Saratoga Investment Corp. (SAR): History, Ownership, Mission, How It Works & Makes Money

As a seasoned investor looking for high-yield opportunities, have you really dug into what makes Saratoga Investment Corp. (SAR) tick, especially with its recent financial performance? This Business Development Company (BDC) closed its 2025 fiscal year with Total Investment Income of nearly $148.9 million, and as of August 31, 2025, it maintained an impressive last twelve months Return on Equity (ROE) of 9.1%, significantly beating the BDC industry average. With Assets Under Management (AUM) sitting at roughly $995.3 million and a current dividend yield near 13.54%, it's defintely worth understanding the mechanics behind how this middle-market lender generates such consistent, high-quality returns while keeping non-accruals at a minimal 0.2% of fair value. We need to look beyond the yield to see the underlying strategy-so, how does SAR's unique ownership and mission translate into that kind of shareholder value?

Saratoga Investment Corp. (SAR) History

You're looking for the bedrock of Saratoga Investment Corp., and honestly, understanding its history is the only way to map its current strategy. The direct takeaway is this: the company started as a small business development company (BDC) focused on the middle market and strategically used the Small Business Administration (SBA) program and Collateralized Loan Obligations (CLOs) to fuel its growth, ultimately building a $978.1 million Assets Under Management (AUM) portfolio by the end of its 2025 fiscal year.

Given Company's Founding Timeline

Year established

The company was incorporated on March 21, 2007, and commenced operations just two days later. It originally operated under the name GSC Investment Corp. until a major strategic shift in 2010.

Original location

Saratoga Investment Corp. has maintained its headquarters in New York, NY, at 535 Madison Avenue, from its founding to the present day.

Founding team members

While the initial management team was part of the GSC Investment Corp. structure, the company's long-term trajectory has been steered by Christian L. Oberbeck, who serves as the Chairman, President, and Chief Executive Officer and has been with the company since its inception. He is the defintely the key figure who drove the later strategic pivots.

Initial capital/funding

The company became publicly traded on the New York Stock Exchange (NYSE: SAR) on March 23, 2007, which was its initial funding mechanism. The initial public offering (IPO) was priced at $15.00 per share.

Given Company's Evolution Milestones

Given Company's Transformative Moments

The company's evolution wasn't a straight line; it was a series of calculated, transformative decisions that built the current funding model. The shift in 2010 from a general investment focus to the lower middle-market was the most important strategic pivot, allowing the firm to build expertise in a less-crowded niche. But the true game-changer was the multi-stage build-out of its capital structure.

• Leveraging the SBA Program: Securing three Small Business Investment Company (SBIC) licenses-in 2012, 2019, and 2022-was a masterstroke. This provided a stable, low-cost source of capital, with the third license (SBIC III LP) providing $136.0 million in undrawn SBA debentures as of February 28, 2025.
• CLO and Joint Venture Expansion: Managing a $650 million CLO fund and co-managing a $400 million joint venture CLO (SLF 2022) has diversified their fee income and expanded their investment capacity beyond the BDC's balance sheet. This structure helps the firm generate attractive risk-adjusted returns.
• The Dividend Signal: Post-fiscal year 2025, the company announced a transition to a monthly dividend of $0.25 per share. This move, following a fiscal year where the company paid a total dividend of $3.31 per share (including a special dividend), signals management's confidence in the stability and predictability of the portfolio's cash flow.

These decisions map directly to its core mission, which you can read more about here: Mission Statement, Vision, & Core Values of Saratoga Investment Corp. (SAR).

Saratoga Investment Corp. (SAR) Ownership Structure

Saratoga Investment Corp. is a publicly traded Business Development Company (BDC) on the New York Stock Exchange (NYSE: SAR), but its ownership structure is notably concentrated, with insiders holding a significant stake. This high level of insider ownership, at over 41%, means management's financial interests are defintely aligned with shareholder returns, a key factor for any BDC.

Saratoga Investment Corp.'s Current Status

Saratoga Investment Corp. operates as a publicly traded Business Development Company (BDC), which is a specific type of closed-end investment company that trades on the NYSE under the ticker SAR. This legal structure requires the company to distribute at least 90% of its taxable income to shareholders, which is why you see a focus on consistent dividends and special distributions, like the $0.25 per share special cash distribution announced in November 2025 to fulfill final Fiscal Year 2025 spillover income requirements.

