Gladstone Investment Corporation (GAIN): Business Model Canvas [Dec-2025 Updated]

You're digging into the nuts and bolts of how Gladstone Investment Corporation (GAIN) actually generates returns, and honestly, understanding a permanent capital Business Development Company (BDC) can be tricky. As someone who's mapped out complex structures for years, I can tell you their model hinges on being a patient, one-stop financing provider for US lower middle market companies-those with $\$4\text{M}$ to $\$15\text{M}$ in EBITDA. Look at the numbers: as of Q3 2025, they were managing about $\mathbf{\$1.1 \text{ billion}}$ in assets, pulling in $\mathbf{\$25.3 \text{ million}}$ in investment income that quarter alone, all while paying fees to their external adviser. This canvas breaks down exactly how they source deals, manage their $\mathbf{28}$ portfolio companies, and balance debt income with equity upside, so you can see the whole picture.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Key Partnerships

You're looking at the core relationships that keep Gladstone Investment Corporation (GAIN) running smoothly, especially how they manage the day-to-day and bring in new deals. These partnerships are defintely critical for their structure as a BDC (Business Development Company).

Gladstone Management Corporation: External Investment Adviser

Gladstone Management Corporation, the Adviser, is central to GAIN's operations, managing the investment advisory and management agreement. The fees paid reflect the scale of the investment activity. For the quarter ended September 30, 2025, the base management fee increased by $0.4 million quarter-over-quarter. Also for that period, income-based incentive fees rose by $0.3 million. The Adviser also provided credits, with an increase of $0.2 million in credits from Adviser for the same quarter. Total expenses, net of credits, for the quarter ended September 30, 2025, were $21,000 thousand.

Gladstone Administration, LLC: Provides Administrative Services

Gladstone Administration, LLC, the Administrator, handles essential administrative functions. Looking back at the end of 2024, the amount due to the Administrator on December 31, 2024, was $679 thousand. This relationship is governed by an administration agreement, which was subject to amendments in June 2025.

Independent Sponsors: Partners in Lower Middle Market Buyout Transactions

Gladstone Investment Corporation invests alongside independent sponsors to close deals in the lower middle market. The target for these companies is an EBITDA between $4 million and $15 million. GAIN typically provides most, if not all, of the equity and debt capital for these transactions. The company had 25 portfolio companies as of March 31, 2025. In Q3 2025, GAIN acquired three new companies, deploying over $187 million in new capital. For the quarter ended June 30, 2025, one investment involved $12.8 million in debt and preferred equity, and another involved $49.5 million in debt and preferred equity.

Capital Markets Agents: Firms like Virtu and M&T Securities for Security Offerings

These agents help GAIN raise capital through public offerings. In June 2025, GAIN entered into sales agreements with Sales Agents including Virtu Americas LLC and M&T Securities, Inc. These agreements collectively provided for the issuance of up to an aggregate of $75 million of common stock. More recently, in Q2 2025 (ended September 30, 2025), GAIN sold 2,238,361 shares under its common stock ATM program at a weighted-average gross price of $14.10 per share, netting approximately $31.1 million. Separately, in Q3 2025, $126.5 million in publicly traded notes were issued with a 7.875% rate.

Portfolio Company Management: Teams GAIN invests alongside for operational support

Gladstone Investment Corporation actively engages with the management teams of the businesses it invests in, often taking board seats. The company's investment structure targets a mix of approximately 75% in debt securities and 25% in equity securities, at cost. The portfolio company management option pool range is typically 10 - 25%. Since inception, the average buyout exit cash-on-cash equity return has been 3.8x.

Here's a quick look at the financial scale of some of these relationships for recent periods:

The structure relies on a consistent flow of capital and operational support from these affiliated and external parties. For instance, the investment size for a typical transaction is up to $75 million.

• Targeted Portfolio Company EBITDA range: $4 million to $15 million.
• Debt to Equity Target Mix: Approximately 75% debt to 25% equity.
• Average Equity Return Since Inception: 3.8x cash-on-cash.
• Shares Sold via ATM (Q2 2025): 2,238,361 shares.

Finance: draft 13-week cash view by Friday.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Key Activities

You're looking at the core engine of Gladstone Investment Corporation (GAIN), the day-to-day work that turns capital into returns. This is all about disciplined sourcing, active oversight, and smart financing.

Sourcing and Underwriting Investments

The primary activity here is finding and vetting companies for investment. Gladstone Investment Corporation (GAIN) focuses on mature-stage businesses in the lower middle market. They are looking for specific financial profiles to ensure a good risk/reward setup.

