agencies, such ratings are an indication of such debt instruments having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. Debt instruments that are rated below investment grade are sometimes referred to as “high yield bonds” or “junk bonds.”

The Company currently has a wholly-owned subsidiary, Lafayette Square SBIC, LP (“SBIC LP”), that has an SBIC license from the SBA, and on May 18, 2023, the SBA issued a “green light” letter inviting the Company to submit its application to obtain a license to operate a specialized small business investment company (“SSBIC”) subsidiary. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SSBIC license, and the Company has received no assurance or indication from the SBA that it will receive an SSBIC license, or of the timeframe in which it would receive a license, should one be granted.The SBIC license provides the Company an incremental source of long-term capital by permitting it to issue up to $175 million of SBA-guaranteed debentures, subject to the SBA’s approval. An SSBIC license could provide access to an additional $175.0 million of SBA-guaranteed debentures, subject to the SBA’s approval, and, as a result, the Company would have access to up to $350.0 million in SBA-guaranteed debentures amongst its family of SBIC funds under common control. These debentures have maturities of ten years and have fixed interest rates tied to the U.S. 10 Year Treasury rate, which are generally lower than comparable bank and other forms of debt.

As described further in "Item 1 - Business" above, we aim to promote public welfare and community development in working class communities by deploying at least 51% of our invested capital to borrowers (i) located in and/or with a majority of operations in Working Class Areas or (ii) that provide Substantial Employment to LMI individuals. In addition to such targeted investing, we seek to improve the retention, well-being, and productivity of employees by connecting our portfolio companies with third-party service providers that deliver workplace benefits and/or advisory support ("Third-Party Solution Providers") through Lafayette Square's services platform, “Worker Solutions” (such platform is described in more detail in "Item 1 - Business" above). This platform is consistent with the mandate that BDCs offer “significant managerial assistance” to their portfolio companies upon request, and we believe these curated services have the potential to (i) positively affect employee well-being and (ii) enhance the risk-adjusted financial returns of the portfolio companies (including by increasing employee retention, morale and productivity).

In line with the aims above, and as described in more detail in "Item 1 - Business" above, we have set 2030 goals to (1) increase employment opportunities (by helping businesses create and/or retain 100,000 working class jobs, and 150,000 jobs overall), (2) provide significant managerial assistance to small and middle-market companies (by incentivizing at least 50% of our borrowers to adopt Worker Solutions) and (3) encourage economic growth in working class communities (by investing at least 50% of our portfolio in borrowers who are either located in working class communities or are substantial employers of working class people.) In order to follow our progress towards these goals and help determine the average employee data of our portfolio companies noted in the table below, we track the locations of our portfolio companies and LMI status of their employees and we rely on feedback on certain employee data points from our portfolio companies. We

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cannot guarantee the accuracy of the information provided to us by our portfolio companies, and the metrics used by different portfolio companies to calculate the information that they provide to us may differ significantly as between such portfolio companies.

While we are generally industry agnostic with respect to our focus on investment sectors, we tend to primarily invest in the business services, franchising, technology & telecommunications, transportation & logistics, and healthcare sectors. In addition, among other things, we have opportunistically looked for exposures in the real-estate industry (including with companies that manage real estate and with real estate-related projects that advance our 2030 Goals) and the solar power industry (including with companies working to strategically enact energy transition plans).

Key Components of Operations

Investments

Our level of investment activity may vary substantially from period to period depending on many factors, including the amount of debt available to middle market companies, the general economic environment and the competitive environment for the type of investments we make.

Revenues

We generate revenue primarily in the form of interest and fee income on debt investments we hold and capital gains, if any, on our investments. We generally expect our debt investments to have a stated term of five to eight years and typically to bear interest at a floating rate usually determined on the basis of a benchmark such as the SOFR. Interest on these debt investments are generally payable quarterly. In some instances, we may receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we may receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. Our portfolio activity reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.

Expenses

We expect our primary annual operating expenses to include advisory fees and the reimbursement of expenses under our investment advisory and management agreement between the Company and the Adviser, dated April 26, 2021 and amended and restated as of August 8, 2023 (and as may be further amended, the “Investment Advisory Agreement”) and our Administration Agreement, respectively. We also bear other expenses, which include:

•our initial organization costs and operating costs incurred prior to the filing of our election to be regulated as a BDC (in connection with our formation and the initial closing of the private offering of shares of our Common Stock);

•the costs associated with our private offering and any subsequent offerings of our securities;

•calculating individual asset values and our net asset value (including the cost and expenses of third-party valuation services);

•out-of-pocket expenses, including travel expenses, incurred by the Adviser, or members of its investment team, or payable to third parties, performing due diligence on prospective portfolio companies, dead deal or broken deal expenses and, if necessary, enforcing our rights;

•certain costs and expenses relating to distributions paid by us;

•administration fees payable under the Administration Agreement and related expenses;

•debt service and other costs of borrowings or other financing arrangements;

•the allocated costs incurred in connection with providing services to employees of portfolio companies (of the type described in Item I. “Business—Investment Strategy”) and/or managerial assistance (including any services offered to portfolio companies) to those portfolio companies that request it (whether such costs are incurred by the Adviser or Administrator or through payments to third party service providers);

•amounts payable to third parties relating to, or associated with, making or holding investments;

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•transfer agent and custodial fees;

•costs of hedging;

•commissions and other compensation payable to brokers or dealers;

•federal and state registration fees;

•any stock exchange listing fees and fees payable to rating agencies;

•the cost of effecting any sales and repurchases of our Common Stock and other securities;

•U.S. federal, state and local taxes;

•independent director fees and expenses;

•costs of preparing consolidated financial statements and maintaining books and records, costs of preparing tax returns, costs of compliance with Sarbanes-Oxley Act, and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies) and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;

•the costs of any reports, proxy statements or other notices to our stockholders (including printing and mailing costs), the costs of any stockholders’ meetings and the compensation of investor relations personnel responsible for the preparation of the foregoing and related matters;

•the costs of specialty and custom software expense for monitoring risk, compliance and overall investments;

•our fidelity bond;

•any necessary insurance premiums;

•extraordinary expenses (such as litigation or indemnification payments or amounts payable pursuant to any agreement to provide indemnification entered into by the Company);

•direct fees and expenses associated with independent audits, agency, consulting and legal costs; costs of winding up;

and other expenses incurred by either the Administrator or us in connection with administering our business, including payments under the Administration Agreement based upon our allocable portion of the compensation paid to our Chief Financial Officer and Chief Compliance Officer and their respective staffs and the cost of providing managerial assistance upon request to portfolio companies, and reimbursements of third-party expenses incurred by the Administrator in carrying out its administrative services including providing assistance in accounting, legal, compliance, operations, technology, internal audit, investor relations, and loan agency services (including any internal and third party service providers and/or software solutions related to the foregoing), and being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, our Administrator assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, our internal control assessment under the Sarbanes-Oxley Act, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. We expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets during periods of asset growth and to increase proportionally when our asset value declines.

Leverage

The amount of leverage we use in any period depends on a number of factors, including cash on-hand available for investing, the cost of financing and general economic and market conditions. Prior to the Small Business Credit Availability Act being signed into law, a BDC generally was not permitted to incur indebtedness unless immediately after such borrowing it has an asset coverage for total borrowings of at least 200%. The Small Business Credit Availability Act, signed into law on March 23, 2018, contains a provision that grants a BDC the option, subject to certain conditions and disclosure obligations, to reduce the asset coverage requirement to 150%. In April 2021, our Board and initial stockholder approved the reduced asset coverage ratio.

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Portfolio and Investment Activity

The following table summarizes our portfolio and investment activity during the years ended December 31, 2023 and December 31, 2022. There were no investments as of December 31, 2021. (information presented herein is at amortized cost unless otherwise indicated):

	For the year ended December 31, 2023		For the year ended December 31, 2022		For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Total Investments, beginning of period	$	84,545	$	—	$	—
New investments purchased	190,068		97,547		—
Net accretion of discount on investments	406		102		—
Net realized gains (losses) on investments	—		(111)		—
Investments sold or repaid	(3,496)		(12,993)		—
Total Investments, end of period	$	271,523	$	84,545	$	—
Portfolio companies, at beginning of period	5		—		—
Number of new portfolio companies	14		5		—
Portfolio companies, at end of period	19		5		—

As of December 31, 2023 and December 31, 2022, the Company’s investments consisted of the following:

	December 31, 2023
	Amortized Cost				Fair Value
First lien senior secured loans	$	263,118	96.9	%	$	265,287	97.0	%
Equity	4,881		1.8	%	4,901		1.8	%
Subordinated debt	1,872		0.7	%	1,753		0.6	%
Preferred equity	1,652		0.6	%	1,652		0.6	%
Warrants	—		—	%	—		—	%
Total	$	271,523	100.0	%	$	273,593	100.0	%

	December 31, 2022
	Amortized Cost				Fair Value
First lien senior secured loans	$	78,221	92.5	%	$	78,156	92.7	%
Equity	4,631		5.5	%	4,631		5.5	%
Subordinated debt	1,693		2.0	%	1,556		1.8	%
Warrants	—		—	%	—		—	%
Total	$	84,545	100.0	%	$	84,343	100.0	%

The tables below describe investments by industry composition based on fair value as of December 31, 2023 and December 31, 2022:

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	December 31, 2023
	Amortized Cost				Fair Value
Construction & Engineering	$	57,458	21.3	%	$	58,360	21.2	%
Commercial Services & Supplies	45,747		16.8	%	45,828		16.8	%
Professional Services	34,254		12.6	%	34,254		12.5	%
Leisure Facilities	33,439		12.3	%	33,789		12.4	%
Media	28,467		10.5	%	28,594		10.5	%
Specialized Consumer Services	15,566		5.7	%	15,625		5.7	%
Health Care Services	13,773		5.1	%	13,773		5.0	%
Environmental & Facilities Services	9,795		3.6	%	9,922		3.6	%
Restaurants	8,683		3.2	%	8,722		3.2	%
Health Care Equipment & Services	8,175		3.0	%	8,391		3.1	%
Health Care Providers & Services	7,840		2.9	%	7,940		2.9	%
IT Services	3,380		1.2	%	3,425		1.3	%
Real Estate Management & Development	2,952		1.1	%	2,970		1.1	%
Hotels, Restaurants & Leisure	1,994		0.7	%	2,000		0.7	%
Total	$	271,523	100.0	%	$	273,593	100.0	%

	December 31, 2022
	Amortized Cost				Fair Value
Commercial Services & Supplies	$	39,024	46.2	%	$	38,647	45.8	%
Media	25,509		30.2	%	25,684		30.5	%
Construction & Engineering	20,012		23.6	%	20,012		23.7	%
Total	$	84,545	100.0	%	$	84,343	100.0	%

The weighted average yields at amortized cost and fair value of our portfolio as of December 31, 2023 and December 31, 2022 were as follows:

	December 31, 2023		December 31, 2022
	Amortized Cost	Fair Value	Amortized Cost	Fair Value
First lien senior secured debt(2)	12.8%	12.8%	12.7%	13.1%
Subordinated debt	14.0%	15.0%	15.0%	15.3%
Weighted Average Yield(1)	12.8%	12.8%	13.1%	13.2%

(1) The weighted average yield of our portfolio does not represent the total return to our stockholders.

(2) Computed based on (a) the annual actual interest rate or yield earned plus amortization of fees and discounts on the performing debt and other income producing investments as of the reporting date, divided by (b) the total investments (including investments on non-accrual and non-income producing investments) at amortized cost or fair value. This calculation excludes exit fees that are receivable upon repayment of certain loan investments. As of December 31, 2023 and December 31, 2022, there were no exit fees.

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	December 31, 2023	December 31, 2022
Number of portfolio companies	19	5
Percentage of performing debt bearing a floating rate (1)	99.3%	98.0%
Percentage of performing debt bearing a fixed rate (1)(2)	0.7%	2.0%
Weighted average spread over SOFR or LIBOR of all accruing floating rate investments	7.0%	8.0%
Weighted average leverage (net debt/EBITDA) (3)	3.0x	2.8x
Weighted average interest coverage (3)	2.8x	2.8x

(1) Measured on a fair value basis. Excludes all equity based investments and debt investments, if any, placed on non-accrual.

(2) Includes income producing preferred stock investments, if applicable.

(3) To calculate net debt, we include debt that is both senior and pari passu to the tranche of debt owned by us but exclude debt that is legally and contractually subordinated in ranking to the debt owned by us. Weighted average net debt to EBITDA is weighted based on the fair value of our debt investments, excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk. Weighted average interest coverage is weighted based on the fair value of our performing debt investments, excluding investments where interest coverage may not be the appropriate measure of credit risk.

Ongoing monitoring and risk management of each asset is conducted by the Adviser's Portfolio Monitoring team under the supervision of the Chief Risk Officer. The Portfolio Monitoring team is separate and distinct from the Adviser's investment team, and has as its primary responsibilities to: 

•formally monitor portfolio companies post-investment on an ongoing basis;

•perform quarterly valuations of all assets in partnership with third-party valuation agent(s);

•maintain and update internal and external asset ratings;

•oversee BDC-level monitoring; and

•lead amendment, “work out,” and restructurings processes.

Portfolio Monitoring monitors the financial trends of each portfolio company to determine if it is meeting its respective business plan and to assess the appropriate course of action with respect to investments in each portfolio company. Portfolio Monitoring has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following: 

•periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and variants from approved budgets and internal projections;

•assessment of performance relative to business plan and key operating metrics and compliance with financial covenants;

•assessment of performance relative to industry benchmarks or portfolio comparables, if any;

•attendance at and participation in board meetings and lender calls; and

•review of monthly, quarterly and annual audited financial statements and financial projections of portfolio companies.

As part of the monitoring process, our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser rates the credit risk of all investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or

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acquisition), although it may also take into account the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. The rating system is as follows:

Investment Rating	Description
1	Involves the least amount of risk to our initial cost basis. The borrower is performing above expectations, and the trends and risk factors for this investment since the time of origination or acquisition are generally favorable which may include the performance of the portfolio company or a potential exit.
2	Involves an acceptable level of risk that is similar to the risk at the time of origination or acquisition. The borrower is generally performing as expected and the risk factors are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a rating of 2.
3	Involves a borrower performing below expectations and indicates that the loan’s risk has increased since origination or acquisition. The borrower could be out of compliance with debt covenants; however loan payments are generally not past due.
4	Involves a borrower performing materially below expectations and indicates that the loan’s risk has increased materially since origination or acquisition. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 120 days past due)
5	Involves a borrower performing substantially below expectations and indicates that the loan’s risk has increased substantially since origination or acquisition. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.

The following table shows the distribution of the Company’s investments on the 1 to 5 internal risk rating scale as of December 31, 2023 and December 31, 2022:

	December 31, 2023				December 31, 2022
Investment Rating	Investments at Fair Value		Percentage of Total Investments		Investments at Fair Value		Percentage of Total Investments
1	$	—	—	%	$	—	—	%
2	273,593		100.0	%	84,343		100.0	%
3	—		—		—		—
4	—		—		—		—
5	—		—		—		—
Total	$	273,593	100.0	%	$	84,343	100.0	%

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Results of Operations

The following table represents the operating results for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021:

	For the year ended December 31, 2023		For the year ended December 31, 2022		For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Total investment income	$	20,751	$	3,496	$	—
Net expenses	12,038		3,659		515
Net investment income (loss)	8,713		(163)		(515)
Net realized gains (losses) on investments	—		(111)		—
Net change in unrealized gains (losses)	2,272		(202)		—
Net increase (decrease) in net assets resulting from operations	$	10,985	$	(476)	$	(515)

Investment Income

The composition of the Company’s investment income was as follows:

	For the year ended December 31, 2023		For the year ended December 31, 2022		For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Investment income
Interest income	$	18,567	$	3,362	$	—
Fee income	70		134		—
Interest from cash and cash equivalents	2,114		—		—
Total investment income	$	20,751	$	3,496	$	—

The increase in total investment income from $3,496 for the year ended December 31, 2022 to $20,751 for the year ended December 31, 2023 was primarily driven by by our deployment of capital and invested balance of investments. The increase in total investment income from $0 for the period from February 19, 2021 (date of inception) to December 31, 2021 to $3,496 for the year ended December 31, 2022 was primarily driven by our deployment of capital and invested balance of investments.

Expenses

The following table summarizes the Company’s expenses for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021:

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	For the year ended December 31, 2023		For the year ended December 31, 2022		For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Interest and financing expenses	$	2,049	$	750	$	—
Management fee	1,640		277		—
Incentive fee	1,615		—		—
General and administrative expenses	1,441		958		232
Administrative services fee	1,485		708		—
Placement fees	1,131		415		—
Legal fees	838		200		35
Professional fees	584		447		82
Organizational costs	332		22		141
Directors' fees	320		176		25
Offering expenses	151		158		—
Total expenses	11,586		4,111		515
Expense support reimbursement	452		(452)		—
Total expenses, net of expense support reimbursement	$	12,038	$	3,659	$	515

Total expenses before expense support increased approximately $7.5 million for the year ended December 31, 2023 from $4.1 million for the year ended December 31, 2022.

