The Drift Academy: Learn Private Credit and BDCs

Course discovery and reader paths updated October 13, 2026. Individual lessons carry their own assumptions and source notes.

The Drift Academy teaches private credit and business development companies, or BDCs, through lessons, quizzes and worked examples. Begin with a borrower's payment, then learn how loan terms, funding costs and credit losses affect the lender and its shareholders.

You do not need an account to open the lessons or answer the quizzes. Start with the foundations if this is new territory, or go directly to the filing guides if you already know the basics.

Choose where to begin

New to private credit?

Start Lesson 1: How a BDC Loan Becomes Investor Income. It explains interest, principal and the costs between a loan and a dividend. Open the 15-question quiz when you are ready to test the distinctions.

Reading a company report?

Start with How to Read a BDC Earnings Report, then examine individual holdings in How to Read a Schedule of Investments. The BDC Research directory connects those methods to company profiles and earnings analysis.

Want a short practice session?

Use the 15 loan-term flashcards, or try a hypothetical in the BDC Loan Economics Calculator. Calculator outputs are educational, depend on your assumptions and are not forecasts.

For the purpose behind the structure, read Why BDCs Matter.

Start with Private Credit Foundations

The first course follows one dollar of public savings into a private-company loan and back toward a shareholder distribution.

Its opening lesson, How a BDC Loan Becomes Investor Income, asks the question that keeps the whole machine honest: what part of a borrower's payment is actually income?

Start here: Open Lesson 1 and take the 15-question quiz.

Prefer a quicker warm-up? Practice 15 private-credit terms with the flashcards.

The answer is not “all of it.” Principal repayment returns capital. Cash interest produces current income. Payment-in-Kind (PIK) interest enlarges the claim but does not put cash in the BDC's account. Funding costs, operating expenses and credit losses take their share before a dividend reaches an investor.

That is the first habit of serious credit analysis: follow the cash, then inspect every place where the accounting can run ahead of it.

How the Academy works

Each lesson has five parts.

1. The mechanism. A concise explanation of the financial system beneath the headline.
2. The diagnostic. Questions that reveal what you already understand and where your instincts need sharpening.
3. The practice. Immediate explanations for correct and incorrect answers. A wrong answer is useful when it exposes a tempting mistake.
4. The laboratory. A calculator, case study or scenario that lets you change assumptions and watch the consequences travel through the system.
5. The source desk. Primary documents, methodology, Key Terms and disclosure in plain sight.

Answers are checked in the reader's browser. The course does not provide an account-based progress dashboard or synchronized progress across devices. Quizzes are learning exercises, not investor profiles or recommendations.

Course map

Private Credit Foundations

Lesson 1: How a BDC Loan Becomes Investor Income

Trace borrower cash flow through a BDC balance sheet, then take the embedded 15-question quiz. Separate interest, principal, PIK, funding cost and credit loss. Start the lesson and quiz, then test the same mechanics in the BDC Loan Economics Calculator.

Lesson 2: Anatomy of a BDC Loan

Open the legal toolbox inside a private loan. Learn how seniority, collateral, covenants and unitranche arrangements can protect a lender without guaranteeing repayment.

Lesson 3: Can a BDC Dividend Be Trusted?

Work backward from the payout through Net Investment Income (NII), cash collection, credit quality, Net Asset Value (NAV) and funding resilience.

Lesson 4: BDC NAV and Non-Accruals

Read fair-value marks, amendments, non-accruals and realized losses as a sequence. Build a simple NAV bridge and learn what can weaken before a loan stops accruing.

Lesson 5: How BDCs Use Leverage and Funding

Inspect the lender's lenders. Follow revolvers, unsecured notes, asset coverage, liquidity and debt maturities beneath the portfolio.

Lesson 6: BDC Loan Returns: Yield, Internal Rate of Return (IRR), Fees and Credit Losses

Put a loan on the return bench. Separate coupon from Internal Rate of Return (IRR), model Original Issue Discount (OID), fees and Payment-in-Kind (PIK) interest, then let recovery test the attractive headline.

Practice deck: BDC Loan Terms Flashcards

Master 15 terms that appear in credit agreements, earnings reports and BDC filings. The flashcard set is written as a real retrieval exercise, not a glossary with the answers already shouting at you.

Complete the six lessons in order, then apply the framework in The Drift BDC Credit & Income Monitor. Check the edition and price dates; the Monitor is not a live quote screen.

Analysis track: read a BDC like an underwriter

Use this sequence when the goal is to move from an earnings headline to an evidence-based view of the company:

1. Read the earnings report and build the seven-number first pass.
2. Read the schedule of investments and locate borrower, seniority, rate, maturity and fair-value risk.
3. Test the dividend against recurring Net Investment Income (NII), spillover income and credit quality.
4. Bridge Net Asset Value (NAV) and non-accruals to distinguish a temporary mark from a weakening loan book.
5. Inspect leverage and funding beneath the asset portfolio.
6. Value the BDC only after the income and credit evidence is assembled.

