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3 SBIC & Commercial Finance Stocks to Buy on Improving Industry Trends
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Given the higher-for-longer interest rate environment, the Zacks SBIC & Commercial Finance industry is poised to benefit from wider investment spreads and higher investment income, as a substantial portion of portfolios are tied to floating rates. Resilient economic growth and continued demand for flexible, customized financing from middle-market companies will likely provide further support.
However, rising concerns around private credit and increased non-accruals and credit losses pressure asset quality. Still, regulatory changes that enhance funding flexibility and capital availability should provide some support to industry participants like Goldman Sachs BDC, Inc. (GSBD - Free Report) , Gladstone Investment Corporation (GAIN - Free Report) and Runway Growth Finance Corp. (RWAY - Free Report) .
About the Industry
The Zacks SBIC & Commercial Finance industry comprises companies that provide finance to small and mid-sized privately held developing firms. These firms are typically underserved by traditional banks and other lenders. Firms suffering from financial distress are the primary target clients of these lenders. The industry players provide customized financing solutions, ranging from senior debt instruments to equity capital. This financing is provided for change of ownership transactions, buyouts, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors, among others. Some of the other products offered by the industry participants are mezzanine loans that typically pay high interest rates and can be converted into equity in the target firm.
3 Themes to Influence the SBIC & Commercial Finance Industry
Higher Interest Rates: The Federal Reserve raised interest rates by 25 basis points for the first time in more than three years amid persistently high inflation and geopolitical concerns. The higher-rate environment is generally favorable for SBIC and Commercial Finance industry players, given that a significant portion of their investment portfolios consists of floating-rate loans. As benchmark rates rise, yields on these investments typically reset higher, supporting net investment income. Though higher rates could temper leveraged buyout activity, loan originations and refinancing volumes, resilient economic activity and a more stable dealmaking environment are expected to offer support. Overall, higher portfolio yields, disciplined underwriting and improving deployment opportunities are expected to boost net investment income and the financial performance of industry participants.
Regulatory Changes: In 2018, an amendment to the Investment Company Act of 1940 by the Small Business Credit Availability Act eased leverage limits for such companies, allowing them to increase their debt-to-equity leverage to 2:1 from 1:1. This helped these companies reduce portfolio risks by investing in higher capital structures without forgoing current returns. The act provided extra funding flexibility to these companies and will continue to offer more growth opportunities.
Asset Quality: Higher interest rates are likely to pressure asset quality for the SBIC and Commercial Finance industry players, which primarily lend to leveraged middle-market companies through floating-rate private credit investments. Rising debt-servicing costs will likely weaken borrowers’ interest coverage and liquidity, particularly among lower middle-market companies with limited financing flexibility. Broader concerns around private credit, including aggressive underwriting in some vintages, elevated leverage and refinancing risks, could further expose weaker credits. Persistent inflation and softer demand may also pressure portfolio-company cash flows, increasing restructurings and non-accruals. Although senior-secured exposure and disciplined underwriting provide some protection, prolonged restrictive conditions could lead to higher credit losses and weaker portfolio performance.
Zacks Industry Rank Shows Bright Prospects
The Zacks SBIC & Commercial Finance industry is a 37-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #90, which places it in the top 36% of more than 245 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of an encouraging earnings outlook for the constituent companies in aggregate. Looking at aggregate earnings estimate revisions, it seems that analysts are gradually gaining confidence in this group’s bottom-line growth potential. Since May-end, the industry’s earnings estimates for 2026 have been marginally revised higher.
Before we present a handful of stocks well-positioned to benefit from the current operating backdrop, let’s examine the industry’s recent stock market performance and valuation picture.
Industry Underperforms Sector and S&P 500
The Zacks SBIC & Commercial Finance industry has underperformed the S&P 500 composite and its sector over the past two years.
The stocks in this industry have collectively lost 19.8% over this period, while the Zacks S&P 500 composite and the Zacks Finance sector have rallied 39.1% and 25.7%, respectively.
Two-Year Price Performance
Industry's Valuation
One might get a good sense of SBIC & Commercial Finance industry’s relative valuation by looking at its price-to-tangible book ratio (P/TB), which is commonly used for valuing loan providers because of large variations in their earnings from one quarter to the next.
The industry currently has a trailing 12-month P/TB of 0.81X. The highest level of 1.04X, the lowest of 0.76X and a median of 0.92X have been recorded by the industry over the past five years. The industry is also trading at a massive discount compared with the market at large, as evidenced by the trailing 12-month P/TB for the S&P 500 composite of 10.10X, as the chart below shows.
