Prospect Capital Corporation (PSEC): Business Model Canvas [Dec-2025 Updated]

You're looking to crack the code on how Prospect Capital Corporation, a veteran in private credit, keeps delivering for investors, especially now. Honestly, their model is built on a clear engine: originating loans to U.S. middle-market companies and funding it all through savvy capital raises. As of late 2025, they manage about $6.64 billion in assets while consistently offering investors a yield over 20%, largely by focusing on safer 71.1% first-lien debt. To see exactly how they source those deals, manage that massive portfolio, and keep those monthly distributions flowing, dig into the full Business Model Canvas breakdown we mapped out below.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Key Partnerships

You're looking at the network that keeps Prospect Capital Corporation funded and deal-sourcing robust. Honestly, these relationships are the engine room for a Business Development Company (BDC) like Prospect Capital Corporation.

The core of the liquidity structure involves major financial institutions.

• Institutional banks maintain the primary revolving credit facility commitments at an aggregate of $2.1215 billion as of the quarter ended September 30, 2025, provided by a group of 48 banks.
• This facility has a maturity date of June 28, 2029, with a revolving period extending through June 28, 2028.

The ability to tap debt and equity capital markets provides the necessary scale and diversification. Prospect Capital Corporation emphasizes unsecured funding to avoid restrictive covenants.

Deal flow relies heavily on established relationships within the private capital ecosystem. Prospect Capital Corporation actively cultivates these origination channels.

• In the five years leading up to March 31, 2025, Prospect closed 68 middle market transactions with 56 private equity sponsors.
• The firm also works with dozens of financial intermediaries, including Wall Street banks, for deal flow.

Expanding distribution to the private wealth channel is a specific strategic focus, involving fintech platforms.

Prospect Capital Management L.P. entered a strategic partnership with iCapital in November 2024. This arrangement allows financial advisors access to Prospect Capital Corporation's Business Development Company (BDC) opportunities via the iCapital Marketplace.

Finance: review the impact of the October 2025 note issuance on the weighted average cost of unsecured debt by next Tuesday.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Key Activities

You're looking at the core actions Prospect Capital Corporation takes to generate returns for its shareholders, focusing on the data closest to late 2025. These activities center on disciplined lending, portfolio refinement, and consistent capital deployment.

Origination and underwriting of new middle-market loans.

Prospect Capital Corporation actively originates and underwrites new debt and equity investments in U.S. middle-market businesses. For the quarter ended September 30, 2025, the company had total originations of $91.6 million. The underwriting process heavily favors senior secured positions, as 81% of those new originations, or $74.2 million, were first lien senior secured loans during that same period. The investment screening process maintains an intensive standard, with a book-to-look ratio of less than 2%.

Strategic rotation into first lien senior secured loans (71.1% of portfolio cost).

A major ongoing activity is the strategic shift to de-risk the portfolio by increasing exposure to the most secure debt. As of the quarter ended September 30, 2025, the first lien mix reached 71.1% of investments based on cost, an increase of 701 basis points since June 2024. Overall, senior and secured debt represented 85% of the portfolio at cost as of September 2025. This rotation involves exiting riskier assets, evidenced by the subordinated structured notes mix decreasing to 0.3% of the portfolio at cost.

Here's a look at the investment portfolio allocation at cost as of September 30, 2025:

Portfolio management, valuation, and monitoring of 114 portfolio companies.

Managing the existing investments is a constant activity, ensuring performance and managing risk. As of September 30, 2025, Prospect Capital Corporation monitored 92 portfolio companies spanning 32 separate industries. The aggregate fair value of the total investment portfolio stood at $6.7 billion as of June 2025, with total assets reported at $6.64 billion as of September 30, 2025. The company tracks the performance of its investments, noting that non-accrual loans were 0.7% of total assets at fair value for the quarter ended September 30, 2025.

The company focuses on enhancing operating performance within these holdings. For instance, management and employees owned 28.5% of all common shares outstanding as of September 30, 2025, representing approximately $0.9 billion of common equity at Net Asset Value (NAV).