Interest and financing expenses increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in the average principal amount of borrowings on our Subscription Facility, draw down in SBA-guaranteed debentures on September 15, 2023, and the increase in the weighted average stated interest rates.

The increase in management fees for the year ended December 31, 2023 when compared to the year ended December 31, 2022 was driven by our deployment of capital and an increase in average gross assets.

Incentive fees increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to the increase in Net Investment Income. Refer to Note 6 Investment Advisory Agreement of the Form 10-K on how the incentive fee is calculated.

The increase in administrative services fee for the year ended December 31, 2023 when compared to the year ended December 31, 2022 was due to the Company's allocable portion of, but not limited to, overhead compensation, rent, office services and equipment, under the Company's Administration Agreement.

General and administrative expenses, legal fees, professional fees and placement fees increased during the year ended December 31, 2023 compared to the year ended December 31, 2022 in connection, but not limited to, independent audit services, external legal services, third-party valuation services for our portfolio, insurance premiums, accounting, financial

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preparation and reporting services, and fees paid to the placement agent for the additional commitment closes and capital draws.

The increase in organizational costs for the year ended December 31, 2023 when compared to the year ended December 31, 2022 was primarily related to the formation of the Company's subsidiaries. Refer to Note 1 of the Form 10-K.

Offering expenses were relatively in line for the year ended December 31, 2023 when compared to the year ended December 31, 2022 in connection with the offering of shares of the Company's common stock, including out-of-pocket of the Adviser and its agents and affiliates.

Financial Condition, Liquidity and Capital Resources

We intend to generate cash primarily from the net proceeds of any private offering of our Common Stock and from cash flows from interest and fees earned from our investments and principal repayments and proceeds from sales of our investments. Our primary use of cash will be investments in portfolio companies, payments of our expenses and cash distributions to our stockholders.

Contractual Obligations

We have entered into the Investment Advisory Agreement with our Adviser. Our Adviser agreed to serve as our investment adviser in accordance with the terms of our Investment Advisory Agreement. Payments under our Investment Advisory Agreement in each reporting period consist of the base management fee equal to a percentage of the value of our gross assets as well as an incentive fee based on our performance.

Under the Investment Advisory Agreement, the Adviser manages the day-to-day operations of, and provides investment advisory services to, the Company. The Board approved the Investment Advisory Agreement in April 2021. The Adviser is a registered investment adviser with the SEC. The Adviser receives fees for providing services, consisting of two components, a base management fee and an incentive fee.

We define a “Liquidity Event” as any of: (1) a quotation or listing of our common stock on a national securities exchange, including an initial public offering or (2) a Sale Transaction. A “Sale Transaction” means (a) the sale of all or substantially all of our capital stock or assets to, or another liquidity event with, another entity or (b) a transaction or series of transactions, including by way of merger, consolidation, recapitalization, reorganization, or sale of stock in each case for consideration of either cash and/or publicly listed securities of the acquirer. Potential acquirers could include entities that are not BDCs that are advised by the Adviser or its affiliates.

Base Management Fee

The base management fee ("Management Fee") is payable quarterly in arrears beginning in the period during its initial capital drawdown from its non-affiliated investors (the "Initial Drawdown") at an annual rate of (i) prior to a Liquidity Event, 0.75%, and (ii) following a Liquidity Event, 1.0%, in each case of the average value of our gross assets (gross assets equal the total assets of the Company as set forth on the Company’s balance sheet) at the end of the two most recently completed calendar quarters. No Management Fee is charged on committed but undrawn capital commitments.

For the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021, the Company incurred Management Fees of $1,640, $277 and $0, respectively. As of December 31, 2023 and December 31, 2022, there was $605 and $167 Management Fee payable to the Adviser, respectively.

Incentive Fee

The Company also pays the Adviser an incentive fee consisting of two parts: (i) an incentive fee based on pre-incentive fee net investment income (the “Income-Based Fee”), and (ii) the capital gains component of the incentive fee (the “Capital Gains Fee”). For more information regarding the Income-Based Fee and the Capital Gains Fee, see Note 6 - Related Party Agreements and Transactions.

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For the year ended December 31, 2023, the Company incurred Income-Based Fee of $1,615. As of December 31, 2023, $565 remained payable. For the year ended December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021, there was no Income-Based or Capital Gains Fee incurred.

Administration Agreement

We have entered into an Administration Agreement with the Administrator pursuant to which the Administrator furnishes us with administrative services necessary to conduct our day-to-day operations. The Administrator is reimbursed for administrative expenses it incurs on our behalf in performing its obligations. Such costs are reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. We do not reimburse our Administrator for any services for which it receives a separate fee.

If any of our contractual obligations discussed above were terminated, our costs may increase under any new agreements that we enter into as replacements. We would also likely incur expenses in locating alternative parties to provide the services we receive under our Investment Advisory Agreement and Administration Agreement.

For the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021, our expenses were paid by a related party of the Adviser and will be reimbursed by us. As of December 31, 2023 and December 31, 2022, the total amount owed to the affiliates of the Adviser is included in the Due to Affiliate line item in the Consolidated Statements of Assets and Liabilities.

For the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021, the Administrator incurred $1,485, $708 and $0, respectively, in fees under the Administrative Agreement, which are included in administrative service fee in the accompanying Consolidated Statements of Operations. As of December 31, 2023 and December 31, 2022, $885 and $550 was unpaid and included in Administrative services fee payable in the accompanying Consolidated Statements of Assets and Liabilities.

Expense Support and Conditional Reimbursement Agreement

On December 30, 2021, we entered into an expense support and conditional reimbursement agreement (the "Expense Support Agreement") with the Adviser. The Adviser may elect to pay certain of our expenses on our behalf (each, an “Expense Payment”), so long as no portion of the payment will be used to pay any interest expense or shareholder servicing and/or distribution fees. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to us in any combination of cash or other immediately available funds no later than forty-five days after such commitment was made in writing, and/or offset against amounts due from us to the Adviser or its affiliates.

Following any calendar quarter in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to our shareholders based on distributions declared with respect to record dates occurring in such calendar quarter (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), we will pay such Excess Operating Funds, or a portion thereof, to the Adviser until such time as all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter have been reimbursed. Any payments required to be made by us will be referred to herein as a “Reimbursement Payment.” “Available Operating Funds” means the sum of (i) our net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) our net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) dividends and other distributions paid to us on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

Our obligation to make a Reimbursement Payment shall automatically become a liability of ours on the last business day of the applicable calendar quarter, except to the extent the Adviser has waived its right to receive such payment for the applicable quarter.

The following table presents a summary of Expense Payments and the related Reimbursement Payments since our inception:

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For the Period Ended	Expense Payments by Adviser		Reimbursement Payments to Adviser		Unreimbursed Expense Payable
June 30, 2022	$	227	$	—	$	227
September 30, 2022	225		—		452
June 30, 2023	—		(329)		123
September 30, 2023	—		(123)		—
Total	$	452	$	(452)	$	—

Pursuant to the Expense Support Agreement, Expense Payments made by the Adviser may become subject to repayment by us in the future. As of December 31, 2022, the Company did not have an obligation to repay Expense Payments to the Adviser and therefore did not record a liability on the Consolidated Statements of Assets and Liabilities. However, during the year ended December 31, 2023, the obligation to repay became due and the Company fully repaid such Expense Payments, so that as of December 31, 2023, the Company has extinguished all such obligations to the the Advisor.

Capital Resources and Borrowings

As of December 31, 2023, we have received signed Subscription Agreements totaling approximately $458.2 million. However, due to investor concentration limits agreed to with certain investors, we have only accepted approximately $377.0 million.

We utilize leverage to finance at least a portion of our investments. The amount of leverage that we employ is subject to the restrictions of the 1940 Act and the supervision of our Board. At the time of any proposed borrowing, the amount of leverage we employ will also depend on our Adviser’s assessment of the market, and other factors. We are permitted, under specified conditions, to borrow money and issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, measures the ratio of total assets less total liabilities not represented by senior securities to total borrowings, is at least equal to 150% immediately after each such issuance. The application of the 150% asset coverage requirement permits us to double the maximum amount of leverage that we are permitted to incur as compared to BDCs who have not obtained the requisite approvals and made the required disclosures. In addition, while any senior securities remain outstanding, we must make provision to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage.

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the Company's total debt for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021:

	For the year ended December 31, 2023			For the year ended December 31, 2022			For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Interest expense	$	1,526		$	494		$	—
Non-usage fee (1)	82			41			—
Amortization of financing costs	441			215			—
Weighted average stated interest rate	7.08		%	5.08		%	—		%
Weighted average outstanding balance (2)	$	21,548		$	19,091		$	—

(1)    Non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the Subscription Facility.

(2)    The Company's initial borrowing occurred on June 29, 2022.

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Subscription Facility

On February 2, 2022, we entered into a subscription-based credit agreement with Sumitomo Mitsui Banking Corporation, which was amended on June 28, 2022, December 21, 2022 and February 1, 2024 (and as may be further amended, modified or supplemented, the “Subscription Facility”). The Subscription Facility allows us to borrow up to $38.4 million, subject to certain restrictions, including availability under a borrowing base that is based upon unused capital commitments made by investors in us. The amount of permissible borrowings under the Subscription Facility may be increased to up to $1 billion with the consent of the lenders. The Subscription Facility matures on May 2, 2024 and bears interest at an annual rate of: (i) with respect to reference rate loans, a reference rate for the period plus a margin equal to 2.50% (the "Applicable Margin") and (ii) with respect to alternative rate loans, the greatest of (a) the administrative agent's prime rate, (b) Term SOFR with a one-month term plus the Applicable Margin and (c) the federal funds rate plus 0.50%. Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments. The Subscription Facility includes customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for credit facilities of this nature.

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the Subscription Facility for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021:

	For the year ended December 31, 2023			For the year ended December 31, 2022			For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Interest expense	$	584		$	494		$	—
Non-usage fee (1)	82			41			—
Amortization of financing costs	372			215			—
Weighted average stated interest rate	7.19		%	5.08		%	—		%
Weighted average outstanding balance (2)	$	8,121		$	19,091		$	—

(1)    Non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the Subscription Facility.

(2)    Our initial borrowing occurred on June 29, 2022.

SBA Debentures

SBIC LP is able to borrow funds from the SBA against its regulatory capital (which approximates equity capital in SBIC LP) that is paid in and is subject to customary regulatory requirements, including, but not limited to, periodic examination by the SBA. As of December 31, 2023, we funded SBIC LP with $82.5 million of regulatory capital, and have $31.0 million in SBA-guaranteed debentures outstanding. SBA debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. Current SBA regulations limit the amount that SBIC LP may borrow to a maximum of $175.0 million, which is up to twice its potential regulatory capital.

The SBA-guaranteed debentures incurred an upfront commitment fee of 1.00% on the total commitment amount and a 2.435% issuance discount on drawdowns, which are amortized over the life of the SBA-guaranteed debentures. In addition, an annual fee of 0.047% is charged on the SBA-guaranteed debentures which are amortized over the period.

The following table summarizes the Company’s SBA-guaranteed debentures as of December 31, 2023:

Issuance Date	Maturity Date	Debenture Amount	Interest Rate	SBA Annual Charge
September 15, 2023	March 1, 2034	$31,000	6.04%	0.047%

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The following table summarizes the interest expense and amortization of financing costs incurred on the SBA-guaranteed debentures for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021:

	For the year ended December 31, 2023			For the year ended December 31, 2022			For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Interest expense	$	566		$	—		$	—
Non-usage fee (1)	—			—			—
Amortization of financing costs	69			—			—
Weighted average stated interest rate	6.23		%	—		%	—		%
Weighted average outstanding balance (2)	$	9,088		$	—		$	—

(1) Non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the SBA-guaranteed debentures.

(2) The Company's initial borrowing occurred on September 15, 2023.

Repurchase Obligations

In order to finance certain investment transactions, we may, from time to time, enter into repurchase agreements with Macquarie US Trading LLC (“Macquarie”), whereby we sell to Macquarie an investment that it holds and concurrently enters into an agreement to repurchase the same investment at an agreed-upon price at a future date, not to exceed 90-days from the date it was sold (the “Macquarie Transaction”).

We entered into a repurchase agreement on March 15, 2023 which was collateralized by the Company’s term loan to Synergi, LLC. Interest under this Repurchase Obligations was calculated as (a) the product of the funded amount of the loan and (b) the product of (i) the number of days the loan is outstanding (subject to number of minimum days per the agreement) and (ii) daily fee rate. The Company maintained effective control over the security because it is entitled and obligated to repurchase the security before its maturity. Therefore, the repurchase agreement was treated as a secured borrowing and not a sale. On June 2, 2023 the Company repurchased its obligation under the repurchase agreement. As of December 31, 2023, there was no outstanding loan and interest payable balance to Macquarie.

Revolving Facility

We anticipate replacing and/or refinancing the existing Subscription Facility with a similar subscription-based credit facility when the existing Subscription Facility terminates, as well as potentially adding an asset-based revolving credit facility to complement the Subscription Facility, or adding asset-based revolving capacity to the existing Subscription Facility (in either case, a “Revolving Facility”). Proceeds of the Revolving Facility may be used for general corporate purposes, including the funding of portfolio investments. While we cannot provide any assurances regarding the terms of any Revolving Facility we may enter into, we expect a Revolving Facility to provide for a three-year revolving period and have a maturity date of up to five years from the closing date of the Revolving Facility (which could be extended in connection with an extension of the revolving period). Subject to certain exceptions, a Revolving Facility would be expected to be secured by a first lien security interest in substantially the entire portfolio of investments held by us. A Revolving Facility is expected to include customary covenants, including certain financial covenants related to asset coverage, net worth and liquidity, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for credit facilities of this nature. The maximum principal amount available under a Revolving Facility is expected to be based on certain advance rates multiplied by the value of our portfolio investments (subject to certain concentration limitations) net of certain other indebtedness that we may incur in accordance with the terms of the Revolving Facility.

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Our facilities consist of the following:

	December 31, 2023						December 31, 2022
	Aggregate Principal Amount Available		Principal Amount Outstanding		Unused Portion		Aggregate Principal Amount Available		Principal Amount Outstanding		Unused Portion
Subscription Facility	$	38,400	$	27,500	$	10,900	$	38,400	$	31,500	$	6,900
SBA-guaranteed debentures	36,960		31,000		5,960		—		—		—
Total	$	75,360	$	58,500	$	16,860	$	38,400	$	31,500	$	6,900

Off-Balance Sheet Arrangements

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of December 31, 2023 and December 31, 2022, we were not party to any off-balance sheet arrangements.

Recent Developments

On February 2, 2024, the Company entered into a Third Amendment to the Subscription Facility, pursuant to which the applicable margin was increased from 1.80% to 2.50%, the unused commitment fee rate was increased, the ability to borrow in currencies other than US Dollars was removed, and the stated maturity date was extended from February 2, 2024 to May 2, 2024.

On February 2, 2024, the Company repaid its outstanding balance on the Subscription Facility in the amount of $27.5 million. As of the date of this Report, there is no outstanding balance on the Subscription Facility.

On January 18, 2024, the Company invested in a senior secured first lien term loan in Rotolo Consultants Inc, with a incremental term loan funded commitment of $17.3 million, bearing an interest rate of 3M Term SOFR + CSA + 6.95%, maturing on January 18, 2029.

On January 26, 2024, the Company invested in a senior secured first lien delayed draw term loan in Cafe Zupas, L.C., with additional funds of $0.5 million, bearing an interest rate of 1M Term SOFR + 7.00%, maturing on December 30, 2027.

On February 12, 2024, the Company invested in a senior secured first lien term loan in truCurrent LLC, with a term loan funded commitment of $12.5 million, bearing an interest rate of 3M Term SOFR + 7.25%, maturing on February 12, 2029. In addition, the Company had an unfunded commitment of $25.0 million in a senior secured first lien delayed draw term loan maturing on February 12, 2029.

On February 23, 2024, the Company invested in a senior secured first lien delayed draw term loan in Zero Waste Recycling LLC, with additional funds of $0.4 million, bearing an interest rate of 3M Term SOFR + CSA + 6.45%, maturing on May 15, 2026.

On January 18, 2024, February 14, 2024 and March 1, 2024, the Company invested in a senior secured first lien delayed draw term loan and revolver in Trilon Group LLC, with additional funds of $1.2 million, bearing an interest rate of 3M Term SOFR + CSA + 6.25%, maturing on May 25, 2029.

On March 15, 2024, the Company invested in a senior secured first lien delayed draw term loan in Standard Real Estate Investment LP, with additional funds of $2.0 million, bearing an interest rate of 3M Term SOFR + CSA + 8.75%, maturing on October 6, 2026.

