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Development Companies Foster Growth by Filling Lending Gap

The banks are once again lending to small businesses "but not as strongly as the companies need it to come back," the chairman and portfolio head of the business development company MVC Capital told CNBC Friday.

As a result, companies like MVC are "fulfilling the need to finance these companies and all parts of the capital structures," Michael Tokarz said. "So we do that and we get higher yields than the banks do."

A business development company, known as a BDC, is created to help grow small companies in the initial stages of their development.

"MVC specifically is a hybrid BDC. So half of our portfolio is loans and half of our portfolio is equity investments. In that equity investment portfolio we focus on opportunities with companies that have an impediment that we can relieve or an opportunity we can seize upon," he explained.

"For the past seven years, right straight through the crisis, our realized rate of return on the equity portion of our portfolio is 43 percent," added Tokarz.

In addition, Tokarz went on say he sees value in food and food processing, commodities, alternative energy and energy including U.S. Gas & Electric.

"So these kinds of companies are defensive in downturns," he concluded.

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