Capital raising via perpetual preferred stock and unsecured debt issuances.

Sustaining operations requires continuous, cost-effective capital raising. Prospect Capital Corporation utilizes multiple avenues for this. The company has raised significant capital from its existing $2.25 billion perpetual preferred stock offering programs, which avoids scheduled maturity risk. Furthermore, on October 30, 2025, the company completed an institutional issuance of approximately $168 million in senior unsecured 5.5% Series A Notes due 2030. As of September 30, 2025, unsecured debt plus perpetual preferred accounted for 80.8% of total debt plus preferred. The weighted average cost of unsecured debt financing was 4.54% at that date.

Real estate investment and management.

While actively rotating out of real estate, management of the remaining portfolio, primarily through National Property REIT Corp (NPRC), remains a key activity. The real estate property portfolio represented 14.2% of investments at cost as of September 2025. The company actively managed this by exiting three property investments since June 2025, generating approximately $59 million in net proceeds, which are expected to be redeployed into first lien loans. The real estate investments have historically delivered a 24% unlevered investment-level gross cash Internal Rate of Return (IRR) since the strategy started. The unrealized gain in NPRC was $320 million as of September 30, 2025.

Key financial metrics from the September 2025 quarter include:

• Net Investment Income (NII) per share: $0.17.
• Monthly common shareholder distribution declared: $0.045 per share for November 2025, December 2025, and January 2026.
• Net Asset Value (NAV) per common share: $6.45 as of September 30, 2025.
• Annualized yield on performing interest-bearing investments for the quarter ended June 2025: 12.2%.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Key Resources

You're looking at the core assets that Prospect Capital Corporation (PSEC) uses to generate its returns. Honestly, for a Business Development Company (BDC), the key resources are a mix of hard financial scale and the human capital that finds and manages the deals. Here's a breakdown of what they are leaning on as of late 2025.

The sheer size of the balance sheet is a primary resource. As of the quarter ended September 30, 2025, Prospect Capital Corporation reported $6.641870 billion in total assets. This scale allows them to participate in larger transactions and maintain access to diverse funding markets. It's the foundation, really.

The human element is just as critical. You need sharp people to navigate the middle market. Prospect Capital relies on an investment team described as having 150+ professionals dedicated to sourcing and diligence. This team supports a significant deal pipeline; they see over 3,000+ opportunities annually, which is a massive funnel for finding quality investments. To be fair, seeing that many deals is what keeps their portfolio fresh.

Alignment of interests is another key resource, often overlooked. Prospect Capital boasts significant insider ownership, with senior management and employees owning 28.5% of the common shares outstanding as of September 30, 2025. That's a strong vote of confidence from the people running the show.

Their liability structure is engineered for stability and long-term deployment. Prospect Capital maintains a laddered liability structure with long-term matched-book funding. This means their debt maturities are spread out, which helps manage refinancing risk. As of the latest reports, they emphasize unsecured financing, with 80.8% of their total debt plus preferred equity being unsecured or preferred equity, and 63% of assets are unencumbered.

Let's put the core quantitative resources into a clearer view for you:

Beyond the headline numbers, the structure of their investment activity itself acts as a resource, built over time. This is evidenced by their track record in sourcing and exiting deals:

• Invested over $22 billion since the July 2004 IPO through September 30, 2025.
• Exited over 350 investments since inception through September 30, 2025.
• Portfolio as of September 30, 2025 included 92 investments across 32 industries.
• 85% of the portfolio is in senior and secured investments (majority first lien) as of September 30, 2025.

Finance: draft 13-week cash view by Friday.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Value Propositions

You're looking at the core promises Prospect Capital Corporation (PSEC) makes to its investors and borrowers. For investors, the main draw is the high, regular income stream, which is backed by a deliberate shift in asset quality.

High Current Income for Investors with a Dividend Yield Over 20%

Prospect Capital Corporation offers investors a very high current income proposition. As of late 2025, the forward dividend yield was reported at 20.26% as of December 5, 2025, with other recent figures showing yields of 20.19% and over 19%. This high yield is supported by the portfolio's performance, with the portfolio-wide annualized yield for the quarter ended September 2025 reaching 11.8%. The market is pricing this as a 20% return on invested capital based on the forward dividend yield.