On March 20, 2024, the Company invested in a senior secured first lien term loan in Salt Dental Collective LLC, with a term loan funded commitment of $10.0 million, bearing an interest rate of 1M Term SOFR + CSA + 6.75%, maturing on February 15, 2028.

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On March 15, 2024, the Company drew down additional $6.0 million in available SBA-guranteed debentures bearing an interim interest rate of 5.83% and an SBA annual charge of 0.047% maturing on September 1, 2034.

On March 19, 2024, the Company submitted its application to the SBA for an additional commitment of $45.5 million, which will bring its total commitment to $82.5 million.

In addition, as of March 19, 2024, we had an investment backlog and pipeline of approximately $111.6 million and $50.5 million, respectively. Investment backlog includes transactions approved by the Adviser’s investment committee and/or for which a formal mandate, letter of intent or a term sheet have been issued, and therefore we believe have a strong likelihood of closing. Investment pipeline includes transactions where initial due diligence has begun and/or analysis is in process, but no formal mandate, letter of intent or term sheets have been issued. The consummation of any of the investments in this backlog and pipeline depends upon, among other things, one or more of the following: satisfactory completion of our due diligence investigation of the prospective portfolio company, our acceptance of the terms and structure of such investment and the negotiation, execution, and delivery of satisfactory transaction documentation. In addition, we may sell all or a portion of these investments and certain of these investments may result in the repayment of existing investments. We cannot assure you that we will make any of these investments or that we will sell all or any portion of these investments.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

Fair Value Measurements

We value investments for which market quotations are readily available at their market quotations. However, a readily available market value is not expected for many of the investments in our portfolio, and we value these portfolio investments at fair value as determined in good faith by the Advisor and our valuation policy and process.

The valuation process is a multi-step endeavor, which includes, but not limited to, the following:

•the quarterly valuation process commences with each portfolio company or investment being initially evaluated by the investment professionals of the Advisor responsible for the monitoring of the portfolio investment;

•the Advisor’s Valuation Committee reviews the valuations provided by the independent third-party valuation firm and develops a valuation recommendation;

•the Adviser's Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with our valuation policy and compares such valuations to the independent valuation firms' valuation ranges to ensure the Adviser's valuations are reasonable;

•the Adviser's Valuation Committee then determines fair value marks for each of our portfolio investments; and

•the Board and Audit Committee periodically reviews the valuation process and provides oversight in accordance with the requirements of Rule 2a-5 under the 1940 Act.

The Company applies Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurement (ASC 820), as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market

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(which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company considers its principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value.

The three-tier hierarchy of inputs is summarized below.

•Level 1 - Quoted prices are available in active markets/exchanges for identical investments as of the reporting date.

•Level 2 - Pricing inputs are observable inputs including, but not limited to, prices quoted for similar assets or liabilities in active markets/exchanges or prices quoted for identical or similar assets or liabilities in markets that are not active, and fair value is determined through the use of models or other valuation methodologies.

•Level 3 - Pricing inputs are unobservable for the investment and include activities where there is little, if any, market activity for the investment. The inputs into determination of fair value require significant management judgment and estimation.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the Consolidated Statements of Operations in Part II, Item 8 of this Form 10-K reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Revenue Recognition

Investment and Related Investment Income

Interest income, including amortization of premium and accretion of discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. The Company records amortized or accreted discounts or premiums as interest income using the effective interest method or straight-line interest method, as applicable, and adjusted only for material amendments or prepayments. Dividend income, which represents dividends from equity investments and distributions from subsidiaries, if any, is recognized on an accrual basis to the extent that the Company expects to collect such amount. PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment. Origination fees received are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized origination fees are recorded as investment income. The Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, covenant waiver fees and loan amendment fees, and are recorded as investment income when earned.

Non-accrual loans

A loan can be left on accrual status during the period the Company is pursuing repayment of the loan. Management reviews all loans that become 90 days or more past due on principal and interest, or when there is reasonable doubt that principal or interest will be collected, for possible placement on non-accrual status. When a loan is placed on non-accrual status, unpaid interest credited to income is reversed. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans are recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid, and, in management’s judgment, payments are likely to remain current.

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Income Taxes

The Company intends to elect to be treated as a RIC under Subchapter M of the Code for the tax year ended December 31, 2023, as well as maintain such election in future taxable years. However, there is no guarantee that the Company will qualify to make such an election for any taxable year. In order to qualify and be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends for U.S. federal income tax purposes to its stockholders of an amount generally at least equal to 90% of its investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each tax year. As a RIC, the Company would intend to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to its stockholders. The Company may be subject to regular federal and state corporate income tax on any net built-in gains with respect to certain of its assets (i.e., the excess of the aggregate gains, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that the Company elects to recognize upon RIC election or when recognized over the next five taxable years.

The Company is subject to a nondeductible 4% U.S. federal excise tax on its undistributed income, unless it timely distributes (or is deemed to have timely distributed) an amount equal to the sum of (1) 98% of ordinary income for each calendar year, (2) 98.2% of the amount by which capital gains exceeds capital losses (adjusted for certain ordinary losses) for a one-year period ending on October 31 of the calendar year, and (3) any income and gains recognized, but not distributed, from the previous years. While the Company intends to distribute any income and capital gains to avoid imposition of this 4% U.S. federal excise tax, it may not be successful in avoiding entirely the imposition of this tax. In that case, the Company will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirement.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, most significantly changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we expect to fund a portion of our investments with borrowings, our net investment income is expected to be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

In addition, any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved.

The following table estimates the potential changes in net cash flow generated from interest income, should interest rates increase or decrease by 100, 200 or 300 basis points. These hypothetical interest income calculations are based on a model of the settled debt investments in our portfolio, held as of December 31, 2023, and are only adjusted for assumed changes in the underlying base interest rates and the impact of that change on interest income. As of December 31, 2023, approximately 99.3% of investments at fair value (excluding investments on non-accrual, unfunded debt investments and non-bearing equity investments) represent floating-rate investments with a LIBOR or SOFR floor (including investments bearing a prime interest rate contracts) and approximately 0.7% of investments at fair value represent fixed-rate investments. Additionally, our subscription-based credit facility is also subject to a floating interest rate and currently paid on a floating SOFR rates. Interest expense is calculated based on outstanding secured borrowings as of December 31, 2023 and based on the terms of our Subscription Facility. Interest expense on our Subscription Facility is calculated using the stated interest rate as of December 31, 2023, adjusted for the hypothetical changes in rates, as shown below. We continue to finance a portion of our investments with borrowings and the interest rates paid on our borrowings may impact significantly our net interest income.

We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.

118

Based on our Consolidated Statements of Assets and Liabilities as of December 31, 2023, the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled debt investments (considering interest rate floors for variable rate instruments), and outstanding secured borrowings assuming no changes in our investment and borrowing structure:

	December 31, 2023
Basis point increase (decrease)	Interest Income		Interest Expense		Net Interest Income
Up 300 basis points	$	7,993	$	(1,755)	$	6,238
Up 200 basis points	$	5,329	$	(1,170)	$	4,159
Up 100 basis points	$	2,664	$	(585)	$	2,079
Down 100 basis points	$	(2,664)	$	585	$	(2,079)
Down 200 basis points	$	(5,329)	$	1,170	$	(4,159)
Down 300 basis points	$	(7,993)	$	1,755	$	(6,238)

We may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options, swaps and forward contracts and credit hedging contracts, such as credit default swaps, in each case, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investment with fixed interest rates.

119

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TABLE OF CONTENTS

		Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)		121
Financial Statements:
	Consolidated Statements of Assets and Liabilities as of December 31, 2023 and December 31, 2022	122
	Consolidated Statements of Operations for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021	123
	Consolidated Statements of Changes in Net Assets for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021	125
	Consolidated Statements of Cash Flows for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021	127
	Consolidated Schedules of Investments as of December 31, 2023 and December 31, 2022	129
Notes to Consolidated Financial Statements		135

120

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Lafayette Square USA, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of assets and liabilities of Lafayette Square USA, Inc. (the Company), including the consolidated schedules of investments, as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in net assets, and cash flows for each of the two years in the period ended December 31, 2023 and for the period from February 19, 2021 (date of inception) to December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations, changes in its net assets, and its cash flows for each of the two years in the period ended December 31, 2023 and for the period from February 19, 2021 (date of inception) to December 31, 2021, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of December 31, 2023 and 2022, by correspondence directly with underlying portfolio companies and the designees of the portfolio companies. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the auditor of the Company since 2021.

New York, New York

March 20, 2024

121

Lafayette Square USA, Inc.
Consolidated Statements of Assets and Liabilities

(dollar amounts in thousands, except per share data or otherwise noted)

	December 31, 2023		December 31, 2022
Assets
Investments, at fair value:
Non-controlled/non-affiliated investments at fair value (amortized cost of $244,442 and $63,838 as of December 31, 2023 and December 31, 2022, respectively)	$	246,342	$	63,636
Non-controlled/affiliated investments at fair value (amortized cost of $27,081 and $20,707 as of December 31, 2023 and December 31, 2022, respectively)	27,251		20,707
Cash and cash equivalents	109,771		20,687
Deferred financing costs	1,094		306
Interest receivable	961		90
Deferred offering costs	—		151
Other assets	407		—
Total assets	$	385,826	$	105,577
Liabilities
SBA-guaranteed debentures (see Note 5)	$	31,000	$	—
Secured borrowings (see Note 5)	27,500		31,500
Distributions payable	3,937		—
Accounts payable and accrued expenses	1,277		1,135
Administrative services fee payable (see Note 6)	885		550
Interest and financing payable	695		323
Management fee payable (see Note 6)	605		167
Incentive fee payable (see Note 6)	565		—
Due to affiliate	123		120
Total liabilities	66,587		33,795
Commitments and Contingencies (See Note 7)
Net assets
Preferred stock, par value $0.001 per share (50,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2023 and December 31, 2022)	—		—
Common stock, par value $0.001 per share (450,000,000 shares authorized, 21,502,768 and 4,916,554 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively)	22		5
Paid-in capital in excess of par	317,677		72,610
Distributable earnings (losses)	1,540		(833)
Total net assets	319,239		71,782
Total liabilities and net assets	$	385,826	$	105,577
Net asset value per common share	$	14.85	$	14.60

The accompanying notes are an integral part of these consolidated financial statements.

122

Lafayette Square USA, Inc.
Consolidated Statements of Operations

(dollar amounts in thousands, except per share data or otherwise noted)

	For the year ended December 31, 2023		For the year ended December 31, 2022		For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Investment Income:
Interest income from non-controlled/non-affiliated investments:
Cash	$	15,440	$	2,816	$	—
Fee income	70		80		—
Interest income from non-controlled/affiliated investments:
Cash	3,127		546		—
Fee income	—		54		—
Interest from cash and cash equivalents	2,114		—		—
Total investment income	20,751		3,496		—
Expenses:
Interest and financing expenses (see Note 5)	$	2,049	$	750	$	—
Management fee (see Note 6)	1,640		277		—
Incentive fee (see Note 6)	1,615		—		—
Administrative services fee (see Note 6)	1,485		708		—
General and administrative expenses	1,441		958		232
Placement fees	1,131		415		—
Legal fees	838		200		35
Professional fees	584		447		82
Organizational costs (See Note 2)	332		22		141
Directors' fees	320		176		25
Offering expenses	151		158		—
Total expenses, before expense support reimbursement	11,586		4,111		515
Expense support reimbursement (see Note 6)	452		(452)		—
Total expenses, including expenses support reimbursement	12,038		3,659		515
Net investment income (loss)	8,713		(163)		(515)
Net realized and unrealized gains (losses) on investment transactions:
Net realized gains (losses) on investments:
Net realized gains (losses) on investments in non-controlled/non-affiliated investments	—		(111)		—
Total net realized gains (losses) on investments	—		(111)		—
Net change in unrealized gains (losses) on investments:

123

Lafayette Square USA, Inc.
Consolidated Statements of Operations (continued)

(dollar amounts in thousands, except per share data or otherwise noted)

Net change in unrealized gains (losses) on investments in non-controlled/non-affiliated investments	2,102		(202)		—
Net change in unrealized gains (losses) on investments in non-controlled/affiliated investments	170		—		—
Total net change in unrealized gains (losses) on investments	2,272		(202)		—
Net increase (decrease) in net assets resulting from operations	$	10,985	$	(476)	$	(515)
Weighted average common shares outstanding	10,910,180		1,481,583		700
Net investment income (loss) per common share (basic and diluted)	$	0.80	$	(0.11)	$	(735.91)
Earnings (loss) per common share (basic and diluted)	$	1.01	$	(0.32)	$	(735.91)

The accompanying notes are an integral part of these consolidated financial statements.

124

Lafayette Square USA, Inc.
Consolidated Statements of Changes in Net Assets
(dollar amounts in thousands, except per share data or otherwise noted)

	Common Stock
	Shares	Par Amount*		Paid in Capital Excess of Par		Distributable Earnings (Losses)		Total net assets
Balance at February 19, 2021 (Date of Inception)	—	$	—	$	—	$	—	$	—
Issuance of common stock	700	—		11		—		11
Net increase (decrease) in net assets resulting from operations:
Net investment income (loss)	—	—		—		(515)		(515)
Net change in unrealized gain (losses)	—	—		—		—		—
Total increase (decrease) for the period ended December 31, 2021	700	—		11		(515)		(504)
Balance, December 31, 2021	700	$	—	$	11	$	(515)	$	(504)
	Common Stock
	Shares	Par Amount*		Paid in Capital Excess of Par		Distributable Earnings (Losses)		Total net assets
Balance, December 31, 2021	700	$	—	$	11	$	(515)	$	(504)
Issuance of common stock	4,915,854	5		72,757		—		72,762
Net increase (decrease) in net assets resulting from operations:
Net investment income (loss)	—	—		—		(163)		(163)
Net realized gain (loss)	—	—		—		(111)		(111)
Net change in unrealized gain (losses)	—	—		—		(202)		(202)
Tax reclassification of stockholders’ equity in accordance with US GAAP	—	—		(158)		158		—
Total increase (decrease) for the year ended December 31, 2022	4,915,854	5		72,599		(318)		72,286
Balance, December 31, 2022	4,916,554	$	5	$	72,610	$	(833)	$	71,782

125

Lafayette Square USA, Inc.
Consolidated Statements of Changes in Net Assets (continued)
(dollar amounts in thousands, except per share data or otherwise noted)

	Common Stock
	Shares	Par Amount		Paid in Capital Excess of Par		Distributable Earnings (Losses)		Total net assets
Balance at December 31, 2022	4,916,554	$	5	$	72,610	$	(833)	$	71,782
Capital transactions:
Issuance of common stock	16,472,283	17		243,906		—		243,923
Reinvestment of stockholder distributions	113,931	—		1,688		—		1,688
Net increase in net assets from capital transactions	16,586,214	17		245,594		—		245,611
Net increase (decrease) in net assets resulting from operations:
Net investment income (loss)	—	—		—		8,713		8,713
Net change in unrealized gain (losses)	—	—		—		2,272		2,272
Total increase (decrease) in net assets from operations	—	—		—		10,985		10,985
Distributions to stockholders from:
Distributable earnings	—	—		—		(9,139)		(9,139)
Total distributions to stockholders	—	—		—		(9,139)		(9,139)
Tax reclassification of stockholders’ equity in accordance with US GAAP	—	—		(527)		527		—
Total increase (decrease) for the year ended December 31, 2023	16,586,214	17		245,067		2,373		247,457
Balance, December 31, 2023	21,502,768	$	22	$	317,677	$	1,540	$	319,239

* Less than $1 as of December 31, 2021.

The accompanying notes are an integral part of these consolidated financial statements.

126

Lafayette Square USA, Inc.
Consolidated Statements of Cash Flows
(dollar amounts in thousands, except per share data or otherwise noted)

	For the year ended December 31, 2023		For the year ended December 31, 2022		For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations	$	10,985	$	(476)	$	(515)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized (gain) loss on investments	—		111		—
Net change in unrealized (gain) loss on investments	(2,272)		202		—
Purchases of investments	(190,068)		(97,547)		—
Net accretion of discount on investments	(406)		(102)		—
Proceeds from sales and repayments of investments	3,496		12,993		—
Amortization of deferred financing costs	441		215		(50)
Changes in operating assets and liabilities:
Interest receivable	(871)		(90)		—
Due from affiliate	—		1		(1)
Deferred offering costs	151		120		(271)
Other assets	(407)		—		—
Accounts payable and accrued expenses	142		796		339
Management fee payable	438		167		—
Incentive fee payable	565		—		—
Administrative services fee payable	335		550		—
Interest and financing payable	372		323		—
Due to affiliate	3		(375)		495
Net cash provided by (used in) operating activities	(177,096)		(83,112)		(3)
Cash flows from financing activities
Proceeds from issuance of shares of common stock	243,923		72,762		11
Distributions paid	(3,514)		—		—
Proceeds from secured borrowings	113,948		51,500		—
Repayments of secured borrowings	(117,948)		(20,000)		—
Proceeds from SBA-guaranteed debentures	31,000		—		—
Deferred financing costs paid	(1,229)		(471)		—
Net cash provided by (used in) financing activities	266,180		103,791		11
Net increase (decrease) in cash and cash equivalents	89,084		20,679		8

127

Lafayette Square USA, Inc.
Consolidated Statements of Cash Flows (continued)
(dollar amounts in thousands, except per share data or otherwise noted)

Cash and cash equivalents at beginning of period	20,687		8		—
Cash and cash equivalents at end of period	$	109,771	$	20,687	$	8
Supplemental information:
Interest expense paid	$	784	$	182	$	—
Shares issued from dividend reinvestment plan	$	1,688	$	—	$	—
Accrual for deferred financing costs	$	1,094	$	306	$	50

The accompanying notes are an integral part of these consolidated financial statements.

