##### 





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, DC 20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   COMMISSION FILE NUMBER: 0-51459
 PATRIOT CAPITAL FUNDING,
    INC.
 (EXACT NAME OF REGISTRANT AS
    SPECIFIED IN ITS CHARTER)
  DELAWARE

74-3068511(STATE OR JURISDICTION OF
    INCORPORATION OR ORGANIZATION)

(IRS EMPLOYER
    IDENTIFICATION NO.)274 Riverside Avenue, Westport, CT(ADDRESS OF PRINCIPAL
    EXECUTIVE OFFICE)

06880(ZIP CODE)   REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE:
 (203) 429-2700
  SECURITIES
    REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
  Name of each exchangeTitle of each class

on which registeredCommon Stock, par value $0.01 per share

NASDAQ Global Select Market   SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
    ACT:
    NONE
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o

Smaller reporting company
    o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




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TABLE OF
    CONTENTS
  PagePART IITEM 1.


BUSINESS


1ITEM 1A.


RISK FACTORS


13ITEM 1B.


UNRESOLVED STAFF COMMENTS


23ITEM 2.


PROPERTIES


23ITEM 3.


LEGAL PROCEEDINGS


23ITEM 4.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


23PART IIITEM 5.


MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


24ITEM 6.


SELECTED FINANCIAL DATA


28ITEM 7.


MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND RESULTS OF OPERATIONS


29ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK


46ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


47ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE


76ITEM 9A.


CONTROLS AND PROCEDURES


76ITEM 9B.


OTHER INFORMATION


77PART IIIITEM 10.


DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


77ITEM 11.


EXECUTIVE COMPENSATION


77ITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    AND RELATED STOCKHOLDER MATTERS


77ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE


77ITEM 14.


PRINCIPAL ACCOUNTING FEES AND SERVICES


78PART IVITEM 15.


EXHIBITS, FINANCIAL STATEMENT SCHEDULES


78SIGNATURES


80EXHIBIT INDEX


81




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PART I ITEM 1.  Business  General
              Corporate
    History and Information




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U.S.-based
  (203) 429-2700. www.patcapfunding.com Form 10-K, Form 10-Q, Form 8-K Form 10-K Form 10-K.
  Our
    Target Market
        Our
    Business Strategy
    
    Deliver a comprehensive suite of customized financing
    solutions in a responsive and efficient
    manner.  Our goal is to provide a comprehensive
    suite of customized financing solutions in a responsive and 2




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efficient manner to private equity sponsors in connection with
    their proposed investments in small- to mid-sized companies.
    Private equity sponsors with whom we work require a high level
    of creativity and knowledge in structuring investment
    transactions. Our ability to provide financing across all levels
    of a companys capital structure appeals to private equity
    sponsors that typically seek to rely on a limited number of
    third party financing sources for their investment transactions
    in order to facilitate and ensure the timely closing of such
    transactions. We believe our ability to provide a comprehensive
    suite of customized financing solutions sets us apart from other
    lenders that focus on providing a limited number of financing
    solutions.  
    Capitalize on our strong private equity sponsor
    relationships.  We are committed to establishing,
    building and maintaining our private equity sponsor
    relationships. Our marketing efforts are focused on building and
    maintaining relationships with private equity sponsors that
    routinely make investments in the small- to mid-sized companies
    that we target. We believe that our relationships with private
    equity sponsors provide us with, in addition to potential
    investment opportunities, other significant benefits, including
    an additional layer of due diligence and additional monitoring
    capabilities. Private equity sponsors also provide our portfolio
    companies with significant benefits, including strategic
    guidance, and an additional potential source of capital and
    operational expertise. We have assembled a management team that
    has developed an extensive network of private equity sponsor
    relationships in our target market over the last 15 years.
    We believe that our management teams relationships with
    these private equity sponsors will provide us with significant
    investment opportunities.
    Employ disciplined underwriting policies and maintain
    rigorous portfolio monitoring.  We have an
    extensive investment underwriting and monitoring process. We
    conduct a thorough analysis of each potential portfolio company
    and its prospects, competitive position, financial performance
    and industry dynamics. We stress the importance of credit and
    risk analysis in our underwriting process. We believe that our
    continued adherence to this disciplined process will permit us
    to mitigate loan losses, to continue to generate a stable and
    diversified revenue stream of current income from our debt
    investments and provide us with the ability to make
    distributions to our stockholders.
    Leverage the skills of our experienced management
    team.  Our management team is led by our president
    and chief executive officer, Mr. Buckanavage, and our chief
    operating officer and chief compliance officer,
    Mr. Hassler, who combined have more than 35 years of
    experience in lending to, and investing in, small- to mid-sized
    companies. The members of our management team have broad
    investment backgrounds, with prior experience at specialty
    finance companies, middle market commercial banks and other
    financial services companies. We believe that the experience and
    contacts of our management team will continue to allow us to
    effectively implement the key aspects of our business strategy.  Investment
    Critera
    