The target for Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is clearly defined:

They aim to provide most, if not all, of the capital needed for a transaction, which helps speed up closing certainty.

Portfolio Management

Once an investment is made, the team shifts to active management. This isn't a passive holding strategy; they use board representation and operational involvement to drive performance. This management is spread across the entire portfolio.

As of the end of the second fiscal quarter, September 30, 2025, Gladstone Investment Corporation (GAIN) was actively managing 28 portfolio companies. This active oversight is crucial, especially since about 37% of the portfolio is comprised of equity products, which is one of the highest shares in the Business Development Company (BDC) sector. The company also reported total assets of approximately $1.1 billion as of the third fiscal quarter of 2025. It's a big job managing that many businesses.

Key management activities include supporting portfolio companies with:

• Funding for add-on acquisitions.
• Evaluating potential dividend recapitalizations.
• Providing interim financing when needed.

Capital Raising

To fuel new investments and support the existing portfolio, Gladstone Investment Corporation (GAIN) must continuously access capital markets. This involves issuing various debt securities to maintain liquidity and a strong balance sheet. They are known for issuing notes to the public.

Recent examples of this key activity include:

• Issuing $126.5 million in publicly traded 7.875% notes maturing in 2030 during the third fiscal quarter of 2025 (contextually linked to activity around that time).
• Pricing a registered direct offering of $60.0 million aggregate principal amount of 6.875% Notes due 2028 in November 2025.

The credit facility was also upsized to $250 million, with $160 million available as of the Q3 2025 earnings report. That's significant dry powder.

Exiting Investments

The final piece of the cycle is realizing returns, which is where the equity component of the model pays off through capital appreciation. This activity is critical for funding supplemental distributions.

For instance, in October 2025, Gladstone Investment Corporation (GAIN) completed the sale of its remaining common equity investment in Sokol and Company, LLC. This exit resulted in a realized gain of approximately $1.8 million on a return of the equity cost basis of $0.5 million. This is the direct mechanism for converting portfolio company growth into realized capital gains for stockholders. Finance: draft 13-week cash view by Friday.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Key Resources

You're looking at the core assets that power Gladstone Investment Corporation's operations. These aren't just line items; they are the engines for deal flow and shareholder returns in the lower middle market.

Permanent Capital Base

• Gladstone Investment Corporation operates as a publicly traded Business Development Company (BDC).
• This structure provides a permanent capital base, meaning there is no fund end-of-life date forcing asset sales.
• The strategy is steered by an external adviser, Gladstone Management Corporation.

Investment Capital

The sheer scale of deployable capital is a primary resource. As of the third quarter of 2025, the balance sheet reflects significant scale:

The portfolio mix itself is a key resource, leaning into equity for potential upside. Equity investments comprised approximately 39% of the portfolio's fair value as of September 30, 2025. That's a substantial allocation for a BDC.

Management Expertise

The intellectual capital comes from the experienced team at the external Adviser. This team handles the day-to-day management and deal sourcing.

• The management team is drawn from the external Adviser, Gladstone Management Corporation.
• This relationship allows Gladstone Investment Corporation to operate with a streamlined, externally managed structure.

Liquidity

Maintaining ready access to capital is crucial for seizing opportunities in a competitive deal environment. Gladstone Investment Corporation has actively managed its revolving credit facility to ensure this.

Here's the quick math on their committed liquidity as of Q3 2025:

Also, recall that in the quarter ending March 31, 2025, they issued $126.5 million in publicly-traded 7.875% Notes due 2030, further diversifying their funding sources. That's smart capital management, defintely.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Value Propositions

You're looking at how Gladstone Investment Corporation (GAIN) creates value for its partners and investors by structuring its financing and investment approach. It's about providing a complete package, not just a loan or a check.

One-Stop Financing: Provides most or all debt and equity

Gladstone Investment Corporation (GAIN) positions itself as a comprehensive capital provider for lower middle market businesses, often structuring deals that include both debt and equity components. This eliminates the need for a borrower to line up multiple sources of capital. For instance, the investment in Global GRAB Technologies, Inc. in July 2025 totaled $67.6 million, comprised of $46.5 million of secured first lien debt and $21.1 million of preferred equity. Similarly, the May 2025 investment in Smart Chemical Solutions, LLC was $49.5 million, split into $35.7 million in debt and $13.8 million in preferred equity. The company signaled aggressive deployment, investing over $187 million in new capital across three new companies during the third fiscal quarter of 2025.