128

Lafayette Square USA, Inc.

Consolidated Schedule of Investments

December 31, 2023

Company (1)(2)(3)(11)(13)	Footnotes	Investment Type	Reference Rate and Spread	Interest Rate	Maturity Date	Par Amount/ Shares (4)		Amortized Cost		Fair Value		Percentage of Net Assets (5)
Non-controlled/non-affiliated investments
Commercial Services & Supplies
Rotolo Consultants, Inc.	(6)(7)	First lien senior secured loan	S+7.45%	13.10%	12/18/2026	$	3,174	$	3,133	$	3,166	1.0	%
Zero Waste Recycling LLC	(6)(7)(8)	First lien senior secured loan	S+6.45%	12.10%	5/15/2026	3,878		3,887		3,859		1.2	%
Zero Waste Recycling LLC	(6)(7)	First lien senior secured loan	S+6.45%	12.10%	5/15/2026	9,835		9,774		9,799		3.1	%
ZWR Holdings, Inc.		Subordinated debt	14.00% (Inc. 10.00% PIK)	14.00%	2/16/2027	1,872		1,872		1,753		0.5	%
ZWR Holdings, Inc.		Warrants				24,953		—		—		—	%
								18,666		18,577		5.8	%
Construction & Engineering
H.W. Lochner, Inc.	(6)(7)	First lien senior secured loan	S+6.75%	12.27%	7/02/2027	13,138		12,780		13,138		4.1	%
H.W. Lochner, Inc.	(6)(7)(8)	First lien senior secured loan	S+6.25%	11.76%	7/02/2027	1,447		1,331		1,447		0.5	%
Synergi, LLC	(6)(7)	First lien senior secured loan	S+7.50%	13.11%	12/17/2027	22,286		22,110		22,286		7.0	%
Synergi, LLC	(6)(7)(8)	First lien senior secured loan	S+7.50%	—%	12/17/2027	—		(30)		—		—	%
TCFIII Owl Buyer LLC	(6)(7)	First lien senior secured loan	S+5.50%	10.97%	4/17/2026	10,897		10,813		10,870		3.4	%
Trilon Group, LLC	(6)(7)	First lien senior secured loan	S+6.25%	11.78%	5/25/2029	6,066		5,972		6,066		1.9	%
Trilon Group, LLC	(6)(7)(8)	First lien senior secured loan	S+6.25%	11.80%	5/25/2029	4,498		4,435		4,498		1.4	%
Trilon Group, LLC	(6)(7)(8)	First lien senior secured loan	S+6.25%	11.75%	5/25/2029	55		47		55		—	%
								57,458		58,360		18.3	%
Environmental & Facilities Services
Ironhorse Purchaser, LLC	(6)(7)(8)	First lien senior secured loan	S+6.50%	—%	9/30/2027	—		(127)		—		—	%
Ironhorse Purchaser, LLC	(6)(7)	First lien senior secured loan	S+6.50%	12.14%	9/30/2027	10,123		9,922		9,922		3.1	%
								9,795		9,922		3.1	%
Health Care Equipment & Services
MSPB MSO, LLC	(6)(7)(8)	First lien senior secured loan	S+5.75%	—	11/10/2028	—		(134)		—		—	%
MSPB MSO, LLC	(6)(7)(8)	First lien senior secured loan	S+5.75%	—	11/10/2028	—		(82)		—		—	%
MSPB MSO, LLC	(6)(7)	First lien senior secured loan	S+5.75%	11.14%	11/10/2028	8,476		8,391		8,391		2.6	%
								8,175		8,391		2.6	%
Health Care Providers & Services
Salt Dental Collective LLC	(6)(7)	First lien senior secured loan	S+7.50%	12.96%	2/15/2028	7,940		7,840		7,940		2.5	%
								7,840		7,940		2.5	%
Health Care Services
Critical Nurse Staffing, LLC	(6)(7)(12)	First lien senior secured loan	S+6.50%	12.04%	11/1/2026	13,908		13,773		13,773		4.3	%
								13,773		13,773		4.3	%
Hotels, Restaurants & Leisure
Aetius Holdings, LLC	(6)(7)	First lien senior secured loan	S+7.00%	12.61%	4/25/2024	2,000		1,994		2,000		0.6	%
								1,994		2,000		0.6	%
IT Services
Dartpoints Operating Company, LLC	(6)(7)(9) (12)	First lien senior secured loan	S+9.38%	14.87%	5/14/2026	3,425		3,380		3,425		1.1	%
								3,380		3,425		1.1	%

129

Lafayette Square USA, Inc.

Consolidated Schedule of Investments (continued)

December 31, 2023

Company (1)(2)(3)(11)(13)	Footnotes	Investment Type	Reference Rate and Spread	Interest Rate	Maturity Date	Par Amount/ Shares (4)	Amortized Cost		Fair Value		Percentage of Net Assets (5)
Leisure Facilities
Dance Nation Holdings LLC	(6)(7)	First lien senior secured loan	S+6.50%	12.11%	8/24/2028	32,137	31,825		32,137		10.1	%
Dance Nation Holdings LLC	(6)(7)(8)	First lien senior secured loan	S+6.50%	—%	8/24/2028	—	(38)		—		—	%
Dance Nation Topco LLC		Preferred Equity				1,652,200	1,652		1,652		0.5	%
							33,439		33,789		10.6	%
Media
Direct Digital Holdings, LLC	(6)(7)	First lien senior secured loan	S+7.95%	13.49%	12/3/2026	7,694	7,662		7,694		2.4	%
Direct Digital Holdings, LLC	(6)(7)	First lien senior secured loan	S+7.95%	13.49%	12/3/2026	20,900	20,805		20,900		6.5	%
							28,467		28,594		8.9	%
Professional Services
M&S Acquisition Corporation	(6)(7)(12)	First lien senior secured loan	S+6.50%	12.11%	12/19/2028	34,600	34,254		34,254		10.7	%
							34,254		34,254		10.7	%
Real Estate Management & Development
Standard Real Estate Investments LP	(6)(7)(8)	First lien senior secured loan	S+8.75%	—%	10/6/2026	—	(18)		—		—	%
Standard Real Estate Investments LP	(6)(7)	First lien senior secured loan	S+8.75%	14.36%	10/6/2026	3,000	2,970		2,970		0.9	%
							2,952		2,970		0.9	%
Restaurants
Café Zupas, L.C	(6)(7)(8) (12)	First lien senior secured loan	S+7.00%	12.35%	12/30/2027	446	413		446		0.1	%
Café Zupas, L.C	(6)(7)(8) (12)	First lien senior secured loan	S+7.00%	—%	12/30/2027	—	(6)		—		—	%
Café Zupas, L.C	(6)(7)(12)	First lien senior secured loan	S+7.00%	12.35%	12/30/2027	8,359	8,276		8,276		2.6	%
							8,683		8,722		2.7	%
Specialized Consumer Services
Best Friends Pet Care Holdings Inc.	(6)(7)(8) (12)	First lien senior secured loan	S+6.45%	—%	6/21/2028	—	(59)		—		—	%
Best Friends Pet Care Holdings Inc.	(6)(7)(12)	First lien senior secured loan	S+6.45%	12.06%	6/21/2028	15,814	15,625		15,625		4.9	%
							15,566		15,625		4.9	%
Total non-controlled/non-affiliated investments							244,442		246,342		77.0	%
Non-controlled/affiliated investments (10)
Commercial Services & Supplies
GK9 Global Companies, LLC	(6)(7)(12)	First lien senior secured loan	S+9.25%	14.86%	10/7/2027	18,925	18,794		18,925		5.9	%
GK9 Global Companies, LLC	(6)(7)(8) (12)	First lien senior secured loan	S+9.25%	14.86%	10/7/2027	3,425	3,406		3,425		1.1	%
IVM GK9 Holdings LLC	(12)	Equity				14,969	4,881		4,901		1.5	%
							27,081		27,251		8.5	%
Total non-controlled/affiliated investments							27,081		27,251		8.5	%
Total Portfolio Investments							$	271,523	$	273,593	85.5	%

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Lafayette Square USA, Inc.

Consolidated Schedule of Investments (continued)

December 31, 2023

(1)	Unless otherwise indicated, all investments are considered Level 3 investments. The fair value of the investment was determined using significant unobservable inputs. See Note 4 "Fair Value Measurement".
(2)	All investments were qualifying assets as defined under Section 55(a) of the Investment Company Act of 1940.
(3)	All investments are denominated in U.S. dollars unless otherwise noted. The prior year table has been modified to confirm to the current year.
(4)	The total funded par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments.
(5)	Percentage is based on net assets of $319,239 as of December 31, 2023.
(6)	Loan includes interest rate floor feature, which generally ranges from 1.00% to 2.50%.
(7)	Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to the Secured Overnight Financing Rate ("SOFR" or "S") or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2023. As of December 31, 2023, the reference rates for our variable rate loans were the 90-day SOFR at 5.36% and 30-day SOFR at 5.34%.
(8)	Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may earn unused commitment fees. Negative cost and fair value, if any, results from unamortized fees, which are capitalized to the cost of the investment. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments as of December 31, 2023:

Investments	Unused Fee Rate	Commitment Type	Commitment Expiration Date	Unfunded Commitment		Fair Value
First Lien Debt
Zero Waste Recycling LLC	0.50%	Delayed Draw Term Loan	5/15/2026	$	1,141	$	(4)
Standard Real Estate Investments LP	—%	Delayed Draw Term Loan	10/06/2026	2,000		—
H.W. Lochner, Inc.	0.50%	Revolver	7/02/2027	1,553		—
Ironhorse Purchaser, LLC	1.00%	Delayed Draw Term Loan	9/30/2027	6,377		—
GK9 Global Companies, LLC	0.50%	Delayed Draw Term Loan	10/07/2027	1,940		—
Synergi, LLC	0.50%	Revolver	12/17/2027	3,750		—
Café Zupas, L.C	0.50%	Delayed Draw Term Loan	12/30/2027	2,898		—
Café Zupas, L.C	0.50%	Revolver	12/30/2027	557		—
Best Friends Pet Care Holdings Inc.	0.50%	Delayed Draw Term Loan	6/21/2028	11,186		—
Dance Nation Holdings LLC	0.50%	Revolver	8/24/2028	4,131		—
MSPB MSO, LLC	0.38%	Delayed Draw Term Loan	11/10/2028	27,548		—
MSPB MSO, LLC	0.38%	Revolver	11/10/2028	8,476		—
Trilon Group, LLC	1.00%	Delayed Draw Term Loan	5/25/2029	2,075		—
Trilon Group, LLC	0.50%	Revolver	5/25/2029	345		—
				$	73,977	$	(4)

(9) The Company categorized its unitranche loan as First Lien Senior Secured Loan. The First Lien Senior Secured Loan is comprised of two components: a first out tranche (“First Out”) and last out tranche (“Last Out”). The Company syndicates the First Out tranche and retains the Last Out tranche. The First Out and Last Out tranches have the same maturity date. Interest disclosed reflects the contractual rate of First Lien Senior Secured Loan. The First Out tranche has priority as to the Last Out tranche with respect to payments of principal, interest and any amounts due thereunder. The Company may be entitled to receive additional interest as a result of the Agreement Among Lenders (“AAL”) entered into with the First Out lender. In exchange for the higher interest rate, the Last Out portion is at a greater risk of loss.

(10) Under the 1940 Act, the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2023, the Company does not “control” any of these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2023, the Company’s non-controlled/affiliated investments were as follows:

Non-controlled/affiliated investments	Fair Value as of December 31,2022		Gross Additions		Gross Reductions		Change in Unrealized Gains (Losses)		Fair Value as of December 31, 2023		Investment Income
GK9 Global Companies, LLC	$	16,076	$	6,413	$	(289)	$	150	$	22,350	$	3,127
IVM GK9 Holdings LLC	4,631		250		—		20		4,901		—
Non-controlled/affiliated investments	$	20,707	$	6,663	$	(289)	$	170	$	27,251	$	3,127

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Lafayette Square USA, Inc.

Consolidated Schedule of Investments (continued)

December 31, 2023

(11)	Except as noted by this footnote, all of the instruments on this table are subject to restrictions on resale.
(12)	Investments held by the SBIC subsidiary (as defined in Note 1).
(13)	Industries are classified by The Global Industry Classification Standard ("GICS").

The accompanying notes are an integral part of these consolidated financial statements.

132

Lafayette Square USA, Inc.

Consolidated Schedule of Investments

December 31, 2022

Company (1)(2)(3)(11)	Footnotes	Investment Type	Reference Rate and Spread	Interest Rate	Maturity Date	Par Amount/ Shares (4)	Amortized Cost		Fair Value		Percentage of Net Assets (5)
Non-controlled/non-affiliated investments
Commercial Services & Supplies
Rotolo Consultants, Inc.	(6)(7)(8)	First lien senior secured loan	L+7.50%	12.23%	12/18/2026	3,209	$	3,158	$	3,160	4.4	%
							3,158		3,160		4.4	%
Zero Waste Recycling LLC	(6)(7)(8)(9)	First lien senior secured loan	L+6.45%	11.13%	5/15/2026	3,442	3,422		3,334		4.6	%
Zero Waste Recycling LLC	(6)(7)(8)	First lien senior secured loan	L+6.45%	11.18%	5/15/2026	10,105	10,044		9,890		13.8	%
ZWR Holdings, Inc.	(6)	Subordinated debt	14.00% (Inc. 10.00% PIK)	14.00%	2/16/2027	1,694	1,693		1,556		2.2	%
ZWR Holdings, Inc.	(6)	Warrants				24,953	—		—		—	%
							15,159		14,780		20.6	%
							18,317		17,940		25.0	%
Construction & Engineering
Synergi, LLC	(6)(7)(8)	First lien senior secured loan	S+7.50%	12.34%	12/17/2027	20	20,049		20,049		27.9	%
Synergi, LLC	(6)(7)(8)(9)	First lien senior secured loan	S+7.50%	12.34%	12/17/2027	—	(37)		(37)		(0.1)	%
							20,012		20,012		27.9	%
Media
Direct Digital Holdings, LLC	(6)(7)(8)	First lien senior secured loan	L+8.45%	12.86%	12/3/2026	4,234	4,191		4,234		5.9	%
Direct Digital Holdings, LLC	(6)(7)(8)	First lien senior secured loan	L+8.45%	13.18%	12/3/2026	21,450	21,318		21,450		29.9	%
							25,509		25,684		35.8	%
Total non-controlled/non-affiliated investments							63,838		63,636		88.7	%
Non-controlled/affiliated investments (10)
Commercial Services & Supplies
GK9 Global Companies, LLC	(6)(7)(8)	First lien senior secured loan	S+9.50%	14.34%	10/07/2027	16,272	16,112		16,112		22.4	%
GK9 Global Companies, LLC	(6)(7)(8)(9)	First lien senior secured loan	S+9.50%	14.34%	10/07/2027	—	(36)		(36)		(0.1)	%
IVM GK9 Holdings LLC	(6)	Equity				4,750	4,631		4,631		6.5	%
							20,707		20,707		28.8	%
Total non-controlled/affiliated investments							20,707		20,707		28.8	%
Total Portfolio Investments							$	84,545	$	84,343	117.5	%

133

Lafayette Square USA, Inc.

