Company: GAINI
Filing Date: 2025-05-13
Form Type: 10-K
Source: 0001321741-25-000010
Chunk: 133

Company: GLADSTONE INVESTMENT CORPORATION\DE
Filing Date: 2025-05-13
Form: 10-K
Item: Item 1A
Chunk 133
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 the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms, and structure. However, if we match our competitors’ pricing, terms, and structure, we may experience decreased net interest income and increased risk of credit loss.Our investments in Lower Middle Market portfolio companies are extremely risky and could cause you to lose all or a part of your investment.Investments in Lower Middle Market portfolio companies are subject to a number of significant risks including the following:•Lower Middle Market businesses are likely to have greater exposure to economic downturns than larger businesses. Our portfolio companies may have fewer resources than larger businesses, and any economic downturns or recessions are more likely to have a material adverse effect on them. When the economy contracts, the financial results of Lower Middle Market businesses, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements and an increase in defaults. Consequently, for any portfolio company that is adversely impacted by an economic downturn or recession, its ability to repay our loan(s) or engage in a liquidity event, such as a sale, recapitalization or initial public offering would be diminished. •Lower Middle Market businesses may have limited financial resources and may not be able to repay the loans we make to them. Our strategy includes providing financing to portfolio companies that typically do not have readily available access to financing. While we believe that this provides an attractive opportunity for us to generate profits, this may make it difficult for the portfolio companies to repay their loans to us upon maturity. A borrower’s ability to repay its loan(s) may be adversely affected by numerous factors, including the failure to meet its business plan, a downturn in its industry or negative economic conditions. Deterioration in a borrower’s financial condition and prospects usually will be accompanied by deterioration in the value of any collateral and a reduction in the likelihood of realizing on any guaranties we may have obtained from the borrower’s management. As of March 31, 2025, loans to four portfolio companies were on non-accrual status with an aggregate debt cost basis of $90.2 million, or 13.1% of the cost basis of all debt investments in our portfolio. We cannot assure you that our efforts to improve profitability and cash flows of these companies will prove successful. In some of our loans we expect to be subordinated to a senior lender and our security interest in any collateral would, accordingly, likely be second lien