    Established companies with positive cash
    flow.  We seek to invest in established companies
    with sound historical financial performance. We typically focus
    on companies with a history of profitability on an operating
    cash flow basis and that generate minimum annual EBITDA
    (Earnings Before Interest, Taxes, Depreciation and Amortization)
    of $2 million. We do not intend to invest in
    start-up
    companies or companies with speculative business plans.
    Strong competitive position in industry.  We
    analyze the strengths and weaknesses of target companies
    relative to their competitors. The factors we consider include
    relative product pricing, product quality, customer loyalty,
    substitution risk, switching costs, patent protection, brand
    positioning and capitalization. We seek to invest in companies
    that have developed leading positions within their respective
    markets, are well positioned to capitalize on growth
    opportunities and operate businesses or in 3




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industries with significant barriers to entry. We seek companies
    that demonstrate advantages when compared to their competitors,
    which may help to protect their market position and
    profitability.  
    Experienced management team.  We seek to invest
    in companies that have experienced management teams. We also
    seek to invest in companies that have proper incentives in
    place, including having significant equity interests, to
    motivate management to act in concert with our interests as
    investors.
    Diversified customer and supplier base.  We
    generally seek to invest in companies that have a diversified
    customer and supplier base. Companies with a diversified
    customer and supplier base are generally better able to endure
    economic downturns, industry consolidation, changing business
    preferences and other factors that may negatively impact their
    customers, suppliers and competitors.
    Private equity sponsorship.  We generally seek
    to invest in companies in conjunction with private equity
    sponsors who have proven capabilities in building value. We
    believe that a private equity sponsor can serve as a committed
    partner and advisor that will actively work with the company and
    its management team to meet company goals and create value. We
    assess a private equity sponsors commitment to a portfolio
    company by, among other things, the capital contribution it has
    made or will make in the portfolio company.
    Exit strategy.  We seek to invest in companies
    that we believe will provide a steady stream of cash flow to
    repay our debt investments and reinvest in their respective
    businesses. We expect that the primary means by which we exit
    our debt investments will be through the repayment of our
    investment by internally generated cash flow. In addition, we
    will seek to invest in companies whose business models and
    expected future cash flows may provide alternate methods of
    repaying our investment, such as through a strategic acquisition
    by other industry participants, an initial public offering, a
    recapitalization or another capital market transaction.  Underwriting
    Process and Investment Approval
    
    Transaction description;
    Company description, including product or service analysis,
    market position, market dynamics, customer and supplier analysis
    and evaluation of management;
    Quantitative and qualitative analysis of historical financial
    performance and financial projections;
    Competitive landscape;
    Business strengths and weaknesses;
    On-site
    visits with management and relevant employees;
    Quantitative and qualitative private equity sponsor
    analysis; and
    Potential investment structures, senior and total leverage
    multiples and investment pricing terms.  and/or and/or
  
    Initial or additional
    on-site
    visits with management and relevant employees;
    Review of historical and projected financial statements,
    including reports from third-party accountants;
    Interviews with customers and suppliers;
    Research on products and services, market dynamics and
    competitive landscape; 4




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
    Management background checks;
    Review of material contracts;
    Review by legal, environmental or other industry consultants, if
    applicable; and
    Financial sponsor diligence, including portfolio company and
    lender reference checks.        Investments
  payment-in-kind payment-in-kind
  Debt
    Investments
    
    negotiating covenants that are designed to protect our
    investments while affording our portfolio companies as much
    flexibility in managing their businesses as possible. Such
    restrictions may include affirmative and negative covenants,
    default penalties, lien protection, change of control provisions
    and board rights; and
    requiring a total return on our investments (including both
    interest and potential equity appreciation) that compensates us
    for credit risk.  Senior
    Secured Loans
   5