Consolidated Schedule of Investments (continued)

December 31, 2022

(1)	Unless otherwise indicated, all investments are considered Level 3 investments and the fair value of the investment was determined using significant unobservable inputs. See Note 4 "Fair Market Measurement".
(2)	All investments were qualifying assets as defined under Section 55(a) of the Investment Company Act of 1940.
(3)	All investments are denominated in U.S. dollars unless otherwise noted. The prior year table has been modified to confirm to the current year.
(4)	The total funded par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments.
(5)	Percentage is based on net assets of $71,782 as of December 31, 2022.
(6)	Unless otherwise indicated, all investments are "restricted securities" as defined in the Securities Act of 1933.
(7)	Loan includes interest rate floor feature.
(8)	Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either the London InterBank Offered Rate ("LIBOR" or “L”), the Secured Overnight Financing Rate ("SOFR" or "S") or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2022. As of December 31, 2022, the reference rates for our variable rate loans were the 90-day LIBOR at 4.77% and SOFR at 4.30%.
(9)	Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may earn unused commitment fees. Negative cost and fair value, if any, results from unamortized fees, which are capitalized to the cost of the investment. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments as of December 31, 2022:

Investments	Unused Fee Rate	Commitment Type	Commitment Expiration Date	Unfunded Commitment		Fair Value
First Lien Debt
ZWR Holdings, Inc.	0.50%	Delayed Draw Term Loan	5/15/2026	$	1,682	$	(36)
GK9 Global Companies, LLC	0.50%	Delayed Draw Term Loan	10/07/2027	7,563		(36)
Synergi, LLC	0.50%	Revolver	12/17/2027	3,750		(37)
				$	12,995	$	(109)

(10)	Under the 1940 Act, the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2022, the Company did not “control” any of these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owned 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2022, the Company’s non-controlled/affiliated investments were as follows:
Non-controlled/affiliated investments		Fair Value as of December 31,2021		Gross Additions		Gross Reductions		Change in Unrealized Gains (Losses)		Fair Value as of December 31,2022		Investment Income
GK9 Global Companies, LLC		$	—	$	16,076	$	—	$	—	$	16,076	$	600
IVM GK9 Holdings LLC		—		4,631		—		—		4,631		—
Total non-controlled/affiliated investments		$	—	$	20,707	$	—	$	—	$	20,707	$	600

(11) No restriction on resale. Except as noted by this footnote, all of the instruments on this table are subject to restrictions on resale.

The accompanying notes are an integral part of these consolidated financial statements.

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Lafayette Square USA, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

(dollar amounts in thousands, except per share data or otherwise noted)

Note 1. Organization

Lafayette Square USA, Inc. (the “Company,” which term refers to either Lafayette Square USA, Inc. or Lafayette Square USA, Inc. together with its consolidated subsidiaries, as the context may require) is an externally managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). On May 16, 2022, Lafayette Square Empire BDC, Inc. filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to change its corporate name from “Lafayette Square Empire BDC, Inc.” to “Lafayette Square USA, Inc.,” effective May 16, 2022. In addition, for U.S. federal income tax purposes, the Company adopted an initial tax year end of December 31, 2021, and was taxed as a corporation for the tax years ending December 31, 2021 and December 31, 2022. The Company intends to elect to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for the tax year ending December 31, 2023, as well as maintain such election in future taxable years. However, there is no guarantee that the Company will qualify to make such an election for any taxable year.

The Company is externally managed by LS BDC Adviser, LLC (the “Adviser”) pursuant to an investment advisory and management agreement between the Company and the Adviser, dated August 8, 2023 (and as may be amended, the “Investment Advisory Agreement”). The Adviser is a subsidiary of Lafayette Square Holding Company, LLC (together with its controlled subsidiaries, including the Adviser and LS Administration, LLC, “Lafayette Square”).

The Company invests in businesses that are primarily domiciled, headquartered and/or have a significant operating presence in each of the ten regions below, with a goal to invest at least 5% of its assets in each region over time. However, the Company anticipates that it could take time to invest substantially all of the capital it expects to raise in a geographically diverse manner due to general market conditions, the time necessary to identify, evaluate, structure, negotiate and close suitable investments in private middle market companies, and the potential for allocations to other affiliated investment vehicles which focus their investments on a specific region. As a result, at any point in time, the Company may have a disproportionate amount of investments in certain regions, and there can be no assurance that the Company will achieve geographic diversification across all ten regions.

• Cascade Region: Alaska, Idaho, Oregon and Washington

• Empire Region: New York, New Jersey, Connecticut and Pennsylvania

• Far West Region: California, Hawaii and Nevada

• Four Corners Region: Arizona, Colorado, New Mexico and Utah

• Great Lakes Region: Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin

• Gulf Coast Region: Arkansas, Louisiana, Oklahoma and Texas

• Mid-Atlantic Region: Delaware, Kentucky, Maryland, North Carolina, South Carolina, Tennessee, Virginia and West Virginia and the District of Columbia

• Northeast Region: Maine, Massachusetts, New Hampshire, Rhode Island and Vermont

• Plains Region: Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming

• Southeast Region: Alabama, Georgia, Florida, Mississippi and the territory of Puerto Rico

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The Company’s investment objective is to generate favorable risk-adjusted returns, including current income and capital appreciation, from directly originated investments in middle market companies.

The Company invests primarily in first and second lien loans and, to a lesser extent, in subordinated and mezzanine loans and equity and equity-like securities, including common stock, preferred stock and warrants. The Company defines middle market companies as those with annual revenues between $10 million and $1 billion, and annual earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of between $10 million and $100 million, although the Company may invest in larger or smaller companies. The Company also may purchase interests in loans, corporate bonds or other instruments through secondary market transactions.

The Company formed wholly-owned subsidiaries, LS BDC Holdings, LLC and LS BDC Holdings (DN), LLC, both Delaware limited liability companies, to hold certain equity or equity-like investments in portfolio companies. Additionally, the Company has formed a wholly-owned subsidiary, Lafayette Square SBIC, LP (“SBIC LP”), a small business investment company (“SBIC”) licensed by the U.S. Small Business Administration (the "SBA"), to invest in eligible “small businesses” as defined by the SBA. SBIC LP received its SBIC license on February 1, 2023 (made effective as of January 27, 2023). SBA regulations currently permit SBIC LP to borrow up to $175.0 million in SBA-guaranteed debentures with at least $87.5 million in regulatory capital (as defined in the SBA regulations). The Company consolidates its wholly-owned subsidiaries in these consolidated financial statements from the date of each subsidiary’s formation. All significant intercompany transactions and balances have been eliminated in such consolidation.

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Note 2. Significant Accounting Policies

Basis of Presentation

The following is a summary of significant accounting policies consistently followed by the Company in the preparation of its consolidated financial statements. The Company is an investment company and accordingly applies specific accounting and financial reporting requirements under Accounting Standards Codification, as issued by the Financial Accounting Standards Board (“ASC”) Topic 946—Financial Services—Investment Companies (“Topic 946”). The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and pursuant to Articles 6, 10 and 12 of Regulation S-X. Certain reclassifications have been made to certain prior period balances to conform with current presentation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company deposits its cash in a financial institution and, at times, such deposits may exceed the Federal Deposit Insurance Corporation insurance limits. As of December 31, 2023 and December 31, 2022, the Company held $109,771 and $20,687 in cash and cash equivalents, respectively, of which no cash was restricted. Of the total cash and cash equivalents balance, $109,771 and $20,682 were held in an interest bearing account with U.S. Bank National Association as of December 31, 2023 and December 31, 2022, respectively. For the years ended December 31, 2023 and December 31, 2022 the Company earned $2,114 and $47, respectively, in interest on cash and cash equivalents balances, and the balance is included under Interest from cash and cash equivalents in the Consolidated Statements of Operations. No interest was earned on cash balances for the period ended December 31, 2021.

Organization and Offering Costs

Organization costs consist of costs incurred to establish the Company and enable it to do business legally. Organization costs are expensed as incurred. Offering costs consist of costs incurred in connection with the offering of the common stock of the Company.

The Company’s initial organizational costs incurred were expensed and initial offering costs are being amortized over one year.

The Company may incur organization and offering expenses of up to $1 million in connection with the formation of the Company and the offering of shares of its common stock, including the out-of-pocket expenses of the Adviser and its agents and affiliates. The Company reimburses the Adviser for the organization and offering costs it incurs on the Company’s behalf. If actual organization and offering costs incurred exceed $1 million, the Adviser or its affiliates will bear the excess costs. As of December 31, 2023, the Company has incurred $804 (since inception) of organization and offering costs.

Deferred Financing Costs

Deferred financing costs, incurred in connection with any credit facility and SBA-guaranteed debentures (see Note 5) are deferred and amortized over the life of the respective credit facility and SBA-guaranteed debentures.

Indemnifications

In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote.

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Revenue Recognition

Investment transactions are accounted for on a trade-date basis. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the amortized cost basis of investment, without regard to unrealized gains or losses previously recognized. The Company reports current period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments in the Consolidated Statements of Operations.

Investment Income

Interest income, including amortization of premium and accretion of discount, is recorded on the accrual basis to the extent that such amounts are collected. The Company records amortized or accreted discounts or premiums as interest income using the effective interest method or straight-line interest method, as applicable, and adjusted only for material amendments or prepayments. Dividend income, which represents dividends from equity investments and distributions from subsidiaries, if any, is recognized on an accrual basis to the extent that the Company collects such amount.

Original Issue Discount

Discounts to par on portfolio securities are accreted into income over the tenor of the instrument. Any remaining discount is accreted into income upon prepayment or redemption of the instrument. The Company then amortizes such amounts using the effective interest method as interest income over the expected life of the investment.

PIK Interest

The Company may, from time to time, hold loans in its portfolio that contain a payment-in-kind ("PIK") interest provision. PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest in cash may be deferred until the time of debt principal repayment.

PIK interest, which is a non-cash source of income at the time of recognition, is included in the Company’s taxable income. This affects the amount the Company would be required to distribute to its stockholders to maintain its tax treatment as a RIC for federal income tax purposes, even though the Company has not yet collected the cash.

Fee Income

Origination fees received are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized origination fees are recorded as investment income. The Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, covenant waiver fees and loan amendment fees, which are recorded as investment income when earned.

Non-accrual loans

A loan can be left on accrual status during the period the Company is pursuing repayment of the loan. Management reviews all loans that become 90 days or more past due on principal and interest, or when there is reasonable doubt that principal or interest will be collected, for possible placement on non-accrual status. When a loan is placed on non-accrual status, unpaid interest credited to income is reversed. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date such loan is placed on non-accrual status. Interest payments received on non-accrual loans are recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid, and, in management’s judgment, future payments are likely to remain current.

Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, the Company is deemed to "control" a portfolio company if it owns more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. Such investments in portfolio companies that the Company "controls" are referred to as "Control Investments." Under the 1940 Act, the Company is deemed to be an "Affiliated Person" of a portfolio company if it owns between 5% and 25% of the portfolio

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company's outstanding voting securities or the Company is under common control with such portfolio company. We refer to such investments in Affiliated Persons as "Affiliated Investments." Investments which are neither Control Investments or Affiliated Investments are referred to as "Non-Controlled/Non-Affiliated investments."

Fair Value of Financial Instruments

The Company applies fair value to all of its financial instruments in accordance with ASC Topic 820—Fair Value Measurement (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements. In accordance with ASC Topic 820, the Company has categorized its financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument rather than an entity-specific measure.

The availability of observable inputs can vary depending on the financial instrument and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new, whether the product is traded on an active exchange or in the secondary market and the current market conditions. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for financial instruments classified as Level 3.

Any changes to the valuation methodology are reviewed by management and the Board to confirm that the changes are appropriate. As markets change, new products develop and the pricing for products becomes more or less transparent, the Company will continue to refine its valuation methodologies.

On December 3, 2020, the SEC adopted Rule 2a-5 under the 1940 Act (the "Valuation Rule"), which established an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. Pursuant to the Valuation Rule, which became effective on September 8, 2022 (the "SEC Compliance Date"), the Board has chosen to designate the Adviser as the Company's valuation designee to perform fair value determinations relating to the value of the assets for which market quotations are not readily available, subject to the Board's oversight.

Income Taxes

The Company adopted an initial tax year end of December 31, 2021, and was taxed as a corporation for U.S. federal income tax purposes, for the tax years ended December 31, 2021 and December 31, 2022. The Company intends to elect to be treated as a RIC under Subchapter M of the Code for the tax year ending December 31, 2023, as well as maintain such election in future taxable years. However, there is no guarantee that the Company will qualify to make such an election for any taxable year. In order to qualify and be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends for U.S. federal income tax purposes to its stockholders of an amount generally at least equal to 90% of its investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each tax year. As a RIC, the Company would intend to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to its stockholders. The Company may be subject to regular federal and state corporate income tax on any net built-in gains with respect to certain of its assets (i.e., the excess of the aggregate gains, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that the Company elects to recognize upon RIC election or when recognized over the next five taxable years.

The Company is subject to a nondeductible 4% U.S. federal excise tax on its undistributed income, unless it timely distributes (or is deemed to have timely distributed) an amount equal to the sum of (1) 98% of ordinary income for each calendar year, (2) 98.2% of the amount by which capital gains exceeds capital losses (adjusted for certain ordinary losses) for a one-year period ending on October 31 of the calendar year, and (3) any income and gains recognized, but not distributed, from the previous years. While the Company intends to distribute any income and capital gains to avoid imposition of this 4% U.S. federal excise tax, it may not be successful in avoiding entirely the imposition of this tax. In that case, the Company will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirement.

The Company accounts for income taxes in conformity with ASC Topic 740 - Income Taxes (“ASC Topic 740”). ASC Topic 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in

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consolidated financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense or tax benefit in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. There were no material unrecognized net tax benefits or unrecognized net tax liabilities related to uncertain income tax positions as of and through December 31, 2023.

Distributions

Distributions to common stockholders are recorded on the record date. Subject to the discretion of and as determined by the Board, the Company will authorize and declare ordinary cash distributions approved by the Board on a quarterly basis. The amount to be paid out as a dividend or distribution is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed to shareholders at least annually, although the Company can retain such capital gains for investment in its discretion.

The Company has adopted a dividend reinvestment plan (the “DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Board authorizes and the Company declares a cash distribution, then stockholders who have not “opted out” of the DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. Shares issued under the DRIP will be issued at a price per share equal to the most recent net asset value (“NAV”) per share as determined by the Board (subject to adjustment to the extent required by Section 23 of the 1940 Act).

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. An entity may elect to adopt the amendments in ASU 2020-04 at any time after March 12, 2020 but no later than December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. In December, 2022, the FASB issued a new Accounting Standards Update ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” that extends the sunset (or expiration) date of Accounting Standards Codification (ASC) Topic 848 to December 31, 2024. This gives reporting entities two additional years to apply the accounting relief provided under ASC Topic 848 for matters related to reference rate reform. The Company adopted ASU 2020-04 and 2021-01 as of June 30, 2023, and concluded that there was no impact of this guidance to the consolidated financial statements and disclosures as of December 31, 2023.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. Management is currently evaluating this ASU to determine its impact on the Company's disclosures.

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Note 3. Investments

The following tables show the composition of the Company’s investment portfolio, at amortized cost and fair value (with corresponding percentage of total portfolio investments) as of December 31, 2023 and December 31, 2022.

	December 31, 2023
	Amortized Cost				Fair Value
First lien senior secured loans	$	263,118	96.9	%	$	265,287	97.0	%
Equity	4,881		1.8	%	4,901		1.8	%
Subordinated debt	1,872		0.7	%	1,753		0.6	%
Preferred equity	1,652		0.6	%	1,652		0.6	%
Warrants	—		—	%	—		—	%
Total	$	271,523	100.0	%	$	273,593	100.0	%

	December 31, 2022
	Amortized Cost				Fair Value
First lien senior secured loans	$	78,221	92.5	%	$	78,156	92.7	%
Equity	4,631		5.5	%	4,631		5.5	%
Subordinated debt	1,693		2.0	%	1,556		1.8	%
Warrants	—		—	%	—		—	%
Total	$	84,545	100.0	%	$	84,343	100.0	%

The following tables show the composition of the Company’s investment portfolio by geographic region, at amortized cost and fair value (with corresponding percentage of total portfolio investments) as of December 31, 2023 and December 31, 2022. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business:

	December 31, 2023
	Amortized Cost				Fair Value
Far West	$	70,645	26.0	%	$	71,013	26.0	%
Gulf Coast	44,775		16.5	%	45,107		16.5	%
Mid-Atlantic	39,607		14.6	%	39,697		14.5	%
Southeast	35,256		13.0	%	35,642		13.0	%
Four Corners	32,910		12.1	%	33,114		12.1	%
Great Lakes	24,924		9.2	%	25,455		9.3	%
Empire	15,566		5.7	%	15,625		5.7	%
Cascade	7,840		2.9	%	7,940		2.9	%
Total	$	271,523	100.0	%	$	273,593	100.0	%

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	December 31, 2022
	Amortized Cost				Fair Value
Mid-Atlantic	$	35,171	41.6	%	$	34,792	41.3	%
Gulf Coast	28,667		33.9	%	28,844		34.1	%
Southeast	20,707		24.5	%	20,707		24.6	%
Total	$	84,545	100.0	%	$	84,343	100.0	%

The following tables show the composition of the Company’s investment portfolio by industry, at amortized cost and fair value (with corresponding percentage of total portfolio investments) as of December 31, 2023 and December 31, 2022.