Monthly Cash Distributions of $0.045 Per Common Share

The income is delivered consistently on a monthly basis. Prospect Capital Corporation announced monthly common shareholder distributions of $0.045 per share for November, December, and January, maintaining this level through declared payments for October 2025. To date, the company has distributed over $4.6 billion in total, equating to $21.79 per share since its Initial Public Offering.

The key income metrics as of late 2025 are summarized below:

Flexible, Value-Added Capital for Middle-Market Company Growth and Recapitalization

Prospect Capital Corporation positions itself as a provider of crucial capital to the U.S. middle market. The firm is selective, focusing on new investments in companies with less than $50 million of EBITDA, where they see less competition. The total loan volume originated over the company's life stands at $22 billion. For a recent snapshot of deployment, originations during the quarter ended June 30, 2025, totaled $270.9 million.

Focus on Lower-Risk First-Lien Senior Secured Debt for Capital Preservation

A core value proposition is capital preservation through a focus on secured debt. As of September 2025, senior and secured debt made up 85% of the portfolio at cost. Specifically, first-lien senior secured loans comprised 71.1% of the portfolio at cost as of September 2025, up from 51.8% in 2022. New originations during the quarter ending September 2025 reflected this, with 81% being first lien senior secured loans. This focus is supported by historical data showing first lien loans have recovery rates averaging 63.5% in default scenarios. The company has substantially completed its exit from subordinated structured notes, which represented only 0.3% of the portfolio as of September 2025.

The portfolio mix clearly shows this strategic emphasis:

• First Lien Senior Secured Loans: 71.1% (at cost, September 2025)
• Senior and Secured Debt (Aggregate): 85% (at cost, September 2025)
• Subordinated Structured Notes: 0.3% (as of September 2025)

Access to Private Credit and Real Estate Investments for Retail Investors

Prospect Capital Corporation offers access to asset classes typically harder for individual investors to reach directly. Prospect Capital Management L.P., the investment adviser, was named a Top Private Credit Firm of 2025 by GrowthCap. The firm manages a large platform with $9.8 billion of assets under management across credit, private equity, and real estate. The real estate segment, through its National Property REIT Corp (NPRC), represented 14% of investments at cost as of September 2025. This real estate platform invests in U.S. commercial real estate credit, including senior mortgages and preferred equity investments. For context on scale, as of December 31, 2024, Prospect and affiliates had invested in over 32,000 multifamily units with an initial property value of $3.5 billion.

You can see the scale of their diversified offerings here:

Finance: review the sustainability of the $0.045 monthly distribution against the Q2 2025 NII of $0.17 per share by next Tuesday.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Customer Relationships

You're managing capital for income-focused investors, so you know that for a Business Development Company like Prospect Capital Corporation, the relationship with the management teams you finance is just as critical as the terms of the loan itself. Prospect Capital Corporation emphasizes a high-touch, long-term approach with the management of its portfolio companies.

This isn't a transactional handshake; it's about deep integration. Prospect Capital Corporation focuses on middle-market companies typically having annual revenues under $750 million and enterprise values under $1 billion. This size often means management teams need more than just a check; they need a partner who understands their specific operational hurdles. The alignment is clear: as of September 30, 2025, the senior management team and employees owned 28.5% of all common shares outstanding, representing about $0.9 billion of common equity at Net Asset Value (NAV). That's a tangible commitment to the long-term success of the portfolio.

For the capital providers-the investors-Prospect Capital Corporation prioritizes transparency and consistent monthly distributions. Income-seeking investors rely on this steady payout. For instance, the company declared monthly cash distributions of $0.0450 per common share for November 2025, December 2025, and January 2026. This commitment to monthly income is a core relationship pillar. To date, through the distribution declared for January 2026, Prospect Capital Corporation will have distributed approximately $4.634 billion in cumulative distributions to all common shareholders. Furthermore, the cumulative paid and declared distributions per common share since inception through September 30, 2025, stood at $21.79. Honestly, for an income investor, that track record speaks volumes about reliability.