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Junior
    Secured Loans
    Subordinated
    Debt
  payment-in-kind,
  One-Stop
    Financing
    Equity
    Investments
  payment-in-kind
  Portfolio
    Management
    
    Monthly review of actual financial performance versus the
    corresponding period of the prior year and financial projections;
    Monthly review of borrowing base, if applicable;
    Quarterly review of operating results, covenant compliance, and
    general business performance, including the preparation of a
    portfolio monitoring report which is distributed to members of
    our investment committee; 6




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
    Periodic face-to-face meetings with management teams and private
    equity sponsors of portfolio companies; and
    Attendance at portfolio company board meetings through board
    seats or observation rights.    
    Investment Rating 1  Investment that exceeds
    expectations
    and/or
    capital gain expected;
    Investment Rating 2  Investment generally performing
    in accordance with expectations;
    Investment Rating 3  Investment that requires closer
    monitoring;
    Investment Rating 4  Investment performing below
    expectations where a higher risk of loss exists; and
    Investment Rating 5  Investment performing
    significantly below expectations where we expect a loss.    December 31, 2007


December 31, 2006Debt





DebtInvestments at


Percentage of


Investments at


Percentage ofInvestment Rating

Fair Value


Total Portfolio


Fair Value


Total Portfolio1

$
46,912,574



12.5
%

$
22,689,633



8.8
%2


255,508,303



68.1



198,127,878



77.13


58,204,103



15.5



36,196,874



14.14


14,669,480



3.9







5














Total

$
375,294,460



100.0
%

$
257,014,385



100.0
%   and/or
  Regulations
  Regulation
    as a Business Development Company
    Qualifying
    Assets
     7




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Managerial
    Assistance to Portfolio Companies
   8




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Senior
    Securities
    Code of
    Ethics
  Rule 17j-1 1-800-SEC-0330. http://www.sec.gov.
  Proxy
    Voting Policies and Procedures
  case-by-case
      Other
     9




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Taxation
    as a Regulated Investment Company
         10




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Determination
    of Net Asset Value
  Quarterly
    Net Asset Value Determinations
             11




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
    Our quarterly valuation process begins with each portfolio
    company investment being initially valued by the investment
    professionals responsible for the portfolio investment;
    Valuation conclusions will then be documented and discussed with
    our investment committee;
    The valuation committee of our board of directors reviews the
    valuation conclusions presented by management;
    Duff & Phelps, an independent valuation firm, performs
    certain mutually agreed upon limited procedures that we have
    engaged them to perform on a selection of our portfolio company
    valuation conclusions; and
    Our board of directors will solely determine the fair value of
    each investment in our portfolio in good faith.    Determinations
    in Connection with Offerings
    
    the net asset value of our common stock disclosed in the most
    recent periodic report we filed with the SEC;
    our managements assessment of whether any material change
    in the net asset value of our common stock has occurred
    (including through the realization of gains on the sale of our
    portfolio securities) from the period beginning on the date of
    the most recently disclosed net asset value of our common stock
    to the period ending two days prior to the date of the sale of
    our common stock; and
    the magnitude of the difference between (i) the net asset
    value of our common stock disclosed in the most recent periodic
    report we filed with the SEC and our managements
    assessment of any material change in the net asset value of our
    common stock since the date of the most recently disclosed net
    asset value of our common stock, and (ii) the offering
    price of the shares of our common stock in the proposed offering. 12




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Competition
    Employees
    ITEM 1A.
    Risk
    Factors  Risk
    Factors
  Investing in our common stock involves a number of
    significant risks. We cannot assure you that we will achieve our
    investment objective. You should consider carefully the risks
    described below and all other information contained in this
    annual report on
    Form 10-K,
    including our financial statements and the related notes.
  Because
    we intend to distribute substantially all of our income to our
    stockholders in connection with our election to be treated as a
    RIC, we will continue to need additional capital to finance our
    growth. If additional funds are unavailable or not available on
    favorable terms, our ability to grow will be
    impaired.
   13