	December 31, 2023
	Amortized Cost				Fair Value
Construction & Engineering	$	57,458	21.3	%	$	58,360	21.2	%
Commercial Services & Supplies	45,747		16.8	%	45,828		16.8	%
Professional Services	34,254		12.6	%	34,254		12.5	%
Leisure Facilities	33,439		12.3	%	33,789		12.4	%
Media	28,467		10.5	%	28,594		10.5	%
Specialized Consumer Services	15,566		5.7	%	15,625		5.7	%
Health Care Services	13,773		5.1	%	13,773		5.0	%
Environmental & Facilities Services	9,795		3.6	%	9,922		3.6	%
Restaurants	8,683		3.2	%	8,722		3.2	%
Health Care Equipment & Services	8,175		3.0	%	8,391		3.1	%
Health Care Providers & Services	7,840		2.9	%	7,940		2.9	%
IT Services	3,380		1.2	%	3,425		1.3	%
Real Estate Management & Development	2,952		1.1	%	2,970		1.1	%
Hotels, Restaurants & Leisure	1,994		0.7	%	2,000		0.7	%
Total	$	271,523	100.0	%	$	273,593	100.0	%

	December 31, 2022
	Amortized Cost				Fair Value
Commercial Services & Supplies	$	39,024	46.2	%	$	38,647	45.8	%
Media	25,509		30.2	%	25,684		30.5	%
Construction & Engineering	20,012		23.6	%	20,012		23.7	%
Total	$	84,545	100.0	%	$	84,343	100.0	%

Note 4. Fair Value Measurements of Investments

FASB ASC 820, Fair Value Measurement (“ASC 820”), clarifies the definition of fair value as the amount that would be received in the sale of an asset or paid in the transfer of a liability in an orderly transaction between market participants at the measurement date. Where available, the Company uses quoted market prices based on the last sales price on the measurement date.

In accordance with Topic 820, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon

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unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). To the extent that fair value is based on inputs that are less observable, the determination of fair value requires a significant amount of management judgment.

The three-tier hierarchy of inputs is summarized below.

Level 1 - Quoted prices are available in active markets/exchanges for identical investments as of the reporting date.

Level 2 - Pricing inputs are observable inputs including, but not limited to, prices quoted for similar assets or liabilities in active markets/exchanges or prices quoted for identical or similar assets or liabilities in markets that are not active, and fair value is determined through the use of models or other valuation methodologies.

Level 3 - Pricing inputs are unobservable for the investment and include activities where there is little, if any, market activity for the investment. The inputs into determination of fair value require significant management judgment and estimation.

The inputs used by management in estimating the fair value of Level 3 investments may include valuations and other reporting provided by representatives of the portfolio companies, original transaction prices, recent transactions for identical or similar instruments, and comparisons to fair values of comparable investments, and may include adjustments to reflect illiquidity or non-transferability. The Adviser has policies with respect to its investments, which may assist the Adviser in assessing the quality of information provided by, or on behalf of, each portfolio investment and in determining whether such information continues to be provided by a reliable source or whether further investigation is necessary. Any such investigation, as applicable, may or may not require the Adviser to forego its normal reliance on the value supplied by, or on behalf of, such portfolio investment and to independently determine the fair value of the Company’s interest in such portfolio investments, consistent with the Adviser’s valuation procedures.

The Company has engaged an independent third-party valuation provider, which performs valuation procedures to arrive at estimated valuation ranges of the investments on a quarterly basis. Investments that have been completed within the past three months are fair valued approximating cost unless there has been a material event since the completion date. If there has been a material event or material information that was not known as of the close of the transaction, the independent third-party valuation provider provides an independent valuation range. The types of valuation methodologies employed by the third-party valuation provider include discounted cash flow, recent financing and enterprise value valuation methodologies. Pursuant to the Valuation Rule, which became effective on the SEC Compliance Date, the Board has chosen to designate the Adviser as the Company's valuation designee to perform fair value determinations relating to the value of the assets for which market quotations are not readily available, subject to the Board's oversight.

The Company’s investments and borrowings are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments and borrowings are traded.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics and other factors.

The use of these valuation models requires significant estimation and judgment by the Adviser. While the Company believes its valuation methods are appropriate, other market participants may value identical assets differently than the Company at the measurement date. The methods used by the Company may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. The Company may also have risk associated with its concentration of investments in certain geographic regions and industries.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Accordingly, the degree of judgment exercised by the Adviser in determining fair value is greatest for securities categorized in Level 3.

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The determination of what constitutes “observable” requires significant judgment by the Adviser. The Adviser considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary. Such observable data may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy where the fair value measurement falls (in its entirety) is based on the lowest level input that is significant to the fair value measurement. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment, and observability of prices and inputs may be reduced for many investments. This condition could cause the investment to be reclassified to a lower level within the fair value hierarchy.

The consolidated financial statements include portfolio investments at fair value of $273,593 and $84,343 as of December 31, 2023 and December 31, 2022, respectively. The fair value of the Company's portfolio investments was determined in good faith by the Company’s Board. Because of the inherent uncertainty of valuation, the determined values may differ significantly from the values that would have been used had a liquid market existed for the investments as of December 31, 2023.

The following tables present fair value measurements of investments, by major class according to the fair value hierarchy as of December 31, 2023 and December 31, 2022.

	December 31, 2023
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
First lien senior secured loans	$	—	$	—	$	265,287	$	265,287
Subordinated debt	—		—		1,753		1,753
Equity	—		—		4,901		4,901
Preferred equity	—		—		1,652		1,652
Warrants	—		—		—		—
Total Investments	$	—	$	—	$	273,593	$	273,593

	December 31, 2022
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
First lien senior secured loans	$	—	$	—	$	78,156	$	78,156
Subordinated debt	—		—		1,556		1,556
Equity	—		—		4,631		4,631
Warrants	—		—		—		—
Total Investments	$	—	$	—	$	84,343	$	84,343

The carrying value of the Credit Facility and SBA-guaranteed debentures approximates fair value as of December 31, 2023, and is considered Level 3.

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the years ended December 31, 2023 and December 31, 2022. There were no investments as of December 31, 2021.

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	For the year ended December 31, 2023
	Investments
	First Lien Senior Secured Loans		Subordinated Debt		Equity		Preferred Equity		Warrants		Total Investments
Balance as of December 31, 2022	$	78,156	$	1,556	$	4,631	$	—	$	—	$	84,343
Purchases of investments and other adjustments to cost	187,988		178		250		1,652		—		190,068
Proceeds from sales and repayments of investments	(3,496)		—		—		—		—		(3,496)
Net realized gain (loss)	—		—		—		—		—		—
Net accretion of discount on investments	406		—		—		—				406
Net change in unrealized gain (loss) on investments	2,233		19		20		—		—		2,272
Balance as of December 31, 2023	$	265,287	$	1,753	$	4,901	$	1,652	$	—	$	273,593

	For the year ended December 31, 2022
	Investments
	First Lien Senior Secured Loans		Subordinated Debt		Equity		Warrants		Total Investments
Balance as of December 31, 2021	$	—	$	—	$	—	$	—	$	—
Purchases of investments and other adjustments to cost	91,223		1,693		4,631		—		97,547
Proceeds from sales and repayments of investments	(12,993)		—		—		—		(12,993)
Net realized gain (loss)	(111)		—		—		—		(111)
Net accretion of discount on investments	102		—		—		—		102
Net change in unrealized gain (loss) on investments	(65)		(137)		—		—		(202)
Balance as of December 31, 2022	$	78,156	$	1,556	$	4,631	$	—	$	84,343

For the year ended December 31, 2023 the net change in unrealized gain (loss) on investments attributable to Level 3 investments still held on December 31, 2023 was $2,272 as shown on the Consolidated Statements of Operations. For the year ended December 31, 2022 the net change in unrealized gain (loss) on investments attributable to Level 3 investments still held on December 31, 2022 was $(202) as shown on the Consolidated Statements of Operations.

Purchases of investments and other adjustments to costs include purchases of new investments at cost, accretion/amortization of income from discount/premium on debt securities and PIK.

Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of Level 3 as of the beginning of the period which the reclassifications occur. There were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2023 and December 31, 2022.

Significant Unobservable Inputs

ASC Topic 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within the fair value hierarchy. The table below is not intended to be all-inclusive, but rather to provide information on significant unobservable inputs and valuation techniques used by the Company.

The tables below summarize the quantitative inputs and assumptions used for items categorized in Level 3 of the fair value hierarchy as of December 31, 2023 and December 31, 2022.

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						Range
	Fair Value, as of December 31, 2023		Valuation Technique	Unobservable Input	Weighted Average Mean	Minimum	Maximum
Assets:
First lien senior secured loans	$	169,630	Discounted Cash Flow	Discount Rate	11.5%	9.9%	14.1%
First lien senior secured loans	95,657		Amortized Cost	Cost	N/A	N/A	N/A
Subordinated debt	1,753		Discounted Cash Flow	Discount Rate	16.3%	15.8%	16.8%
Equity	4,901		Comparable Multiples	EV/EBITDA	6.8x	6.5x	7.0x
Preferred equity	1,652		Comparable Multiples	EV/EBITDA	6.3x	6.0x	6.5x
Warrants	—		Comparable Multiples	EV/EBITDA	8.5x	8.3x	8.8x
Total Level 3 Assets	$	273,593

						Range
	Fair Value, as of December 31, 2022		Valuation Technique	Unobservable Input	Weighted Average Mean	Minimum	Maximum
Assets:
First lien senior secured loans	$	78,156	Discounted Cash Flow	Discount Rate	12.8%	10.9%	14.7%
Subordinated debt	1,556		Discounted Cash Flow	Discount Rate	16.3%	16.0%	16.5%
Equity	4,631		Comparable Multiples	EV/EBITDA	8.0x	8.0x	8.0x
Warrants	—		Comparable Multiples	EV/EBITDA	8.8x	8.5x	9.0x
Total Level 3 Assets	$	84,343

The significant unobservable input used in the income approach of fair value measurement of the Company’s investments is the discount rate used to discount the estimated future cash flows received from the underlying investment, which include both future principal and interest payments. Increases (decreases) in the discount rate would result in a decrease (increase) in the fair value estimate of the investment. Included in the consideration and selection of discount rates are the following factors: risk of default, rating of the investment and comparable investments, and call provisions.

The significant unobservable inputs used in the market approach of fair value measurement of the Company’s investments are the market multiples of EBITDA or revenue of the comparable guideline public companies. The Company selects a population of public companies for each investment with similar operations and attributes of the portfolio company. Using these guideline public company data, a range of multiples of enterprise value to EBITDA or revenue is calculated. The Company selects percentages from the range of multiples for purposes of determining the portfolio company’s estimated enterprise value based on such multiple and generally the latest twelve months EBITDA or revenue of the portfolio company (or other meaningful measure). Increases (decreases) in the multiple will result in an increase (decrease) in enterprise value, resulting in an increase (decrease) in the fair value estimate of the investment.

Note 5. Debt

As a BDC, we are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to shares of our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150%, subject to receipt of certain approvals and compliance with certain disclosure requirements, immediately after each such issuance. Section 61(a) of the 1940 Act reduces the asset coverage requirements applicable to BDCs from 200% to 150% so long as the BDC meets certain disclosure requirements and obtains certain approvals. In April 2021, our Board and initial stockholder approved the reduced asset coverage ratio. The reduced asset coverage requirements permit us to increase the maximum amount of leverage that we are permitted to incur by reducing the asset coverage requirements applicable to us from 200% to 150%. As defined in the 1940 Act, asset coverage of 150% means that for every $100 of net assets we hold, we may raise $200 from borrowing and issuing senior securities as compared to $100 from borrowing and issuing senior securities for every $100 of net assets under 200% asset coverage requirement. In addition, while any senior securities

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remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. As of December 31, 2023 and December 31, 2022, the Company’s asset coverage ratio based on the aggregate amount outstanding of senior securities was 645.7% and 327.9%.

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the Company's total debt for the years ended December 31, 2023 and December 31, 2022 and for the period February 19, 2021 (date of inception) to December 31, 2021:

	For the year ended December 31, 2023			For the year ended December 31, 2022			For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Interest expense	$	1,526		$	494		$	—
Non-usage fee (1)	82			41			—
Amortization of financing costs	441			215			—
Weighted average stated interest rate	7.08		%	5.08		%	—		%
Weighted average outstanding balance (2)	$	21,548		$	19,091		$	—

(1)    Non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the Subscription Facility.

(2)    The Company's initial borrowing occurred on June 29, 2022.

Credit Facilities

Subscription Facility

On February 2, 2022, the Company entered into a subscription-based credit agreement with Sumitomo Mitsui Banking Corporation, which was amended on June 28, 2022, December 21, 2022, and February 1, 2024 (and as may be further amended, modified or supplemented, the “Subscription Facility”). The Subscription Facility allows the Company to borrow up to $38.4 million, subject to certain restrictions, including availability under a borrowing base that is based upon unused capital commitments made by investors in the Company. The amount of permissible borrowings under the Subscription Facility may be increased to up to $1 billion with the consent of the lenders. The Subscription Facility matures on May 2, 2024 and bears interest at an annual rate of: (i) with respect to reference rate loans, a reference rate for the period plus a margin equal to 2.50% (the "Applicable Margin") and (ii) with respect to alternative rate loans, the greatest of (a) the administrative agent's prime rate, (b) Term SOFR with a one-month term plus the Applicable Margin and (c) the federal funds rate plus 0.50%. Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments. The Subscription Facility includes customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for credit facilities of this nature.

As of December 31, 2023 and December 31, 2022, the Company had $27.5 million and $31.5 million, respectively, in outstanding borrowings from the Subscription Facility.

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the Subscription Facility for the years ended December 31, 2023 and December 31, 2022 and for the period from February 19, 2021 (date of inception) to December 31, 2021:

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	For the year ended December 31, 2023			For the year ended December 31, 2022			For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Interest expense	$	584		$	494		$	—
Non-usage fee (1)	82			41			—
Amortization of financing costs	372			215			—
Weighted average stated interest rate	7.19		%	5.08		%	—		%
Weighted average outstanding balance (2)	$	8,121		$	19,091		$	—

(1)    Non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the Subscription Facility.

(2)    The Company's initial borrowing occurred on June 29, 2022.

SBA Debentures

SBIC LP is able to borrow funds from the SBA against its regulatory capital (which approximates equity capital in SBIC LP) that is paid in and is subject to customary regulatory requirements, including, but not limited to, periodic examination by the SBA. As of December 31, 2023, we funded SBIC LP with $82.5 million of regulatory capital, and have $31.0 million in SBA-guaranteed debentures outstanding. SBA debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. Current SBA regulations limit the amount that SBIC LP may borrow to a maximum of $175.0 million, which is up to twice its potential regulatory capital.

The SBA-guaranteed debentures incurred an upfront commitment fee of 1.00% on the total commitment amount and a 2.435% issuance discount on drawdowns, which are amortized over the life of the SBA-guaranteed debentures. In addition, an annual fee of 0.047% is charged on the SBA-guaranteed debentures which are amortized over the period.

The following table summarizes the Company’s SBA-guaranteed debentures as of December 31, 2023:

Issuance Date	Maturity Date	Debenture Amount		Interest Rate	SBA Annual Charge
September 15, 2023	March 1, 2034	$	31,000	6.04%	0.047%

The following table summarizes the interest expense and amortization of financing costs incurred on the SBA-guaranteed debentures for the years ended December 31, 2023 and December 31, 2022 and for the period from February 19, 2021 (date of inception) to December 31, 2021:

	For the year ended December 31, 2023			For the year ended December 31, 2022			For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Interest expense	$	566		$	—		$	—
Non-usage fee (1)	—			—			—
Amortization of financing costs	69			—			—
Weighted average stated interest rate	6.23		%	—		%	—		%
Weighted average outstanding balance (2)	$	9,088		$	—		$	—

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(1) Non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the SBA-guaranteed debentures.

(2) The Company's initial borrowing occurred on September 15, 2023.

Repurchase Obligations

In order to finance certain investment transactions, the Company may, from time to time, enter into repurchase agreements with Macquarie US Trading LLC (“Macquarie”), whereby the Company sells to Macquarie an investment that it holds and concurrently enters into an agreement to repurchase the same investment at an agreed-upon price at a future date, not to exceed 90-days from the date it was sold (the “Macquarie Transaction”).

The Company entered into a repurchase agreement on March 15, 2023 which was collateralized by the Company’s term loan to Synergi, LLC. Interest under this Repurchase Obligations was calculated as (a) the product of the funded amount of the loan and (b) the product of (i) the number of days the loan is outstanding (subject to number of minimum days per the agreement) and (ii) daily fee rate. The Company maintained effective control over the security because it is entitled and obligated to repurchase the security before its maturity. Therefore, the repurchase agreement was treated as a secured borrowing and not a sale. On June 2, 2023 the Company repurchased its obligation under the repurchase agreement. As of December 31, 2023, there was no outstanding loan and interest payable balance to Macquarie.