The company is externally managed by Saratoga Investment Advisors, LLC, which is a crucial distinction in the BDC space. This management structure means the company's performance is tied to the investment decisions of an external advisor, but the substantial insider ownership helps mitigate potential agency risk. If you want to dive deeper into who is buying the stock, check out Exploring Saratoga Investment Corp. (SAR) Investor Profile: Who's Buying and Why?

Saratoga Investment Corp.'s Ownership Breakdown

The shareholder mix for Saratoga Investment Corp. is heavily weighted toward insiders and retail investors, which is somewhat unusual for a publicly traded financial firm. As of the most recent data for the 2025 fiscal year, insiders control the largest block of shares.

Here's the quick math: Insiders and retail investors collectively own over 85% of the company. This means the stock is not dominated by the large institutional funds you see in S&P 500 companies, leading to potentially higher volatility but also a strong incentive for management to perform, as their personal wealth is deeply tied to the stock price.

Saratoga Investment Corp.'s Leadership

The company is steered by a small, experienced leadership team that has been instrumental in its strategic direction and performance, including the long-term return on equity (ROE) averaging 10.1% over the past eleven years.

• Christian L. Oberbeck: Chairman of the Board, Chief Executive Officer & President. He is the central figure, holding the top three executive and board roles.
• Henri Steenkamp: Chief Financial Officer (CFO), Chief Compliance Officer (CCO), Treasurer & Secretary. He manages the financial and regulatory backbone of the BDC.
• Mike Grisius: Co-Managing Partner and Chief Investment Officer (CIO). He is responsible for the investment strategy, which, as of October 2025, involved a portfolio with a fair value of nearly $1 billion.

This core leadership team, especially with Mr. Oberbeck's significant ownership, is the primary driver of the company's strategy, focusing on customized financing solutions for U.S. middle-market businesses.

Saratoga Investment Corp. (SAR) Mission and Values

Saratoga Investment Corp. stands on the dual pillars of creating attractive risk-adjusted returns for its shareholders and acting as a critical financial partner to the U.S. middle-market businesses it serves.

This focus on disciplined, value-add investing is what separates a Business Development Company (BDC) like Saratoga Investment Corp. from a simple lender; they aim to be the growth catalyst. Honestly, a clear mission is what keeps the investment strategy sharp, even when the market gets choppy.

Saratoga Investment Corp.'s Core Purpose

The company's purpose extends beyond just collecting interest; it's about providing flexible, long-term capital to companies that are the backbone of the U.S. economy. They target cash-flow-positive businesses, typically with annual revenues between $8 million and $250 million. This lower-middle-market focus is where a partner's capital can defintely make the biggest difference.

Official mission statement

Saratoga Investment Corp.'s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments. The company achieves this by providing customized financing solutions to U.S. middle-market businesses, primarily through senior and unitranche leveraged loans and mezzanine debt.

• Generate current income and long-term capital appreciation.
• Provide customized financing solutions to U.S. middle-market businesses.
• Invest in change of ownership, strategic acquisitions, and growth initiatives.

For the fiscal year ended February 28, 2025, this strategy resulted in a Total Investment Income of nearly $148.9 million, showing the mission's direct translation into shareholder value.

Vision statement

The company's vision is to be the essential financial partner-the 'turning point'-for its portfolio companies, marshaling its knowledge and capital to creatively and effectively close transactions. This isn't just a transactional view; it's a partnership model aiming for mutual, sustainable growth.

• Be the 'turning point' for portfolio companies.
• Partner with and invest in strong, growing middle-market companies.
• Consistently deliver strong returns, growing the Net Asset Value (NAV).

A key measure of this vision is the portfolio's health: as of the 2025 fiscal year-end, non-accruals stood at just 0.3% of fair value, which is a strong indicator of disciplined underwriting and effective partnership. You can dig into how that non-accrual rate impacts performance in Breaking Down Saratoga Investment Corp. (SAR) Financial Health: Key Insights for Investors.

Saratoga Investment Corp. Core Values

While not a formal list of one-word values, the company's actions and stated goals point to three core tenets that drive their investment committee decisions.

• Disciplined Investment Approach: Strategies are designed to manage risk while capitalizing on opportunities, like their focus on senior and unitranche leveraged loans.
• Value Creation for Shareholders: A commitment to maintaining and growing dividend payouts, which totaled $3.31 per share declared for the 2025 fiscal year.
• Support for Portfolio Companies: Providing strategic guidance and operational expertise, not just capital, to help businesses achieve their full potential.

Saratoga Investment Corp. slogan/tagline

The most concise phrase capturing their market position is their promotional call to action, which speaks directly to their target client: 'Finding Solutions for your Capital Needs.' That's a clear, no-nonsense statement of what they do.