Patient Capital: Offers long-term investment horizon without forced exit deadlines

As a business development company (BDC), Gladstone Investment Corporation (GAIN) structure inherently supports a longer-term view, focusing on investments in connection with acquisitions, changes in control, and recapitalizations. This contrasts with shorter-term private equity funds that have defined lifecycles. The focus on middle-market acquisitions suggests investments are held until the portfolio company is ready for a strategic exit, not based on an arbitrary fund deadline. The company's total assets stood at $1.1 billion as of the third quarter of fiscal year 2025.

Certainty of Closing: Eliminates the need for multiple third-party financing sources

By offering a one-stop solution, Gladstone Investment Corporation (GAIN) streamlines the financing process, which is a significant value driver for businesses needing speed and certainty. This single-source approach reduces execution risk for the borrower. The company maintains a healthy pipeline for new acquisitions, indicating consistent deal flow evaluation and execution capability. The total investment income for the second quarter ended September 30, 2025, was $25.3 million, showing active deployment and management of its capital base.

Balanced Return Profile: Combines current income (debt) with capital appreciation (equity)

Gladstone Investment Corporation (GAIN) structures its portfolio to capture both steady income from its debt holdings and upside potential from its equity stakes. This balance is key to its return profile. As of March 31, 2025, 36% of the portfolio was allocated to Equity investments. The weighted average yield on its debt investments was reported at 13.4% during the second quarter of fiscal year 2025. The Net Asset Value (NAV) per common share increased to $13.53 as of September 30, 2025, driven in part by net unrealized appreciation of $35.3 million in that quarter.

The ability to commit significant capital, like the $187 million deployed in Q3 2025, underscores the capacity to act as a primary capital source. The regular monthly distribution was $0.08 per common share for October, November, and December 2025, totaling $0.24 for the quarter, supplemented by a focus on capital gains.

• Focus on lower middle market businesses.
• Total assets reached $1.1 billion.
• Net investment income for Q2 2025 was $4.3 million.
• Debt portfolio weighted average yield was 13.4% in Q2 2025.
• Equity portion of portfolio at 36% as of March 31, 2025.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Customer Relationships

Gladstone Investment Corporation (GAIN) investment professionals actively oversee each investment by continuously evaluating the portfolio company's performance. They typically work collaboratively with the portfolio company's management to identify and incorporate best resources and practices.

The methods for this high-touch advisory include:

• monthly analysis of financial and operating performance;
• frequent assessment of the portfolio company's performance against its business plan;
• attendance at and/or participation in the portfolio company's board of directors or management meetings;
• assessment of portfolio company management, governance and strategic direction; and
• review and assessment of the portfolio company's operating outlook and financial projections.

The Adviser's investment professionals interact with various parties involved with an investment by actively engaging with internal and external constituents, including management.

Long-Term Partnership Focus

Gladstone Investment Corporation (GAIN) differs from other private equity funds because it has no partnership end-of-life deadlines. This structure allows GAIN to provide truly patient, long-term capital. The company aims to generate current income and capital gain potential throughout the economic cycle.

The portfolio size reflects this ongoing commitment:

Direct and Personal

GAIN typically provides most, if not all, of the equity and debt capital required to close a transaction, which increases certainty and speed of closing. The investment team handles due diligence and ongoing support. The company added experienced talent to its investing team in support of continuing portfolio growth and managing the current portfolio.

Investment activity during the period demonstrates this direct involvement:

• In May 2025, GAIN invested $49.5 million in a new portfolio company.
• In July 2025, GAIN invested $67.6 million in a new portfolio company.
• Total investment for the fiscal year ended March 31, 2025, was $221 million.

The total fair value of the portfolio at March 31, 2025, was $979 million. The total assets for Gladstone Investment Corporation were $1.1 billion as of Q3 2025.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Channels

You're looking at how Gladstone Investment Corporation (GAIN) actually gets its deals and connects with the market to fund them. It's not just one road; it's a few distinct paths that all feed into their core business of providing debt and equity capital to established private businesses in the U.S.

Direct Deal Sourcing: Leveraging relationships with independent sponsors and management

Gladstone Investment Corporation (GAIN) relies heavily on its network to find deals that fit its lower middle-market focus. This channel is about the relationships they cultivate, not just cold calls. They target established businesses, often in sectors like manufacturing, consumer products, and business services. Specifically, they look for firms with an EBITDA generally between $3 million and $20 million and revenues ranging from $20 million to $100 million.