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We
    commenced investment operations in 2003 and, as a result, have a
    limited operating history.
    Economic
    recessions or downturns could impair our portfolio companies and
    harm our operating results.
    Regulations
    governing our operation as a business development company will
    affect our ability to, and the way in which we, raise additional
    capital.
    Senior Securities and Other Indebtedness. and/or
  
    Under the provisions of the 1940 Act, we are permitted, as a
    business development company, to issue senior securities only in
    amounts such that our asset coverage, as defined in the 1940
    Act, equals at least 200% after each issuance of senior
    securities. If the value of our assets declines, we may be
    unable to satisfy this test. If that happens, we may be required
    to sell a portion of our investments and, depending on the
    nature of our leverage, repay a portion of our debt at a time
    when such sales
    and/or
    repayments may be disadvantageous.
    Any amounts that we use to service our debt or make payments on
    preferred stock will not be available for dividends to our
    common stockholders.
    It is likely that any senior securities or other indebtedness we
    issue will be governed by an indenture or other instrument
    containing covenants restricting our operating flexibility.
    Additionally, some of these securities or other indebtedness may
    be rated by rating agencies, and in obtaining a rating for such 14




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securities and other indebtedness, we may be required to abide
    by operating and investment guidelines that further restrict
    operating and financial flexibility.  
    We and, indirectly, our stockholders will bear the cost of
    issuing and servicing such securities and other indebtedness.
    Preferred stock or any convertible or exchangeable securities
    that we issue in the future may have rights, preferences and
    privileges more favorable than those of our common stock,
    including separate voting rights and could delay or prevent a
    transaction or a change in control to the detriment of the
    holders of our common stock.  Additional Common Stock.
  Securitization of Loans.
  We are
    dependent upon our key investment personnel for our future
    success.
    Our
    success depends on attracting and retaining qualified personnel
    in a competitive environment.
   15




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Our
    management team has limited experience managing a business
    development company.
    Our
    business model depends to a significant extent upon strong
    referral relationships with private equity sponsors, and our
    inability to maintain or develop these relationships, or the
    failure of these relationships to generate investment
    opportunities, could adversely affect our
    business.
    We
    operate in a highly competitive market for investment
    opportunities.
     16




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The
    agreements governing our amended and restated securitization
    revolving credit facility contain various covenants that, among
    other things, limit our discretion in operating our business and
    provide for certain minimum financial covenants.
      We
    will be subject to corporate-level income tax if we fail to
    maintain our status as a RIC under Subchapter M of the
    Code.
    
    The annual distribution requirement for a RIC will be satisfied
    if we distribute to our stockholders on an annual basis at least
    90% of our net ordinary income and realized net short-term
    capital gains in excess of realized net long-term capital
    losses, if any. Because we use debt financing, we are subject to
    certain asset coverage ratio requirements under the 1940 Act and
    financial covenants under loan and credit agreements that could,
    under certain circumstances, restrict us from making
    distributions necessary to satisfy the distribution requirement.
    If we are unable to obtain cash from other sources, we could
    fail to qualify for RIC tax treatment and thus become subject to
    corporate-level income tax.
    The income source requirement will be satisfied if we obtain at
    least 90% of our income for each year from dividends, interest,
    gains from the sale of stock or securities or similar sources.
    The asset diversification requirement will be satisfied if we
    meet certain asset diversification requirements at the end of
    each quarter of our taxable year. Failure to meet those
    requirements may result in our having to dispose of certain
    investments quickly or delay the closing of new investments in
    order to prevent the loss of RIC status and could result in a
    loss of business. Because most of our investments will be in
    private companies, and therefore will be relatively illiquid,
    any such dispositions could be made at disadvantageous prices
    and could result in substantial losses.    We may
    have difficulty paying our required distributions if we
    recognize income before or without receiving cash representing
    such income.
  payment-in-kind, payment-in-kind
 17




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and/or
  We
    borrow money, which magnifies the potential for gain or loss on
    amounts invested and may increase the risk of investing in
    us.
    Changes
    in interest rates may affect our cost of capital and net
    investment income.
    A
    significant portion of our investment portfolio is and will
    continue to be recorded at fair value as determined in good
    faith by our board of directors and, as a result, there is and
    will continue to be uncertainty as to the value of our portfolio
    investments.
   18