Saratoga Investment Corp. (SAR) How It Works

Saratoga Investment Corp. is a Business Development Company (BDC) that acts as a specialized lender and investor, primarily providing customized debt and equity financing to private, U.S. middle-market companies. It essentially bridges the capital gap for businesses that are too large for typical bank loans but too small for high-yield bond markets, generating income for its shareholders through interest payments and capital appreciation from its investments.

Saratoga Investment Corp.'s Product/Service Portfolio

You need to know exactly what they sell to understand their revenue stream. Saratoga Investment Corp. offers a suite of structured financing products, focusing on senior debt to manage risk while still capturing attractive yields from private credit. For the fiscal year ended February 28, 2025, the fair value of their investment portfolio stood at approximately $978.1 million, invested across 48 portfolio companies, plus a Collateralized Loan Obligation (CLO) and a Joint Venture (JV) fund.

Saratoga Investment Corp.'s Operational Framework

The company's operational process is built on a disciplined, sourcing-to-exit investment cycle, allowing them to manage risk and maintain a high Net Investment Income (NII) yield, which was 14.1% for the fiscal year 2025.

• Sourcing and Underwriting: The team leverages its deep industry relationships to find proprietary deal flow, focusing on resilient businesses. They made investments totaling $168.1 million in the fiscal year 2025, including three new platform companies and 35 follow-on investments.
• Capital Structure Utilization: Saratoga Investment Corp. operates as a BDC, which means it must distribute at least 90% of its taxable income to shareholders. Plus, it utilizes two active Small Business Investment Company (SBIC) licensed subsidiaries, which allows it to access lower-cost, long-term debt from the U.S. Small Business Administration (SBA).
• Portfolio Management: They actively monitor their investments. A key metric here: non-accruals-investments where interest payments are significantly past due-were reduced to just 0.3% of fair value in fiscal 2025, showing strong credit quality control.

That low non-accrual rate is defintely a marker of quality underwriting, especially in a competitive market.

Saratoga Investment Corp.'s Strategic Advantages

The firm's success isn't just about the deals they close, but how they structure themselves to withstand market shifts and maximize returns for shareholders. You can get a deeper dive into the numbers by Breaking Down Saratoga Investment Corp. (SAR) Financial Health: Key Insights for Investors.

• Experienced Team and Sourcing: The senior investment professionals have over 200 years of combined experience investing in the middle-market, which is crucial for navigating complex, private transactions.
• Liquidity and Capital Capacity: As of the end of fiscal 2025, the company had substantial dry powder, with a total undrawn borrowing capacity of $428.2 million, including $136.0 million in undrawn SBA debentures. This gives them a significant edge to deploy capital quickly when market opportunities arise.
• Diversified Portfolio: Their portfolio is spread across 40 different industries, with the largest exposure, Healthcare Software, being only 8.9% as of November 30, 2024. This diversification dampens the impact of a downturn in any single sector.
• Attractive Valuation: Despite strong performance in 2025, the stock was trading at a 5.79% discount to its Net Asset Value (NAV) per share of $26.95 as of November 30, 2024, which is often a sign of undervaluation compared to the BDC industry average.

Saratoga Investment Corp. (SAR) How It Makes Money

Saratoga Investment Corp. primarily makes money by acting as a specialized lender and investor for U.S. middle-market companies, generating the bulk of its revenue from the interest payments on the debt it extends. As a Business Development Company (BDC), it's essentially a high-yield investment vehicle that pools capital to lend to businesses that are too small for the public debt markets, and it must distribute at least 90% of its taxable income to shareholders.

Saratoga Investment Corp.'s Revenue Breakdown

In the fiscal year ended February 28, 2025, Saratoga Investment Corp. generated total investment income of $148.9 million, an increase of 3.6% over the prior year. This income is highly concentrated in recurring interest payments from its debt portfolio, which is typical for a credit-focused BDC. The portfolio mix, as of the end of the third quarter of fiscal 2025, clearly shows where the revenue originates.

The core of the business is lending, so Interest Income on Debt Investments, primarily from first lien term loans, accounts for the vast majority of revenue. [cite: 3 from first search] The overall Total Investment Income saw a 3.6% increase for the fiscal year 2025, but the weighted average interest rate on the core portfolio actually dropped from 12.6% to 11.5% over the year, so volume and fee income had to pick up the slack.

Business Economics

The economic engine of Saratoga Investment Corp. is built on a simple but powerful spread: borrowing money cheaply and lending it at a higher rate. This is the net interest margin, and it's the key to their profitability.