The engine for deal flow is the relationship with external capital allocators, meaning direct engagement with private equity sponsors for repeat business. Prospect Capital Corporation has cultivated a deep network here. Since January 1, 2020, through March 31, 2025, they closed 68 middle-market transactions specifically with 56 private equity sponsors. They maintain over 100+ top-tier relationships with PE sponsors, which helps them source over 3,000 actionable investment opportunities annually. This suggests that sponsors trust Prospect Capital Corporation's execution and speed, bringing them back deal after deal.

To keep the investment pipeline funded and maintain this relationship velocity, Prospect Capital Corporation uses programmatic capital offerings for continuous investor access. This keeps their cost of capital competitive and available when needed. They actively use their existing $2.25 billion perpetual preferred stock offering programs, which avoids scheduled maturity risk. Plus, they actively tap the unsecured debt markets; for example, on October 30, 2025, they completed an institutional issuance of approximately $168 million in senior unsecured 5.5% Series A Notes due 2030. As of September 30, 2025, they had $652.2 million of program notes outstanding, laddered out to March 2052. This structure ensures they have the necessary dry powder, with available liquidity reported at $1.52 billion as of that same date.

Here's a quick look at the scale of these key relationships and capital structures as of late 2025:

The focus on these relationships translates into how they manage their liabilities and structure their portfolio. For instance, first lien senior secured loans represented 70.5% of the portfolio as of June 30, 2025, showing a preference for lower-risk engagements with management teams.

• Investor relations emphasize monthly distributions, declared at $0.0450 per share for upcoming months.
• Management and employee ownership stands at 28.5% of common shares, showing strong internal alignment.
• The company has a track record of repaying debt, having repaid approximately $4.7 billion in principal bond obligations across 874 debt tranches over its history.
• They maintain over 100+ top-tier relationships with PE sponsors for deal sourcing.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Channels

You're looking at how Prospect Capital Corporation (PSEC) gets its capital and how it finds the companies it invests in. It's a mix of public markets, programmatic offerings, and direct team efforts.

NASDAQ Stock Exchange for Common Stock (PSEC)

The common stock trades publicly on the NASDAQ-GS exchange. This is a primary route for retail and institutional equity capital. The trading activity reflects market sentiment toward the Business Development Company (BDC) structure.

Here are some recent trading metrics as of late 2025:

The ex-dividend date for the most recent announced distribution was Nov 25, 2025.

Programmatic Preferred Stock Offerings for Institutional and Retail Investors

Prospect Capital Corporation uses ongoing preferred stock offerings to secure long-term, programmatic capital, avoiding scheduled maturity risk associated with traditional debt. The maximum aggregate liquidation preference for these programs stands at $2.25 billion.

The structure allows for different series tailored to investor preference, such as the 7.50% Series A5 and 7.50% Series M5 announced in early 2025, both paying a 7.5% dividend.

• Series A5 Sales Load: 10% of offering price.
• Series M5 Sales Load: 3% of offering price.
• Total Stockholder Transaction Expenses (Series A5): 11.5%.
• Total Stockholder Transaction Expenses (Series M5): 4.5%.
• Annual Management Fees: 5.5% of net assets attributable to common stock.
• Annual Incentive Fees: 1.82% of net assets attributable to common stock.

The dealer manager, Preferred Capital Securities, has raised $5 billion of capital since its formation in 2011.

Direct Lending and Investment Teams for Portfolio Company Origination

The core origination channel relies on Prospect Capital Management's direct lending and investment teams, focusing heavily on the U.S. middle market. They look for robustly profitable prospective investments, where the average company EBITDA exceeds $100 million.

Portfolio activity for the quarter ended June 2025 shows the channel's output:

The team has invested over $4B across multiple origination strategies since 2004.

iCapital Platform for Reaching Wealth Management Advisors

Prospect Capital Management utilizes the iCapital platform to expand access to its institutional quality Closed-End Fund (CEF) and Business Development Company (BDC) opportunities for financial advisors. This channel leverages a major fintech infrastructure provider.