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the Repurchase Obligation for the years ended December 31, 2023 and December 31, 2022 and for the period from February 19, 2021 (date of inception) to December 31, 2021:

	For the year ended December 31, 2023			For the year ended December 31, 2022			For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Interest expense	$	376		$	—		$	—
Non-usage fee	—			—			—
Amortization of financing costs	—			—			—
Weighted average stated interest rate	8.68		%	—		%	—		%
Weighted average outstanding balance (1)	$	4,339		$	—		$	—

(1)    The Company's initial borrowing occurred on March 15, 2023.

The facilities of the Company consist of the following:

	December 31, 2023						December 31, 2022
	Aggregate Principal Amount Available		Principal Amount Outstanding		Unused Portion		Aggregate Principal Amount Available		Principal Amount Outstanding		Unused Portion
Subscription Facility	$	38,400	$	27,500	$	10,900	$	38,400	$	31,500	$	6,900
SBA-guaranteed debentures	36,960		31,000		5,960		—		—		—
Total	$	75,360	$	58,500	$	16,860	$	38,400	$	31,500	$	6,900

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Note 6. Related Party Agreements and Transactions

Investment Advisory Agreement

Under the Investment Advisory Agreement, the Adviser manages the day-to-day operations of, and provides investment advisory services to the Company. The Board approved the Investment Advisory Agreement on April 26 2021 and approved its renewal on June 23, 2023. The Adviser is a registered investment adviser with the SEC. The Adviser receives fees for providing services, consisting of two components, a base management fee and an incentive fee.

Base Management Fee:

The base management fee (“Management Fee”) is payable quarterly in arrears beginning in the period during the Initial Drawdown at an annual rate of (i) prior to a Liquidity Event, 0.75%, and (ii) following a Liquidity Event, 1.0%, in each case of the average value of our gross assets (gross assets equal the total assets of the Company as set forth on the Company’s Consolidated Statements of Assets and Liabilities) at the end of the two most recently completed calendar quarters. No Management Fee is charged on committed but undrawn capital commitments.

We define a “Liquidity Event” as the earliest to occur of: (1) a quotation or listing of our common stock on a national securities exchange, including an initial public offering or (2) a Sale Transaction. A “Sale Transaction” means (a) the sale of all or substantially all of our capital stock or assets to, or another liquidity event with, another entity or (b) a transaction or series of transactions, including by way of merger, consolidation, recapitalization, reorganization, or sale of stock in each case for consideration of either cash and/or publicly listed securities of the acquirer. Potential acquirers could include entities that are not BDCs that are advised by the Adviser or its affiliates.

For the years ended December 31, 2023 and December 31, 2022 and for the period from February 19, 2021 (date of inception) to December 31, 2021, the Company incurred Management Fee expense of $1,640, $277 and $0, respectively. As of December 31, 2023 and December 31, 2022, $605 and $167, respectively, remained payable as shown on the Consolidated Statements of Assets and Liabilities.

Incentive Fee:

The Company also pays the Adviser an incentive fee consisting of two parts: (i) an incentive fee based on pre-incentive fee net investment income (the “Income-Based Fee”), and (ii) the capital gains component of the incentive fee (the “Capital Gains Fee”) of which is described in more detail below.

The Income-Based Fee, is based on Pre-Incentive Fee Net Investment Income Returns and is determined and payable in arrears as of the end of each calendar year. “Pre-Incentive Fee Net Investment Income Returns” means, as the context requires, either the dollar value of, or percentage rate of return on the value of our net assets at the end of the immediately preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses accrued for the quarter (including the Management Fee, expenses payable under the Administration Agreement), and any interest expense or fees on any credit facilities or outstanding debt and distributions paid on any issued and outstanding preferred shares, but excluding the incentive fee.

Pre-Incentive Fee Net Investment Income Returns include, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Net Investment Income Returns do not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income Returns, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, is compared to a “hurdle rate” of return of 1.25% per quarter (5.0% annualized).

Prior to a Liquidity Event, we pay the Adviser the Income-Based Fee as follows:

•no incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which our Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.25%;

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•100% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.47% (5.88% annualized). We refer to this portion of our Pre-Incentive Fee Net Investment Income Returns (which exceeds the hurdle rate but is less than 1.47%) as the “catch-up.” The “catch-up” is meant to provide the Adviser with approximately 15% of our Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.47% in any calendar quarter; and

•15% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.47% (5.88% annualized). This reflects that once the hurdle rate is reached and the catch-up is achieved, 15% of all Pre-Incentive Fee Net Investment Income Returns thereafter are allocated to the Adviser.

Following a Liquidity Event, we will pay the Adviser the Income-Based Fee as follows:

•no incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which our Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.25%;

•100% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.47% (5.88% annualized). The “catch-up” is meant to provide the Adviser with approximately 17.5% of our Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.47% in any calendar quarter; and

•17.5% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.47% (5.88% annualized). This reflects that once the hurdle rate is reached and the catch-up is achieved, 17.5% of all Pre-Incentive Fee Net Investment Income Returns thereafter are allocated to the Adviser.

For the year ended December 31, 2023, the Company incurred Income-Based Fee of $1,615. As of December 31, 2023, $565 remained payable. For the year ended December 31, 2022 and for the period from February 19, 2021 (Date of Inception) through December 31, 2021, there was no Income-Based Fee payable.

The second part of the incentive fee, the Capital Gains Fee, is determined and payable in arrears as of the end of each calendar year (or at the time of a Liquidity Event). The Capital Gains Fee is equal to 15% of (1) realized capital gains less (2) realized capital losses, less unrealized capital losses on a cumulative basis from inception through the day before the Liquidity Event, less the aggregate amount of any previously paid Capital Gains Fee.

Prior to a Liquidity Event, the Capital Gains Fee equals:

•15% of cumulative realized capital gains less all realized capital losses and unrealized capital depreciation on a cumulative basis from inception through the end of such calendar year (or upon a Liquidity Event), less the aggregate amount of any previously paid Capital Gains Fee as calculated in accordance with GAAP.

Following a Liquidity Event, the amount payable equals:

•17.5% of cumulative realized capital gains from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid Capital Gains Fee as calculated in accordance with GAAP.

If a Liquidity Event occurs on a date other than the first day of a fiscal year, the Capital Gains Fee will be calculated as of the day before the Liquidity Event, with such Capital Gains Fee paid to the Adviser annually following the end of the fiscal year in which the Liquidity Event occurred. Solely for purposes of calculating the Capital Gains Fee after a Liquidity Event, the Company will be deemed to have previously paid a Capital Gains Fee prior to a Liquidity Event equal to the product obtained by multiplying (a) the actual aggregate amount of previously paid Capital Gains Fee for all periods prior to a Liquidity Event by (b) the percentage obtained by dividing (x) 17.5% by (y) 15%.

Each year, the Capital Gains Fee is calculated net of the aggregate amount of any previously paid Capital Gains Fee for all prior periods. We will accrue, but will not pay, a Capital Gains Fee with respect to unrealized appreciation because a Capital Gains Fee would be owed to the Adviser if we were to sell the relevant investment and realize a capital gain. In no

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event will the Capital Gains Fee payable pursuant to the Investment Advisory Agreement exceed the amount permitted by the Investment Advisers Act of 1940, as amended (the “Advisers Act”), including Section 205 thereof.

For the purpose of computing the Capital Gains Fee, the calculation methodology looks through derivative financial instruments or swaps as if we owned the reference assets directly.

For the years ended December 31, 2023 and December 31, 2022 and for the period from February 19, 2021 (Date of Inception) through December 31, 2021, there were no Capital Gains Fees incurred.

Administration Agreement

Pursuant to the administration agreement between the Company and LS Administration, LLC (the “Administration Agreement”), LS Administration, LLC (the “Administrator”) furnishes the Company with office space, office services, and equipment. Under the Administration Agreement, our Administrator performs or oversees the performance of our required administrative services, which include providing assistance in accounting, legal, compliance, operations, technology, internal audit, and investor relations, and loan agency services (including any third party service providers related to the foregoing) and being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, our Administrator assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and disseminating reports to our stockholders, assessing our internal controls under the Sarbanes-Oxley Act, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

Payments under the Administration Agreement are equal to an amount that reimburses our Administrator for its costs and expenses. Such payments include the Company's allocable portion of (i) the expenses incurred by our Administrator in performing its obligations under the Administration Agreement, (ii) the compensation paid to our Chief Compliance Officer and Chief Financial Officer and their respective staffs, and (iii) the cost of providing managerial assistance upon request to portfolio companies. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party. Additionally, we ultimately bear the costs of any sub-administration agreements that our Administrator may enter into. Our Administrator reserves the right to waive all or part of any reimbursements due from us at its sole discretion.

The Administration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, our Administrator and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it will be entitled to indemnification from us for any damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Administrator’s services under the Administration Agreement or otherwise as administrator for us.

For the years ended December 31, 2023 and December 31, 2022 and for the period from February 19, 2021 (Date of Inception) through December 31, 2021, the Administrator incurred $1,485, $708 and $0, respectively, in fees under the Administrative Agreement. These fees are included in administrative service fees in the accompanying Consolidated Statements of Operations. As of December 31, 2023 and December 31, 2022, $885 and $550, respectively, were unpaid and included in administrative services fee payable in the accompanying Consolidated Statements of Assets and Liabilities. No administrative services fee was charged to the Company prior to the Company’s commencement of operations.

Additionally, pursuant to a sub-administration agreement with SS&C Technologies, Inc. (“SS&C”), SS&C performs certain of the Company’s required administrative services, which include providing assistance in accounting, legal, compliance, operations, investor relations and technology, being responsible for the financial records that the Company is required to maintain and preparing reports to the Company’s stockholders and reports filed with the SEC. SS&C is also reimbursed for certain expenses it incurs on our behalf.

Our Administrator and Adviser have entered into staffing agreements with affiliates of Lafayette Square pursuant to which such Lafayette Square affiliates agree to provide our Administrator and Adviser with access to certain legal, operations, financial, compliance, accounting, internal audit (in their role of performing our Sarbanes-Oxley Act internal control assessment), clerical and administrative personnel.

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Affiliated transactions

The Adviser’s investment allocation policy seeks to ensure allocation of investment opportunities on a fair and equitable basis over time between the Company and other funds or investment vehicles managed by the Adviser or its affiliates. It is expected that the Company may have overlapping investment strategies with such affiliated funds and/or investment vehicles, but there are prohibitions under the 1940 Act from participating in certain transactions with such affiliates without prior approval of the directors who are not interested persons, and in some cases, the prior approval of the SEC. As a result, the Company, the Adviser and certain of their affiliates applied for, and have been granted, exemptive relief by the SEC for the Company to co-invest with other funds or investment vehicles managed by the Adviser or certain of its affiliates, in a manner consistent with the requirements of the Company’s organizational documents and investment strategy as well as applicable laws and regulations and the Adviser’s fiduciary duties. As a result of such exemptive relief, there could be significant overlap in the Company’s investment portfolio and the investment portfolios of such other affiliated entities that avail themselves of such exemptive relief and that have an investment objective similar to the Company. In addition, any transaction fees (including break-up or commitment fees, but excluding transaction fees contemplated by Section 17(e) or 57(k) of the 1940 Act, as applicable, which are retained by the Adviser, to the extent permitted by applicable law) received in connection with a co-investment transaction among the Company and its affiliated entities are distributed to the participating entities (including the Company) on a pro rata basis based on the amounts they invested or committed, as the case may be, in such transaction.

Due to Affiliate

The Administrator pays for certain unaffiliated third-party expenses incurred by the Company. These expenses are not marked-up and represent the same amount the Company would have paid had the Company paid the expenses directly. After the commencement of operations these expenses are reimbursed on an ongoing basis. As of December 31, 2023 and December 31, 2022, $123 and $120, respectively, were included in the Due to Affiliate line item in the Consolidated Statements of Assets and Liabilities for reimbursable expenses, that were paid by the Administrator on behalf of the Company.

Expense Support and Conditional Reimbursement Agreement

On December 30, 2021, the Company entered into an expense support and conditional reimbursement agreement (the "Expense Support Agreement") with the Adviser. The Adviser may elect to pay certain Company expenses on the Company’s behalf (each, an “Expense Payment”), provided that no portion of the payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to the Company in any combination of cash or other immediately available funds no later than 45 days after such commitment was made in writing, and/or offset against amounts due from the Company to the Adviser or its affiliates.

Following any calendar quarter in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Company’s shareholders based on distributions declared with respect to record dates occurring in such calendar quarter (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), the Company shall pay such Excess Operating Funds, or a portion thereof, to the Adviser until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar quarter have been reimbursed. Any payments required to be made by the Company are referred to herein as a “Reimbursement Payment.” “Available Operating Funds” means the sum of (i) the Company’s net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) the Company’s net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) dividends and other distributions paid to the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

The Company’s obligation to make a Reimbursement Payment will automatically become a liability of the Company on the last business day of the applicable calendar quarter, except to the extent the Adviser has waived its right to receive such payment for the applicable quarter.

The following table presents a summary of Expense Payments and the related Reimbursement Payments since the Company's inception:

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For the Period Ended	Expense Payments by Adviser		Reimbursement Payments to Adviser		Unreimbursed Expense Payable
June 30, 2022	$	227	$	—	$	227
September 30, 2022	225		—		452
June 30, 2023	—		(329)		123
September 30, 2023	—		(123)		—
Total	$	452	$	(452)	$	—

As of December 31, 2022, the Company did not have an obligation to repay Expense Payments to the Advisor and therefore did not record a liability on the Consolidated Statements of Assets and Liabilities. However, during the year ended December 31, 2023, the obligation to repay became due and the Company fully repaid its Expense Reimbursement obligation of $452, so that as of December 31, 2023, the Company has extinguished all such obligations to the Advisor.

Note 7. Commitments and Contingencies

As of December 31, 2023, the Company was not subject to any legal proceedings, although the Company may, from time to time, be involved in litigation arising out of operations in the normal course of business or otherwise.

The Company has and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments or delayed draw commitments. As of December 31, 2023 and December 31, 2022 the fair value of unfunded commitments held by the Company was $(4) and $(109), respectively, as shown on the Consolidated Schedule of Investments. The Company had the following unfunded commitments to fund investments as of the indicated dates:

	Par Value as of		Par Value as of
	December 31, 2023		December 31, 2022
Unfunded delayed draw and revolving senior secured loans	$	73,977	$	12,995
Total unfunded commitments	$	73,977	$	12,995

Note 8. Directors Fees

Our independent directors receive an annual fee of $100 (prorated for any partial year). In addition, the chair of the Audit Committee receives an additional annual fee of $20 (prorated for any partial year). We are also authorized to pay the reasonable out-of-pocket expenses for each independent director incurred in connection with the fulfillment of his or her duties as independent directors (provided that such compensation will only be paid if the committee meeting is not held on the same day as any regular meeting of the Board).

For the fiscal year December 31, 2023, independent directors fees will be paid in the form of our common stock issued at a price per share equal to the greater of NAV or the market price at the time of payment. As of December 31, 2023, the Company had not yet issued any common stock to our directors as compensation for their services.

No compensation is paid to directors who are ‘‘interested persons’’ of the Company (as such term is defined in the 1940 Act). For the years ended December 31, 2023 and December 31, 2022 and for the period from February 19, 2021 (date of inception) to December 31, 2021, the Company accrued $320, $176 and $25 for directors’ fees expense, respectively.

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Note 9. Share Data and Distributions

Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2023 and December 31, 2022 and for the period from February 19, 2021 (date of inception) to December 31, 2021:

	For the year ended December 31, 2023		For the year ended December 31, 2022		For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Earnings (loss) per common share (basic and diluted):
Net increase (decrease) in net assets resulting from operations	$	10,985	$	(476)	$	(515)
Weighted average common shares outstanding	10,910,180		1,481,583		700
Earnings (loss) per common share (basic and diluted):	$	1.01	$	(0.32)	$	(735.91)

Capital Activity

The Company is authorized to issue 50,000,000 shares of preferred stock at a par value of $0.001 per share and 450,000,000 shares of common stock at a par value of $0.001 per share. The Company has entered into subscription agreements in which investors have made capital commitments to purchase shares of the Company's common stock (the “Subscription Agreements”) with several investors, providing for the private placement of the Company’s common stock. Under the terms of the Subscription Agreements, investors are required to fund drawdowns to purchase the Company’s common stock at a price per share equal to the most recent NAV per share as determined by the Board (subject to the adjustment to the extent required by Section 23 of the 1940 Act) up to the amount of their respective capital subscriptions on an as-needed basis as determined by the Company with a minimum of ten business days prior notice.