Price-to-Tangible Book Ratio (TTM)
As finance stocks typically have a low P/TB ratio, comparing SBIC & commercial loan providers with the S&P 500 may not make sense to many investors. Hence, comparing the group’s P/TB ratio with its broader sector ensures that the group is trading at a solid discount. The Zacks Finance sector’s trailing 12-month P/TB of 5.93X is also well above the Zacks SBIC & Commercial Finance industry’s ratio, as shown below.
Price-to-Tangible Book Ratio (TTM)
3 SBIC & Commercial Finance Stocks to Bet on
Goldman Sachs BDC: Headquartered in New York, GSBD primarily invests in U.S. middle-market companies through senior secured loans, including first-lien and unitranche debt, along with select equity investments. This Zacks Rank #1 (Strong Buy) company’s portfolio is highly defensive from a capital-structure standpoint, with 98.6% of investments comprising senior secured debt as of June 30, 2026, including 96.9% in first-lien investments. You can see the complete list of today’s Zacks #1 Rank stocks here.
Goldman Sachs BDC is expected to benefit from elevated interest rates, given that 98.9% of its performing debt investments carried floating rates as of June 30, 2026. The company had investments across 173 portfolio companies spanning 39 industries, providing meaningful diversification.
As of June 30, 2026, Goldman Sachs BDC’s investment portfolio had a fair value of $3.20 billion, while NAV was $12.06 per share. Its liquidity position remained solid, with $795.6 million of availability under its revolving credit facility and $50.7 million of cash and cash equivalents. Nonetheless, asset quality remains a key watchpoint, with investments in 10 portfolio companies on non-accrual status, representing 2.9% of the portfolio at fair value.
The company’s shares have rallied 6.9% over the past six months. The Zacks Consensus Estimate for 2026 and 2027 earnings has remained unchanged over the past seven days. GSBD has a market cap of $1.1 billion.
Price and Consensus: GSBD
Gladstone Investment: Headquartered in McLean, VA, GAIN primarily invests in lower middle-market U.S. companies through secured debt and equity securities. The company generally targets businesses with EBITDA of $5-$25 million and seeks to maintain a portfolio mix of roughly 70% debt and 30% equity at cost. As of June 30, 2026, its portfolio comprised 29 companies across 16 industries, with an aggregate fair value of nearly $1.3 billion.
Gladstone Investment is likely to benefit from elevated interest rates, as 100% of its performing debt investments were floating rate and indexed to SOFR as of June 30, 2026. The weighted-average yield on debt investments was 12.9%. During the fiscal first quarter, portfolio activity was muted, with no new investments and only $0.6 million deployed into existing portfolio companies.
As of June 30, 2026, Gladstone Investment’s portfolio had a fair value of $1.28 billion and NAV was $16.24 per share. The company had $247.4 million of availability under its $405-million credit facility, although adjusted availability based on collateral requirements was $163.2 million. Asset quality remains a key watchpoint, with three portfolio companies on non-accrual status, representing 5.5% of debt investments at cost and 1.8% at fair value. Further, $18.8 million of net unrealized depreciation during the quarter primarily reflected weaker performance at certain portfolio companies.
This Zacks Rank #1 company has a market cap of $630.4 million. Over the past six months, the company’s shares have gained 11.5%. Over the past week, the Zacks Consensus Estimate for earnings has remained unchanged for 2026 and 2027.
Price and Consensus: GAIN
Runway Growth Finance: Headquartered in Menlo Park, CA, RWAY provides senior secured loans (and sometimes equity components) to growth-stage companies mainly in sectors like technology, healthcare, business services and financial services. The company offers hybrid debt and equity financing to high-growth potential companies.
Runway Growth Finance has posted steady growth in total investment income and is expected to sustain this momentum amid rising demand for customized financing and supportive regulatory trends. This Zacks Rank #2 (Buy) company’s investment commitments to both new and existing portfolio companies continue to grow, supported by a solid balance sheet and disciplined credit management. Since inception, it has closed 115 transactions, funded $3 billion and committed $3.7 billion in investments and realized 59 exits.
As of June 30, 2026, it had $210.8 million in liquidity, including $10.8 million in unrestricted cash and cash equivalents, and $200 million in credit facilities. The fair value of Runway Growth Finance’s total investment portfolio was $1.19 billion as of June 30, 2026, and NAV was $11.91 per share.
RWAY has a market cap of $281.6 million. Over the past six months, the company’s shares have declined 2.1%. The Zacks Consensus Estimate for 2026 and 2027 earnings has remained unchanged over the past week.