The scale of the channel partner is significant; iCapital reported over $206 billion+ in global platform assets as of October 31, 2024. Prospect Capital Management reported $11.9 billion of Assets Under Management (AUM) as of November 2024.

• Partnership announced: November 12, 2024.
• Prospect's Regulatory Assets Under Management (as of June 30, 2024): $8.9 billion.
• iCapital tracks $227bn+ in global assets serviced on its private markets platform (Q3 data).

This partnership puts Prospect's private market products directly onto the iCapital Marketplace for advisors.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Customer Segments

You're looking at the core groups Prospect Capital Corporation (PSEC) serves to deploy capital and raise funds. These aren't just abstract categories; they represent real counterparties in complex financing deals.

Retail and institutional investors seeking high-yield income.

• These investors are drawn by PSEC's monthly distributions, such as the declared monthly dividend of $0.045 per common share for November 2025, December 2025, and January 2026.
• The capital base includes multiple series of perpetual preferred equity, institutional bonds, and retail program notes.
• As of September 30, 2025, the Total Equity Capitalization stood at $4.6 billion.
• Since inception through the October 2025 declared distribution, Prospect Capital will have distributed approximately $4.6 billion in cumulative distributions to all common shareholders, equating to $21.66 per share.
• Corporate insiders, a key investor group, owned about 27.98% of the company's stock as of late September 2025.

U.S. middle-market companies (revenues up to $750 million).

This is the primary destination for PSEC's deployed capital. The focus is clearly defined by size and structure.

Private equity sponsors needing financing for leveraged buyouts.

Prospect Capital Corporation actively engages with sponsors, though the focus has shifted slightly.

• The strategy includes focusing on new investments in companies with smaller funded private equity sponsors and independent sponsors.
• The firm also invests in companies with no third party financial sponsors.
• Total assets as of September 30, 2025, were $6.64 billion, down from $6.80 billion the prior quarter.

Institutional lenders participating in the credit facility.

These lenders provide the necessary leverage to fund the middle-market investments.

• PSEC maintains a revolving credit facility with aggregate commitments of $2.1 billion.
• This facility involves 48 current lenders.
• The facility matures in June 2029, offering a long-term funding ladder.
• The company also accesses capital through institutional bond issuances, such as the approximately $168 million of senior unsecured 5.5% Series A Notes due December 31, 2030, completed in October 2025.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Cost Structure

You're looking at the expense side of the ledger for Prospect Capital Corporation, which is heavily influenced by its debt-funded structure and external management arrangement. Honestly, for a Business Development Company (BDC), the cost of capital is the single biggest driver here.

Interest Expense on Unsecured Debt Financing

The cost of borrowing is paramount, as Prospect Capital relies significantly on debt to fund its investments. As of the quarter ended September 30, 2025, the weighted average cost of unsecured debt financing stood at 4.54%. This is slightly up from 4.52% at June 30, 2025. For context, at the end of the March 2025 quarter, this cost was 4.33%.

Looking at the actual expense for the most recent period, the Interest and credit facility expenses for the quarter ended September 2025 totaled $33,687 thousand. This compares to $36,151 thousand for the quarter ended March 2025. The company actively manages its liabilities; for instance, it retired a $156.2 million convertible bond maturity in March 2025.

Management and Incentive Fees Paid to the External Advisor

Prospect Capital Corporation is externally managed by Prospect Capital Management L.P. (PCM), which incurs both a base fee and an incentive fee. The fee structure includes a hurdle rate comparison:

• Quarterly Hurdle Rate: 1.75% (or 7.00% annualized) of pre-incentive fee net investment income on net assets.
• Income Incentive Fee Trigger: 20.00% of pre-incentive fee net investment income that exceeds 125.00% of the quarterly hurdle rate (8.75% annualized).

For the quarter ended September 2025, the costs were:

To give you a comparison, the Base management fee for the March 2025 quarter was $35,578 thousand, with an Income incentive fee of $4,207 thousand.