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The
    lack of liquidity in our investments may adversely affect our
    business.
  We generally make investments in private
    companies.
  We may
    experience fluctuations in our quarterly results.
    Our
    financial condition and results of operations will depend on our
    ability to manage growth effectively.
      Changes
    in laws or regulations governing our operations may adversely
    affect our business.
   19




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Interpretations
    of the staff of the Securities and Exchange Commission regarding
    the appropriateness of the consolidation of our wholly-owned,
    bankruptcy remote, special purpose subsidiary may have an impact
    on our business, financial condition and results of
    operations.
    Our
    board of directors may change our operating policies and
    strategies without prior notice or stockholder approval, the
    effects of which may be adverse.
    Our
    investments in portfolio companies may be risky, and we could
    lose all or part of our investment.
    
    may have limited financial resources and may be unable to meet
    their obligations under their debt instruments that we hold,
    which may be accompanied by a deterioration in the value of any
    collateral and a reduction in the likelihood of us realizing any
    guarantees that we may have obtained in connection with our
    investment;
    may have shorter operating histories, narrower product lines and
    smaller market shares than larger businesses, which tend to
    render them more vulnerable to competitors actions and
    market conditions, as well as general economic downturns;
    are more likely to depend on the management talents and efforts
    of a small group of persons; therefore, the death, disability,
    resignation or termination of one or more of these persons could
    have a material adverse impact on our portfolio company and, in
    turn, on us;
    generally have less predictable operating results, may from time
    to time be parties to litigation, may be engaged in rapidly
    changing businesses with products subject to a substantial risk
    of obsolescence, and may require substantial additional capital
    to support their operations, finance expansion or maintain their
    competitive position. In addition, our executive officers and
    directors may, in the ordinary course of business, be named as
    defendants in litigation arising from our investments in the
    portfolio companies; and
    generally have less publicly available information about their
    businesses, operations and financial condition. We are required
    to rely on the ability of our management team and investment
    professionals to obtain adequate information to evaluate the
    potential returns from investing in these companies. If we are
    unable to uncover all material information about these
    companies, we may not make a fully informed investment decision,
    and may lose all or part of our investment.  Our
    portfolio is and may continue to be concentrated in a limited
    number of portfolio companies and industries, which will subject
    us to a risk of significant loss if any of these companies
    defaults on its obligations under any of its debt instruments or
    by a downturn in the particular industry.
   20




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Our
    portfolio companies may incur debt that ranks equally with, or
    senior to, our investments in such companies.
    Second
    priority liens on collateral securing loans that we make to our
    portfolio companies may be subject to control by senior
    creditors with first priority liens. If there is a default, the
    value of the collateral may not be sufficient to repay in full
    both the first priority creditors and us.
      There
    may be circumstances where our debt investments could be
    subordinated to claims of other creditors or we could be subject
    to lender liability claims.
   21




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We may
    not control any of our portfolio companies.
    Defaults
    by our portfolio companies will harm our operating
    results.
    Prepayments
    of our debt investments by our portfolio companies could
    adversely impact our results of operations and reduce our return
    on equity.
    We may
    not realize gains from our equity investments.
    There
    is a risk that you may not receive dividends or that our
    dividends may not grow over time.
    Investing
    in our shares may involve an above average degree of
    risk.
   22




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The
    market price of our common stock may fluctuate
    significantly.
    
    significant volatility in the market price and trading volume of
    securities of business development companies or other companies
    in our sector, which are not necessarily related to the
    operating performance of these companies;
    changes in regulatory policies, accounting pronouncements or tax
    guidelines, particularly with respect to RICs or business
    development companies;
    loss of RIC status;
    changes in earnings or variations in operating results;
    changes in the value of our portfolio of investments;
    any shortfall in revenue or net income or any increase in losses
    from levels expected by investors or securities analysts;
    departure of our key personnel;
    operating performance of companies comparable to us;
    general economic trends and other external factors; and
    loss of a major funding source.  Terrorist
    attacks, acts of war or national disasters may affect any market
    for our common stock, impact the businesses in which we invest
    and harm our business, operating results and financial
    condition.
    Certain
    provisions of our restated certificate of incorporation and
    restated bylaws as well as the Delaware General Corporation Law
    could deter takeover attempts and have an adverse impact on the
    price of our common stock.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   23