View the Zacks #1 Rank List
Image: Bigstock
3 SBIC & Commercial Finance Stocks to Buy on Improving Industry Trends
Given the higher-for-longer interest rate environment, the Zacks SBIC & Commercial Finance industry is poised to benefit from wider investment spreads and higher investment income, as a substantial portion of portfolios are tied to floating rates. Resilient economic growth and continued demand for flexible, customized financing from middle-market companies will likely provide further support.
However, rising concerns around private credit and increased non-accruals and credit losses pressure asset quality. Still, regulatory changes that enhance funding flexibility and capital availability should provide some support to industry participants like Goldman Sachs BDC, Inc. (GSBD - Free Report) , Gladstone Investment Corporation (GAIN - Free Report) and Runway Growth Finance Corp. (RWAY - Free Report) .
About the Industry
The Zacks SBIC & Commercial Finance industry comprises companies that provide finance to small and mid-sized privately held developing firms. These firms are typically underserved by traditional banks and other lenders. Firms suffering from financial distress are the primary target clients of these lenders. The industry players provide customized financing solutions, ranging from senior debt instruments to equity capital. This financing is provided for change of ownership transactions, buyouts, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors, among others. Some of the other products offered by the industry participants are mezzanine loans that typically pay high interest rates and can be converted into equity in the target firm.
3 Themes to Influence the SBIC & Commercial Finance Industry
Higher Interest Rates: The Federal Reserve raised interest rates by 25 basis points for the first time in more than three years amid persistently high inflation and geopolitical concerns. The higher-rate environment is generally favorable for SBIC and Commercial Finance industry players, given that a significant portion of their investment portfolios consists of floating-rate loans. As benchmark rates rise, yields on these investments typically reset higher, supporting net investment income. Though higher rates could temper leveraged buyout activity, loan originations and refinancing volumes, resilient economic activity and a more stable dealmaking environment are expected to offer support. Overall, higher portfolio yields, disciplined underwriting and improving deployment opportunities are expected to boost net investment income and the financial performance of industry participants.
Regulatory Changes: In 2018, an amendment to the Investment Company Act of 1940 by the Small Business Credit Availability Act eased leverage limits for such companies, allowing them to increase their debt-to-equity leverage to 2:1 from 1:1. This helped these companies reduce portfolio risks by investing in higher capital structures without forgoing current returns. The act provided extra funding flexibility to these companies and will continue to offer more growth opportunities.
Asset Quality: Higher interest rates are likely to pressure asset quality for the SBIC and Commercial Finance industry players, which primarily lend to leveraged middle-market companies through floating-rate private credit investments. Rising debt-servicing costs will likely weaken borrowers’ interest coverage and liquidity, particularly among lower middle-market companies with limited financing flexibility. Broader concerns around private credit, including aggressive underwriting in some vintages, elevated leverage and refinancing risks, could further expose weaker credits. Persistent inflation and softer demand may also pressure portfolio-company cash flows, increasing restructurings and non-accruals. Although senior-secured exposure and disciplined underwriting provide some protection, prolonged restrictive conditions could lead to higher credit losses and weaker portfolio performance.
Zacks Industry Rank Shows Bright Prospects
The Zacks SBIC & Commercial Finance industry is a 37-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #90, which places it in the top 36% of more than 245 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of an encouraging earnings outlook for the constituent companies in aggregate. Looking at aggregate earnings estimate revisions, it seems that analysts are gradually gaining confidence in this group’s bottom-line growth potential. Since May-end, the industry’s earnings estimates for 2026 have been marginally revised higher.
Before we present a handful of stocks well-positioned to benefit from the current operating backdrop, let’s examine the industry’s recent stock market performance and valuation picture.
Industry Underperforms Sector and S&P 500
The Zacks SBIC & Commercial Finance industry has underperformed the S&P 500 composite and its sector over the past two years.
The stocks in this industry have collectively lost 19.8% over this period, while the Zacks S&P 500 composite and the Zacks Finance sector have rallied 39.1% and 25.7%, respectively.
Two-Year Price Performance
Industry's Valuation
One might get a good sense of SBIC & Commercial Finance industry’s relative valuation by looking at its price-to-tangible book ratio (P/TB), which is commonly used for valuing loan providers because of large variations in their earnings from one quarter to the next.