Operating Expenses Related to a 150+ Professional Staff

The operational overhead supports a substantial team. As of March 31, 2025, Prospect Capital highlighted having 125+ professionals focused on the middle market. Another data point suggests 177 Employees for Prospect Capital Corporation. These professionals drive the investment diligence and management processes.

Total Operating Expenses for the quarter ending September 2025 were $78,274 thousand. Here is a breakdown of key components for that quarter:

• Allocation of overhead from Prospect Administration: $5,524 thousand.
• Audit, compliance and tax related fees: $899 thousand.
• Directors' fees: $150 thousand.

The Total Operating Expenses for the March 2025 quarter were $87,227 thousand.

Costs of Capital Raising, Including Debt and Equity Issuance

Issuing new debt or equity involves direct costs, though the proceeds often go toward refinancing or investment deployment. A recent example of a debt issuance cost relates to the new notes:

On October 30, 2025, Prospect Capital completed the institutional issuance of approximately $168 million in aggregate principal amount of senior unsecured 5.5% Series A Notes due 2030. The purpose of this issuance was expected to be primarily for the refinancing of existing indebtedness.

The capital structure is also supported by perpetual preferred stock programs, with $2.25 billion in existing programs noted as a diversified capital source.

Prospect Capital Corporation (PSEC) - Canvas Business Model: Revenue Streams

The revenue streams for Prospect Capital Corporation are heavily concentrated in the income generated from its core lending activities within the middle market, supplemented by realized gains from asset sales and ongoing income from its specialized real estate holdings.

Interest Income from Middle-Market Loans: This is the dominant source of revenue for Prospect Capital Corporation. For the fiscal quarter ended September 30, 2025, 96.7% of the total investment income was derived from interest income, reflecting the company's strategic focus on senior secured debt investments that provide a steady, recurring cash flow stream. This high percentage underscores the importance of the debt portfolio in funding operations and distributions.

The Total Investment Income for the quarter ended September 30, 2025, was reported at $157.6 million. This figure represents the top-line revenue generated from all investments before expenses.

Within the interest income, a portion is recognized as Payment-in-Kind (PIK) interest, which accrues and is added to the principal balance rather than being paid in cash currently. For the September 2025 quarter, Prospect Capital's PIK income was $15.4 million, which represented about 10% of the total interest income of approximately $152.4 million. This is a reduction from the 18% share PIK held in the interest income during the same period last year, signaling a de-risking of the income profile.

You can see a comparison of key income components below:

Income from Real Estate and Structured Credit Investments: While the primary focus is middle-market lending, Prospect Capital Corporation maintains exposure to real estate through its investment in National Property REIT Corp (NPRC). The remaining real estate property portfolio included 55 properties as of October 31, 2025, which paid an income yield of 5.1% for the September 2025 quarter. The company also had an unrealized gain of $320 million on its aggregate NPRC investments as of September 30, 2025. Income from structured credit, specifically subordinated structured notes, is being actively reduced as the company exits that portfolio.

Capital Gains/Losses from the Sale or Exit of Investments: Realized gains contribute to revenue when investments are successfully exited. Prospect Capital Corporation exited three property investments after July 1, 2025, generating approximately $59 million of net proceeds. These specific exits yielded an unlevered investment-level gross cash IRR of 22.8% and a cash-on-cash multiple of 2.3 times. Since its IPO through September 30, 2025, Prospect Capital's exited investments resulted in an investment level realized gross internal rate of return (IRR) of approximately 12%, based on total capital invested of approximately $13.0 billion and total proceeds of approximately $16.6 billion.

Here are the key components driving the revenue profile:

• Interest income from middle-market loans is the primary driver.
• The first lien senior secured loan mix represented 84.8% of investments at cost as of September 30, 2025.
• Real estate portfolio income yield was 5.1% for the September quarter.
• Realized gross IRR on exited investments since inception is approximately 12%.
• Total cumulative distributions paid and declared through the January 2026 distribution reached $4.634 billion.

Finance: draft Q2 2026 revenue projection based on current first lien mix by next Tuesday.