When a deal is sourced, the typical size for an individual investment is up to $75 million, though this can change based on the opportunity. The intended long-term portfolio composition guides this sourcing, aiming for approximately 75% in debt securities and 25% in equity securities, measured at cost.

The activity from this channel was robust in the most recently reported period; for the quarter ended September 30, 2025 (Q2 FY2025), Gladstone Investment Corporation (GAIN) deployed over $187 million of new capital, which was noted as their single largest investment quarter to date.

Investment Team: The primary channel for transaction execution and monitoring

The Investment Team acts as the internal engine that vets, executes, and manages the capital deployed through the sourcing channels. They are the ones turning relationships into funded investments. This team is responsible for structuring the combined debt and equity investments that support buyouts, recapitalizations, and growth financings.

The execution of this channel directly impacts the income statement. For the quarter ended September 30, 2025, Total Investment Income reached $25.3 million. The team's management of the portfolio is reflected in the Net Asset Value (NAV) per common share, which stood at $13.53 as of September 30, 2025. This team also manages the portfolio's interest-bearing assets, which saw their weighted-average principal balance increase, contributing to a $1.0 million rise in interest income quarter-over-quarter for Q2 FY2025.

The team's involvement often goes beyond just capital provision; they maintain active involvement, sometimes taking majority ownership stakes in portfolio companies.

Public Markets (NASDAQ: GAIN): For raising capital and distributing returns to shareholders

The NASDAQ listing for Gladstone Investment Corporation (GAIN) is the critical external channel for both funding the investment pipeline and returning capital to you, the shareholder. This public presence allows for capital raises outside of traditional debt markets. For instance, in the quarter ended September 30, 2025, the company sold 2,238,361 shares of common stock under its At-the-Market (ATM) program at a weighted-average gross price of $14.10 per share, raising approximately $31.1 million in net proceeds.

The distribution side is very regular. Gladstone Investment Corporation (GAIN) pays dividends monthly. The expected next dividend per share was $0.08 USD, with an ex-dividend date around December 22, 2025. This results in an annual dividend of $2.20 per share, translating to a reported yield of 15.75% or 6.87% depending on the specific market data source used for the calculation at that time. The Payout Ratio relative to the annual dividend was listed as 60.15%.

The overall scale of the company, which this channel represents to the public, was noted with Total Assets reaching $1.1 billion as of Q3 2025.

Here's a quick snapshot of the key financial metrics tied to these channels as of late 2025:

The operational flow through these channels can be seen in the recent income figures:

• Total Investment Income (Q2 2025): $25.3 million.
• Net Investment Income (Q2 2025): $4.3 million or $0.11 per common share.
• Net Asset Value per Share (Sept 30, 2025): $13.53.
• Debt Issuance Rate (Notes due 2030): 7.875%.

The ability to issue $126.5 million in new publicly traded notes due 2030 at 7.875% directly supports the deal pipeline sourced by the relationships. Also, the company paid a supplemental distribution of $0.70 per share during Q3 2025, which is supported by realized capital gains, a different outcome from the regular monthly channel.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Customer Segments

You're looking at the specific types of established private businesses Gladstone Investment Corporation (GAIN) targets for its debt and equity investments. These are not typically companies that can easily access public capital markets.

The core focus remains on U.S.-based businesses that fit a specific financial profile, often seeking capital for growth, recapitalization, or change of control events.

Lower Middle Market Companies are defined by their earnings power:

• US-based businesses with $4 million to $15 million in EBITDA.
• Companies must have a proven business model.
• They need predictable and stable cash flow with consistent earnings.

Gladstone Investment Corporation (GAIN) targets businesses that are market leaders in stable industries and possess strong management teams capable of performing across economic cycles.

The structure of the customer segment is further detailed by the type of transaction they are seeking capital for:

• Management Buyout Teams: Existing management seeking capital to execute a change in control transaction.
• Independent Sponsors: Financial partners who require committed capital to close on acquisition opportunities.

For Mature Businesses, the key characteristic is the stability of their operations:

• Stable cash flow history.
• Minimal market or technology risk exposure.
• Demonstrated potential for future cash flow expansion.
• Long-term customer relationships are a positive indicator.

Here's a look at the typical capital deployment metrics associated with these customer segments, based on recent activity and stated criteria. The total invested from the IPO through March 31, 2025, was approximately $2.0 billion in 62 companies, excluding syndicated loans.

The net asset value per common share as of September 30, 2025, was $13.53.

