A business development company must publish every loan it holds, with its interest rate, its spread over the base rate and, in the loan's own description, where it ranks. We read 31,676 loans to 7,316 companies, held by 165 BDCs at 30 June 2026, and grouped them by place in the queue.1
First-lien loans, repaid first from everything the company owns, are most of the market: 26,529 loans and $320bn of the $372bn lent. Their median spread is 500 basis points, or five percentage points over the base rate, with the middle half between 450 and 550. Unitranche loans, which combine first and second lien in one facility, price the same at the median, 500.
Below the first lien the price jumps. Second-lien loans and subordinated or mezzanine loans both have a median spread of 725 basis points, and the most expensive quarter of second-lien loans pays 900 or more. Unsecured loans also price at 725. The all-in rate follows: 8.67% for first lien at the quarter's end, 10.76% for second lien.
The second change is in how the interest is paid. Some loans let the borrower pay part of the interest in more debt instead of cash, which is called payment in kind. Of the money lent first lien, 11.7% is in loans with some PIK. In second lien it is 28.8%, and in unsecured loans 65.3%.
PIK can be a sign of strain, a borrower that cannot pay in cash, or a term agreed at the start to let a growing company keep its cash. The filings do not say which, and both are common. What they do show is that the junior lender is paid more and paid later.
A last pattern is about how many lenders a borrower has. Borrowers financed by a single BDC pay a median of 525 basis points and carry PIK on 19.9% of their debt. Borrowers financed by seven or more BDCs, usually larger companies with club or syndicated loans, pay 475 and carry PIK on 8.8%.
The price of a loan is set less by the borrower than by its place in the queue.
For a company raising debt, the arithmetic is plain. A layer of second-lien or mezzanine debt costs about two and a quarter points a year more than first lien on that slice. Often part of its interest accrues rather than being paid. That can still be cheaper than selling equity. Whether it is depends on what the equity would cost, which our guide to how private credit prices a loan sets out.
Method. Debt positions held by BDCs in the SEC's data sets for the quarter to 30 June 2026, revolving credit facilities excluded, principal above zero. The place in the queue is read from each loan's description, as the lender writes it. The groups are unitranche; first lien (including first-out and senior secured); second lien (including last-out); subordinated or mezzanine; venture and growth debt; unsecured. 89.6% of loans state one; the rest are shown as not stated in the Ledger. Spreads are over the floating base rate, usually SOFR. PIK counts loans with a stated PIK rate or marked as PIK. Every table is in the Ledger.
“The price of a loan is set less by the borrower than by its place in the queue.”
Sources
- Business Development Company data sets, US Securities and Exchange Commission, quarter to 30 June 2026
Cite as: “Second lien costs 225 basis points more than first lien”, Norvian Review, 13 October 2026.