The order matters. A valuation multiple is the last step in the analysis, not the first.

BDC Valuation

Lesson 1: How to Value a BDC: NAV, Earnings, Dividends and Credit

Use Net Asset Value (NAV) and normalized Net Investment Income (NII) as separate anchors, test both against credit quality, build explicit scenario ranges in the BDC Valuation Workbench and defend the result in a 12-question quiz. This is where the accounting stops being a collection of ratios and starts becoming judgment.

BDC Filing Literacy

Lesson 1: How to Read a BDC Earnings Report: NII, NAV and Credit

Build a seven-number first pass, trace management's headline to the filing, reconcile adjusted measures and inspect credit, funding and portfolio turnover. The lesson includes a filing desk, a sourced Main Street Capital example and an eight-question quiz with shuffled choices.

Lesson 2: How to Read a BDC Schedule of Investments: Loans, Marks and Risk

Turn the portfolio table into a credit map. Read instrument type, rate, maturity, cost, fair value and footnotes together; group security rows at the borrower level; then use the Portfolio Risk Desk and eight-question quiz to test the method.

Future courses will move into portfolio construction, tax treatment and deeper filing-based case studies.

Put the lessons to work

Use the BDC Research directory to choose a company report, and the Investor Tools & Guides to work through its income and credit measures. Keep the reporting period and the issuer's definitions with each figure you compare.

BDC Weekly follows filings, borrowing and private-credit developments between earnings reports. Subscribe to The Drift to receive the next issue by email. The lessons remain available without subscribing.

What you should be able to do

The Academy is not built around memorizing definitions for their own sake.

By the end of the foundations course, a reader should be able to open a BDC filing and ask better questions:

• How much reported income arrived in cash?
• What is the borrower being asked to pay, and can its business support that burden?
• How senior is the lender's claim if the borrower fails?
• What does the BDC pay to fund the asset?
• How much of the dividend is supported by repeatable earnings rather than a temporary tailwind?
• What evidence would change the thesis?

That is Wall Street fluency without the velvet rope.

Why this matters

BDCs connect public investors with private companies that need capital for acquisitions, equipment, healthcare services, software, manufacturing, logistics and ordinary growth.

That structure can make investors more prosperous while financing productive ideas. It can also allocate money badly, overburden borrowers or disguise weak cash collection behind attractive reported yields.

Capital is not virtuous because it moves. It becomes useful when it reaches a sound idea at a price the business can carry and the investor can understand.

The mission of The Drift is to make that allocation more legible. A better-informed retail investor can demand better underwriting, recognize fragile income and direct savings toward institutions that finance durable enterprise.

The learning standard

The Academy uses primary documents whenever the claim permits it: regulatory guidance, public filings, official fund materials, credit agreements and economic data from public institutions.

Institutional research can add context, but a brand name is not a substitute for evidence. Current figures are dated. Hypothetical calculations show their assumptions. Uncertainty is named rather than lacquered over.

Every abbreviation is expanded on first use and repeated below in Key Terms. Important definitions never depend only on a hover label.

Key Terms

Business Development Company (BDC): A closed-end company that elects BDC status under the Investment Company Act of 1940, operates to invest in qualifying businesses, and makes managerial assistance available as the law requires.

Payment-in-Kind (PIK): Interest paid by adding to the loan balance rather than delivering cash during the period.

Net Asset Value (NAV): The value of a BDC's assets minus its liabilities, expressed in total or per share.

Net Investment Income (NII): Investment income less applicable operating expenses, commonly used when evaluating a BDC's recurring earnings and dividend coverage.

Source Notes

The Academy's description of publicly traded BDC structure and investor risks follows the U.S. Securities and Exchange Commission's investor bulletin on publicly traded BDCs. Loan mechanics are checked against current public BDC filings and credit disclosures. Each lesson carries its own source notes and methodology so a reader can inspect the evidence closest to the claim.

Disclosure

The Drift Academy is not an educational accrediting institution. Lessons, quizzes, flashcards, calculators and hypothetical examples do not award professional credentials.

The Drift is published by Drift Research LLC for informational and educational purposes only. Nothing published by The Drift constitutes personalized investment advice, financial advice, tax advice, accounting advice, legal advice, or a recommendation to buy, sell, or hold any security. The Drift is not a registered investment adviser, broker-dealer, financial planner, or fiduciary. Data and calculations are derived from sources believed reliable and from methods described in the applicable source and calculation notes, but they may contain errors, estimates, rounding differences, or information that has become outdated. Readers should review the original sources and make their own assessment. All investments involve risk, including possible loss of principal. Past performance and hypothetical results do not guarantee future results. Consult qualified professionals before acting.

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