As of December 31, 2023 and December 31, 2022, the Company had closed capital commitments totaling $377.0 million and $146.5 million, respectively, for the private placement of the Company's common stock, of which $60.3 million and $73.9 million, respectively, were unfunded.

Share Issuance Date	Shares Issued	Amount		Average Offering Price per Share
January 26, 2023	2,510,396	$	37,129	$	14.79
March 28, 2023	1,188,592	17,746		14.93
June 27, 2023	4,392,543	65,097		14.82
December 13, 2023	8,380,752	123,951		14.79
Total	16,472,283	$	243,923	$	14.81

Share Issuance Date	Shares Issued	Amount		Average Offering Price per Share
June 24, 2022	1,747,083	$	26,206	$	15.00
September 13, 2022	1,790,045	26,206		14.64
December 21, 2022	1,378,726	20,350		14.76
Total	4,915,854	$	72,762	$	14.80

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Distributions

Distributions to common stockholders are recorded on the ex-dividend date. The Company intends to elect to be taxed as a RIC under the Code for its taxable year ending December 31, 2023, and for future taxable years. The Company will be required to distribute dividends each tax year as a RIC to its stockholders of an amount generally at least equal to 90% of its investment company taxable income, determined without regard to any deduction for dividends paid, in order to be eligible for tax benefits allowed to a RIC under Subchapter M of the Code. The Company anticipates paying out as a distribution all or substantially all of those amounts. The amount to be paid out as a dividend is determined by the Board and is based on management’s estimate of the Company’s annual taxable income. Net realized capital gains, if any, may be distributed to stockholders or retained for reinvestment.

The Company has adopted the DRIP that provides for the automatic reinvestment of all cash distributions declared by the Board of Directors, unless a stockholder elects to “opt out” of the DRIP. As a result, if the Board of Directors declares a cash distribution, then the stockholders who have not “opted out” of the DRIP will have their cash distributions automatically reinvested in additional shares of common stock, rather than receiving the cash distribution. The Company reserves the right to use primarily newly issued shares to implement the DRIP, whether the shares are trading at a price per share at or above NAV. NAV is determined as of the latest available quarter end before such distribution. However, the Company reserves the right to purchase shares in the open market in connection with the implementation of the DRIP. In the event the price per share is trading at a discount to NAV, the Company intends to purchase shares in the open market rather than issue new shares. The following table summarizes the distributions declared on shares of the Company’s common stock and shares distributed pursuant to the DRIP to stockholders who had not opted out of the DRIP:

Date Declared	Record Date	Payment Date	Amount	Amount Per Share	DRIP Shares Issued
April 21, 2023	April 21, 2023	May 15, 2023	$1,292	$0.15	30,168
June 23, 2023	June 23, 2023	August 14, 2023	$1,297	$0.15	29,859
September 29, 2023	September 29, 2023	November 13, 2023	$2,614	$0.20	53,904
December 13, 2023	December 12, 2023	January 04, 2024	$3,936	$0.30	81,573

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Note 10. Tax Matters

The Company intends to elect to be treated as a RIC under Subchapter M of the Code for the year ended December 31, 2023 and intends to qualify for tax treatment as a RIC annually thereafter. As a RIC, the Company generally will not pay U.S. federal income taxes at corporate tax rates on any ordinary income or capital gains that it timely distributes to its shareholders as dividends. To qualify as a RIC, the Company must meet certain minimum distribution, source-of-income, and asset diversification requirements. The minimum distribution requirements applicable to RICs require the Company to distribute at least 90% of its investment company taxable income, as defined by the Code, each year. The Company has complied with all RIC requirements for the year ended December 31, 2023, and will be making the election to be treated as a RIC with its year ended December 31, 2023, tax return.

In order to present certain components of the Company’s capital accounts on a tax-basis, certain reclassifications have been recorded to the Company’s accounts. These reclassifications have no impact on the net asset value of the Company and result primarily from non-deductible offering expense. For the years ended December 31, 2023, December 31, 2022 and for the period from February 19, 2021 (date of inception) to December 31, 2021, the Company reclassified balances as follows.

	As of December 31, 2023		As of December 31, 2022		As of December 31, 2021
Distributable earnings	$	527	$	(158)	$	—
Paid-in capital in excess of par	(527)		158		—

For U.S. federal income tax purposes, distributions paid to stockholders are reported as ordinary income, return of capital, long term capital gains or a combination thereof. The tax character of distributions paid for the years ended December 31, 2023, December 31, 2022, and for the period from February 19, 2021 (date of inception) to December 31, 2021, were as follows:

	For the year ended December 31, 2023		For the year ended December 31, 2022		For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Ordinary Income	$	9,139	$	—	$	—
Long-term Capital Gain	$	—	$	—	$	—
Return of Capital	$	—	$	—	$	—

As of December 31, 2023, December 31, 2022 and December 31, 2021, the tax cost and estimated gross unrealized appreciation/(depreciation) from investments for federal income tax purposes are as follows.

	As of December 31, 2023		As of December 31, 2022		As of December 31, 2021
Tax cost	$	271,522	$	84,545	$	—
Gross unrealized appreciation	$	2,217	$	177	$	—
Gross unrealized depreciation	(147)		(379)		—
Net unrealized investment appreciation / (depreciation) on investments	$	2,070	$	(202)	$	—

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At December 31, 2023, the components of distributable earnings on a tax basis detailed below differ from the amounts reflected in the Company’s Statements of Assets and Liabilities by temporary and other book/tax differences, primarily relating to the tax treatment of organizational costs, as follows:

	For the year ended December 31, 2023
Undistributed Ordinary Income	$	26
Capital Loss Carry Forwards	(111)
Other Accumulated Losses	(445)
Net unrealized appreciation/(depreciation) from investments	2,070
Accumulated earnings/(deficit) on a tax basis	$	1,540

For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. As a RIC, the Fund is permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. Capital loss carry forwards generated prior to the Fund qualifying as a RIC can be carried forward for 5 years, and, accordingly, would begin to expire as of December 31, 2027. The Fund has net capital loss carry forwards for federal income tax purposes as follows:

	Period Ended	Amount	Expiration
Lafayette Square USA, Inc	12/31/2022	$111	12/31/2027

The Company did not qualify to elect treatment as a RIC for the year ended December 31, 2022 and the period from February 19, 2021 (date of inception) to December 31, 2021 and was subject to tax as a regular corporation. It is not anticipated that the Company will incur U.S. federal, state, and local taxes (other than nominal state and local taxes) as a corporation. Consequently, no such taxes were accrued for the period in which the company was subject to taxes as a regular corporation. The following disclosures relate to the period in which the company was taxed as a regular corporation.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. Components of the Company’s deferred tax assets and liabilities as of December 31, 2022 are as follows:

	For the year ended December 31, 2022
Deferred tax assets:
Net operating loss carryforward	101
Capital loss carryforward	28
Net unrealized loss on investments	51
Organizational costs	$	31
Valuation allowance	(211)
Total deferred tax assets	—
Deferred tax liabilities:
Total deferred tax liabilities	$	—
Net deferred tax assets and liabilities	$	—

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The Company’s income tax provision consists of the following as of December 31, 2022:

	For the year ended December 31, 2022
Current tax (expense)/benefit:
Federal	$	—
State and Local	—
Total current tax (expense)/benefit	—
Deferred tax (expense)/benefit:
Federal	175
State and Local	36
Valuation allowance	(211)
Total deferred tax (expense)/benefit	$	—

Total income tax (expense) benefit for the Company differs from the amount computed by applying the federal statutory income tax rate of 21% to net increase (decrease) in net assets from operations for the years ended December 31, 2022:

	For the year ended December 31, 2022
Income tax benefit at federal statutory rate (21%)	$	100
State and local income tax benefit (net of federal detriment)	21
Prior year net operating loss carryforward	97
Organizational costs	33
Permanent differences	(40)
Valuation allowance	(211)
Total income tax (expense)/benefits	$	—

At December 31, 2022, the Company determined a valuation allowance was required. The Company’s assessment considered, among other matters, the nature, frequency and severity of current and cumulative losses, the duration of statutory carryforward periods and the associated risk that operating loss and capital loss carryforwards are limited or are likely to expire unused, and unrealized gains and losses on investments. Through the consideration of these factors, the Company determined that it is more likely than not that the Company’s net deferred tax asset would not be realized. As a result, the Company recorded a full valuation allowance with respect to its deferred tax asset for the years ended December 31, 2022. From time to time, the Company may modify its estimates or assumptions regarding its deferred tax liability and/or asset balances and any applicable valuation allowance as new information becomes available. Modifications to the Company’s estimates or assumptions regarding its deferred tax liability and/or asset balances and any applicable valuation allowance, changes in generally accepted accounting principles or related guidance or interpretations thereof, limitations imposed on or expirations of the Company’s net operating losses and capital loss carryovers (if any) and changes in applicable tax law could result in increases or decreases in the Company’s NAV per share, which could be material.

As of December 31, 2022, the Company had a net operating loss carryforward for federal income tax purposes of $397. This net operating loss may be carried forward indefinitely but would not be useable to offset income in taxable years in which the Company qualifies as a RIC.

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Note 11. Financial Highlights

Below is the schedule of financial highlights of the Company for the years ended December 31, 2023, December 31, 2022 and for the period from February 19, 2021 (date of inception) to December 31, 2021:

Per Common Share Data:(1)	For the year ended December 31, 2023			For the year ended December 31, 2022			For the period from February 19, 2021 (Date of Inception) through December 31, 2021
Net asset value, beginning of period	$	14.60		$	(720.91)		$	—
Net investment income (loss)	0.80			(0.11)			(735.91)
Net realized and unrealized gain (loss)	0.21			(0.21)			—
Net increase (decrease) in net assets resulting from operations	1.01			(0.32)			(735.91)
Initial issuance of Common Stock	—			—			15.00
Effect of offering price of subscriptions	0.04			735.83			—
Distributions declared	(0.80)			—			—
Net asset value, end of period	$	14.85		$	14.60		$	(720.91)
Total return based on NAV(2)	7.32		%	(102.03)		%	(4906.05)		%
Common shares outstanding, end of period	21,502,768			4,916,554			700
Weighted average shares outstanding	10,910,180			1,481,583			700
Net assets, end of period	$	319,239		$	71,782		$	(504)
Ratio/Supplemental data(3):
Ratio of net investment income (loss) to average net assets(4)	4.81		%	(0.55)		%	(298.82)		%
Ratio of expenses to average net assets(4)	6.65		%	12.39		%	(298.82)		%
Ratio of expenses (before management fees, incentive fees and interest and financing expenses) to average net assets(4)	3.72		%	8.92		%	(298.82)		%
Weighted average debt outstanding(5)	$	21,548		$	19,091		$	—
Total debt outstanding	$	58,500		$	31,500		$	—
Asset coverage ratio	645.7		%	327.9		%	—		%
Portfolio turnover	—		%	37		%	N/A

(1)The per share data were derived by using the weighted average shares from the date of the first issuance of shares, through December 31, 2023, December 31, 2022 and December 31, 2021.

(2)Total return is based upon the change in net asset value per share between the opening and ending net assets per share and the issuance of common stock in the period. Total return is not annualized.

(3)Annualized, except for organizational expenses, which are non-recurring.

(4)For the year ended December 31, 2022, prior to the effect of the Expense Support Agreement, the ratio of net investment income (loss) to average net assets, and expenses to average net assets is (2.08)% and 13.92%, respectively.

(5)The Company's initial borrowing occurred on June 29, 2022.

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Note 12. Subsequent Events

The Company's management evaluated subsequent events through the date of issuance of the consolidated financial statements. Other than the subsequent events disclosed below, there have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in, the consolidated financial statements.

On February 1, 2024, the Company entered into a Third Amendment to the Subscription Facility, pursuant to which the applicable margin was increased from 1.80% to 2.50%, the unused commitment fee rate was increased, the ability to borrow in currencies other than US Dollars was removed, and the stated maturity date was extended from February 2, 2024 to May 2, 2024.

On February 2, 2024, the Company repaid its outstanding balance on the Subscription Facility in the amount of $27.5 million. As of the date of this Report, there is no outstanding balance on the Subscription Facility.

On March 15, 2024, the Company drew down additional $6.0 million in available SBA-guranteed debentures bearing an interim interest rate of 5.83% and an SBA annual charge of 0.047% maturing on September 1, 2034.

On March 19, 2024, the Company submitted its application to the SBA for an additional commitment of $45.5 million, which will bring its total commitment to $82.5 million.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There are not and have not been any disagreements between us and our accountant on any matter of accounting principles, practices, or consolidated financial statement disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of December 31, 2023, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness and design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective at a reasonable assurance level in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, of material information about us required to be included in periodic SEC filings. However, in evaluation of the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published consolidated financial statements.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions recorded necessary to permit the preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles. Our policies and procedures also provide reasonable assurance that receipts and expenditures are being made only in accordance with authorizations of management and our directors, and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation. Also, projections of any evaluation of effectiveness as to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework issued in 2013. Based on the assessment, management believes that, as of December 31, 2023, our internal control over financial reporting is effective based on those criteria.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

On March 19, 2024, the Company updated its Code of Business Conduct and Ethics to reflect various updates in its compliance procedures.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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Not Applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 with respect to executive officers is incorporated by reference to the information presented in the section captioned “Executive Officers” in our definitive proxy statement for the 2024 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days of the Company's fiscal year-end (the “Proxy Statement”).

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated by reference to the information presented in the sections captioned “Board of Directors - Committees of the Board of Directors” and “Executive Compensation” in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is incorporated by reference to the information presented in the sections captioned “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation - Equity Compensation Plan Information” in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE

The information required by Item 13 is incorporated by reference to the information presented in the sections captioned “Certain Relationships and Related Party Transactions” and “Board of Directors” in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 is incorporated by reference to the information presented in the section captioned “Audit Function” in the Proxy Statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the year ended December 31, 2023 (and are numbered in accordance with Item 601 of Regulation S-K).

(a)(1) and (2) Consolidated Financial Statements and Schedules

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No.	Description
3.1	Certificate of Incorporation of the Registrant(1)
3.2	Amendment to Certificate of Incorporation(2)
3.3	Form of Bylaws(1)
3.4	Amendment to Bylaws(3)
4.1	Description of the Registrant's Securities (filed as Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 25, 2022 and incorporated herein by reference).
10.1	Form of Investment Advisory Agreement(1)
10.2	Form of Administration Agreement(1)
10.3	Form of Custody Agreement(1)
10.4	Form of Indemnification Agreement(1)
10.5	Dividend Reinvestment Plan(1)
10.6	Form of Subscription Agreement(1)
10.7	Revolving Credit Agreement, dated as of February 2, 2022, by and among Lafayette Square USA, Inc., as Borrower, Sumitomo Mitsui Banking Corporation ("SMBC"), as Administrative Agent and the letter of credit issuer, and the other lenders named therein (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on February 3, 2022 and incorporated herein by reference).
10.8	First Amendment to Revolving Credit Agreement, dated as of June 28, 2022, among the Registrant, the other Borrowers and SMBC (filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2022 filed on August 10, 2022 and incorporated herein by reference).
10.9	Second Amendment to Revolving Credit Agreement and Waiver, dated as of December 21, 2022, among the Registrant, the other Borrowers and SMBC (filed as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 21, 2023 and incorporated herein by reference).
10.10	Third Amendment to Revolving Credit Agreement dated as of February 1, 2024, among the Registrant, the banks and financial institutions listed on the signature pages thereto, and SMBC (filed as Exhibit 10.01 to the Registrant's Current Registrant's Current Report on Form 8-K filed on February 9, 2024 and incorporated herein).
14.1	Code of Business Conduct and Ethics*
21.1	Subsidiaries of the Registrant.*
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

(1) Previously filed as part of the Registrant's Registration Statement on Form 10 (File No. 000-56289) filed on May 28, 2021 and incorporated herein by reference.

(2) Previously filed as part of Registrant's Current Report on Form 8-K filed on May 19, 2022 and incorporated herein by reference.

(3) Previously filed as part of Registrant's Current Report on Form 8-K filed on June 8, 2023 and incorporated herein by reference.

*Filed herewith.

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ITEM 16. FORM 10-K SUMMARY

Not Applicable.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Lafayette Square USA, Inc.
Date: March 20, 2024	By: /s/ Damien Dwin
	Name: Damien Dwin
	Title: President and Chief Executive Officer
Date: March 20, 2024	By: /s/ Seren Tahiroglu
	Name: Seren Tahiroglu
	Title: Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 20, 2024.

Name	Title
/s/ Damien Dwin	President, Chief Executive Officer and Chairman of the
Damien Dwin	Board of Directors
/s/ Seren Tahiroglu	Chief Financial Officer
Seren Tahiroglu
/s/ Jacqueline Bradley	Director
Jacqueline Bradley
/s/ Troy Dixon	Director and Chairman of the Audit Committee
Troy Dixon

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