The geographic requirement for these customer segments is a Continental United States location.

Finance: draft 13-week cash view by Friday.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Cost Structure

You're looking at the expense side of Gladstone Investment Corporation's operations, which is heavily influenced by its structure as a Business Development Company (BDC) managed by an external adviser. The costs here are critical because they directly impact the Net Investment Income (NII) available for distribution to you, the investor.

The total expenses, net of credits, for the quarter ended September 30, 2025 (Q2 2026), jumped to $21.0 million from $14.5 million in the prior quarter, a significant increase of 45.3%. This spike was driven by variable incentive fees and rising debt costs.

Here's a breakdown of the key cost components, focusing on the latest reported figures and year-over-year context:

• Operating Costs: General and administrative expenses, which fall under the broader operating costs, totaled $49.214 million for the fiscal year ended March 31, 2025.
• Interest Expense: Costs associated with borrowed capital showed an upward trend. For the full fiscal year ending March 31, 2025, the Interest Expense was $28,246 thousand. This expense increased again in Q2 2026 due to the timing of borrowings for new investment activity. Specifically, interest expense increased by $1.1 million in Q2 2026 compared to Q1 2026 due to increased borrowings on the credit facility.
• Incentive Fees: These are tied to performance. Gladstone Investment Corporation accrued $4.9 million for capital gains-based incentive fees in Q2 2026. This accrual was the primary driver of the drop in GAAP NII per share to $0.11 from $0.25 in the prior quarter.
• Management Fees: The base management fees paid to the Adviser also saw an uptick. The base management fee increased by $0.4 million in Q2 2026 compared to Q1 2026.

To give you a clearer picture of the cost drivers in the most recent quarter (Q2 2026), here is how the increase in total expenses was composed:

It's important to note that the capital gains-based incentive fee is accrued under US GAAP each quarter based on unrealized appreciation but is only contractually due annually on realized gains. Management often points to the Adjusted NII (which excludes this fee) as a better measure of ongoing performance, which was $0.24 per share in Q2 2026, covering the $0.08 monthly dividend.

Gladstone Investment Corporation (GAIN) - Canvas Business Model: Revenue Streams

You're looking at how Gladstone Investment Corporation (GAIN) actually brings in the money to support those monthly distributions. For the quarter ended September 30, 2025, the total top-line revenue from investments hit $25.3 million. That was a nice bump up from the $23.5 million booked in the quarter ended June 30, 2025. So, the engine is running a bit hotter, which is what we want to see.

The primary drivers for that quarter-over-quarter revenue lift were clear. Interest income saw a $1.0 million increase, which they tied directly to a higher weighted-average principal balance in their interest-bearing portfolio. Then, you had a $0.7 million uptick in dividend and success fee income, which, honestly, is the variable part of the equation; timing matters a lot there.

Here's a quick look at the key revenue figures for the most recent reported quarter:

Interest Income: From secured first lien and subordinated debt investments.

This is the bread and butter for Gladstone Investment Corporation (GAIN). They structure their portfolio to generate steady cash flow from the debt they provide to middle-market companies. Their stated long-term intent for the investment portfolio, measured at cost, is to hold approximately 75% in debt securities, which directly fuels this interest income stream. The other 25% is targeted for equity securities.

• Debt securities target: 75% of portfolio (at cost).
• Equity securities target: 25% of portfolio (at cost).
• Income goal: Grow current income from debt interest payments.

Realized Capital Gains: From the successful sale of equity positions.

While the core income is interest, the long-term capital appreciation from selling equity stakes is crucial for supplemental payouts. For instance, the company has invested in 65 buyout portfolio companies since inception in 2005, exiting 33 of those to date. Though the September 30, 2025 quarter saw a net realized loss of $29.9 million, the structure relies on successful exits generating capital gains to supplement regular distributions.

Dividend and Success Fee Income: Variable income from portfolio company performance.

This is the performance kicker. It includes dividends from portfolio holdings and, importantly, success fees. These fees are tied to realized capital gains, meaning they are not a steady monthly feature but rather lumpy income when investments are sold profitably. You saw this stream increase by $0.7 million quarter-over-quarter for the period ending September 30, 2025. The regular monthly distribution was maintained at $0.08 per share, or $0.96 annually, but shareholders also received a supplemental distribution of $0.70 per share in October, which was declared in the prior quarter, showing the impact of realized gains.

The structure is designed to deliver consistent monthly income plus supplemental income derived from potential capital gains. That's the whole model, really.