• Floating-Rate Advantage: The company's portfolio is predominantly invested in floating-rate debt, meaning the interest payments they receive from portfolio companies rise and fall with base rates like SOFR (Secured Overnight Financing Rate). This is a huge advantage when rates are rising, but it creates pressure when base rates decrease, as seen by the drop in the core portfolio's weighted average yield to 11.5% by the end of fiscal 2025.
• Conservative Capital Structure: A significant portion of the company's liabilities, including its Collateralized Loan Obligation (CLO) fund and Small Business Investment Company (SBIC) debentures, are fixed-rate or long-duration. This structural difference-floating-rate assets financed by fixed-rate liabilities-protects the net interest margin, even when short-term rates fluctuate.
• High Liquidity for Deployment: As of the end of fiscal year 2025, the company had robust liquidity with $204.7 million in cash and cash equivalents, plus $292.2 million in undrawn borrowing capacity. That's a lot of dry powder to deploy into new, accretive investments, especially as market volatility creates opportunities.

The name of the game is managing the spread, and they've been smart about locking in liability costs.

Saratoga Investment Corp.'s Financial Performance

Looking at the key metrics for fiscal year 2025 and the most recent data available (Q1 Fiscal Year 2026, ended May 31, 2025), the company shows a solid, albeit slowing, performance, which is a realistic picture of the current credit environment.

• Net Asset Value (NAV) Growth: NAV is the real book value of a BDC. As of May 31, 2025, the NAV was $396.4 million, an increase of 0.9% from the previous quarter, which is a good sign of portfolio stability and net realized/unrealized gains. [cite: 15 from first search]
• Return on Equity (ROE): The Last Twelve Months (LTM) ROE as of May 31, 2025, was 9.3%, which is a strong result and beats the BDC industry average. [cite: 15 from first search] This shows management is generating efficient returns on shareholder capital.
• Net Investment Income (NII): NII per share for the full fiscal year 2025 was $3.81. For the most recent quarter (Q1 FY2026), adjusted NII per share was $0.66, a 17.9% sequential increase from the prior quarter, demonstrating strong operational rebound. [cite: 15 from first search]
• Credit Quality: Portfolio quality remains high, with non-accruals (loans not generating interest) reduced to just 0.3% of fair value at the end of fiscal 2025. That's defintely a low number and a testament to their underwriting standards.

For a deeper dive into how these metrics stack up against the competition and what they mean for your portfolio, check out Breaking Down Saratoga Investment Corp. (SAR) Financial Health: Key Insights for Investors. Your next step should be to look at the latest Q2 and Q3 FY226 earnings transcripts to see how they plan to deploy that $292.2 million in undrawn capacity, as that will be the primary driver of forward NII growth.

Saratoga Investment Corp. (SAR) Market Position & Future Outlook

Saratoga Investment Corp. is positioned as a niche, high-quality player in the Business Development Company (BDC) space, leveraging its disciplined underwriting to maintain superior credit quality despite its smaller scale.

The company's future trajectory hinges on successfully deploying its substantial dry powder-over $400 million in total undrawn capacity as of fiscal year 2025-into new, high-yielding private credit assets to offset recent portfolio repayments and declining interest rates. You should expect management to prioritize asset base expansion while maintaining the strong credit metrics that defintely set it apart.

Competitive Landscape

Saratoga Investment Corp. operates in a highly fragmented BDC market, estimated to hold approximately $451 billion in assets under management (AUM) as of 2025. The company's market share is small, which gives it flexibility but exposes it to intense competition from much larger, diversified platforms like Ares Capital Corporation.

Opportunities & Challenges

The company's ability to generate attractive shareholder returns will depend on how effectively it navigates the current interest rate environment and executes on its capital deployment strategy.

Industry Position

Saratoga Investment Corp. is firmly positioned as a boutique BDC specializing in the lower end of the U.S. middle market, distinct from the mega-BDCs that dominate the upper middle market.

Its standing is defined by a focus on security and leverage efficiency. The company's portfolio quality remains a key differentiator, with 99.7% of credits rated in the highest category as of fiscal year 2025.

• Maintain a high ratio of first-lien loans (86.8% of the portfolio as of November 30, 2024).
• Outperform the BDC sector in Return on Equity (ROE) over the long term due to its high-leverage model.
• Use its two active Small Business Investment Company (SBIC) licenses to access lower-cost, government-guaranteed debt for investments.

For a detailed view on how these operational metrics translate to financial health, you should read Breaking Down Saratoga Investment Corp. (SAR) Financial Health: Key Insights for Investors.