The industry currently has a trailing 12-month P/TB of 0.81X. The highest level of 1.04X, the lowest of 0.76X and a median of 0.92X have been recorded by the industry over the past five years. The industry is also trading at a massive discount compared with the market at large, as evidenced by the trailing 12-month P/TB for the S&P 500 composite of 10.10X, as the chart below shows.
Price-to-Tangible Book Ratio (TTM)
As finance stocks typically have a low P/TB ratio, comparing SBIC & commercial loan providers with the S&P 500 may not make sense to many investors. Hence, comparing the group’s P/TB ratio with its broader sector ensures that the group is trading at a solid discount. The Zacks Finance sector’s trailing 12-month P/TB of 5.93X is also well above the Zacks SBIC & Commercial Finance industry’s ratio, as shown below.
Price-to-Tangible Book Ratio (TTM)
3 SBIC & Commercial Finance Stocks to Bet on
Goldman Sachs BDC: Headquartered in New York, GSBD primarily invests in U.S. middle-market companies through senior secured loans, including first-lien and unitranche debt, along with select equity investments. This Zacks Rank #1 (Strong Buy) company’s portfolio is highly defensive from a capital-structure standpoint, with 98.6% of investments comprising senior secured debt as of June 30, 2026, including 96.9% in first-lien investments. You can see the complete list of today’s Zacks #1 Rank stocks here.
Goldman Sachs BDC is expected to benefit from elevated interest rates, given that 98.9% of its performing debt investments carried floating rates as of June 30, 2026. The company had investments across 173 portfolio companies spanning 39 industries, providing meaningful diversification.
As of June 30, 2026, Goldman Sachs BDC’s investment portfolio had a fair value of $3.20 billion, while NAV was $12.06 per share. Its liquidity position remained solid, with $795.6 million of availability under its revolving credit facility and $50.7 million of cash and cash equivalents. Nonetheless, asset quality remains a key watchpoint, with investments in 10 portfolio companies on non-accrual status, representing 2.9% of the portfolio at fair value.
The company’s shares have rallied 6.9% over the past six months. The Zacks Consensus Estimate for 2026 and 2027 earnings has remained unchanged over the past seven days. GSBD has a market cap of $1.1 billion.
Price and Consensus: GSBD
Gladstone Investment: Headquartered in McLean, VA, GAIN primarily invests in lower middle-market U.S. companies through secured debt and equity securities. The company generally targets businesses with EBITDA of $5-$25 million and seeks to maintain a portfolio mix of roughly 70% debt and 30% equity at cost. As of June 30, 2026, its portfolio comprised 29 companies across 16 industries, with an aggregate fair value of nearly $1.3 billion.
Gladstone Investment is likely to benefit from elevated interest rates, as 100% of its performing debt investments were floating rate and indexed to SOFR as of June 30, 2026. The weighted-average yield on debt investments was 12.9%. During the fiscal first quarter, portfolio activity was muted, with no new investments and only $0.6 million deployed into existing portfolio companies.
As of June 30, 2026, Gladstone Investment’s portfolio had a fair value of $1.28 billion and NAV was $16.24 per share. The company had $247.4 million of availability under its $405-million credit facility, although adjusted availability based on collateral requirements was $163.2 million. Asset quality remains a key watchpoint, with three portfolio companies on non-accrual status, representing 5.5% of debt investments at cost and 1.8% at fair value. Further, $18.8 million of net unrealized depreciation during the quarter primarily reflected weaker performance at certain portfolio companies.
This Zacks Rank #1 company has a market cap of $630.4 million. Over the past six months, the company’s shares have gained 11.5%. Over the past week, the Zacks Consensus Estimate for earnings has remained unchanged for 2026 and 2027.
Price and Consensus: GAIN
Runway Growth Finance has posted steady growth in total investment income and is expected to sustain this momentum amid rising demand for customized financing and supportive regulatory trends. This Zacks Rank #2 (Buy) company’s investment commitments to both new and existing portfolio companies continue to grow, supported by a solid balance sheet and disciplined credit management. Since inception, it has closed 115 transactions, funded $3 billion and committed $3.7 billion in investments and realized 59 exits.
As of June 30, 2026, it had $210.8 million in liquidity, including $10.8 million in unrestricted cash and cash equivalents, and $200 million in credit facilities. The fair value of Runway Growth Finance’s total investment portfolio was $1.19 billion as of June 30, 2026, and NAV was $11.91 per share.
RWAY has a market cap of $281.6 million. Over the past six months, the company’s shares have declined 2.1%. The Zacks Consensus Estimate for 2026 and 2027 earnings has remained unchanged over the past week.
Price and Consensus: RWAY
