 That being said, for the investment firms, covenant-lite loans can also be helpful because of the negative optics if a portfolio company goes into default, and fewer restrictions means fewer ways a company can go into default.In addition to private funds, much of the capital for private debt comes from business development companies (BDCs).BDCs were created by Congress in 1980 as closed-end funds regulated under the Investment Company Act of 1940 to provide small and growing companies access to capital and to enable private equity funds to access public capital markets.