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Equity Securities  Price
    Range of Common Stock
    High


LowFiscal year 2006First quarter

$
13.07


$
12.07Second quarter

$
12.85


$
10.66Third quarter

$
13.35


$
10.54Fourth quarter

$
14.90


$
13.32Fiscal year 2007First quarter

$
14.57


$
13.15Second quarter

$
15.65


$
14.04Third quarter

$
15.24


$
12.13Fourth quarter

$
13.35


$
10.09     Sales of
    Unregistered Securities
    Dividends
     24




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Date Declared

Record Date

Payment Date

Amount2007November 1, 2007

December 14, 2007

January 16, 2008

$
0.33August 2, 2007

September 14, 2007

October 17, 2007

$
0.32April 30, 2007

June 15, 2007

July 17, 2007

$
0.32February 23, 2007

March 15, 2007

April 18, 2007

$
0.32Total  2007





$
1.292006November 10, 2006

December 15, 2006

January 17, 2007

$
0.31August 7, 2006

September 15, 2006

October 17, 2006

$
0.31May 9, 2006

June 2, 2006

July 17, 2006

$
0.29February 28, 2006

March 21, 2006

April 11, 2006

$
0.29Total  2006





$
1.20    25




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Stock
    Performance Graph
      COMPARISON
    OF CUMULATIVE TOTAL RETURN(1)
 
  
  Company/ Index


7-28-05(1)


2005


2006


2007Patriot Capital Funding, Inc.


$
100



$
90



$
117



$
90Nasdaq Composite Index


$
100



$
108



$
121



$
132Patriot Capital Funding Peer Group(2)


$
100



$
94



$
120



$
105     (1)
    
    From July 28, 2005, the date our common stock began to
    trade on the Nasdaq National Market (now known as the NASDAQ
    Global Select Market) in connection our initial public offering.(2)
    
    The Patriot Capital Funding Peer Group consists of the following
    investment companies that have elected to be regulated as
    business development companies under the 1940 Act: Ares Capital
    Corporation, Gladstone Capital Corporation, Gladstone Investment
    Corporation, Hercules Technology Growth Capital, Inc., MVC
    Capital, Inc., NGP Capital Resources Company, Prospect Energy
    Corporation, and Technology Investment Capital Corporation. 26




---



##### 



Securities
    Authorized For Issuance Under Equity Compensation
    Plans
    Number of SecuritiesRemaining Available forNumber of Securities to be


Weighted-Average


Future Issuance UnderIssued Upon Exercise of


Exercise Price of


Equity Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesPlan Category

Warrants and Rights


Warrants and Rights


Reflected in Column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


1,135,181


$
11.65



1,208,000Equity compensation plans not approved by security holders


1,301,496
(1)


14.00



Total


2,436,677


$
12.91



1,208,000
(2)     (1)
    
    The stock option plan pursuant to which these options were
    issued was approved by our stockholders prior to our initial
    public offering.(2)
    
    On February 27, 2008, the board of directors granted
    options to purchase 800,500 shares of our common stock to
    our executive officers and employees. The exercise price of
    these options is $10.91 per share, the closing market price of
    common stock on the date of grant.  Stock
    Option Plan
         27




---



##### 



Item 6.
    Selected
    Financial Data  Form 10-K.
  Year Ended December 31,Income Statement Data:

2007


2006


2005


2004


2003Investment Income:Interest income

$
37,147,275


$
25,387,709


$
13,035,673


$
4,616,665


$
253,755Fees


1,280,361



270,176



366,830



241,870



5,274Other investment income


534,901



848,449



46,839







Total Investment Income


38,962,537



26,506,334



13,449,342



4,858,535



259,029Expenses:Compensation expense


5,410,075



3,877,525



2,481,761



1,326,576



835,600Consulting fees(1)










554,796



1,000,000



916,666Interest(2)


7,421,596



4,332,582



3,517,989



1,504,998



201,331Professional fees


887,021



1,045,613



730,550



192,938



290,822Prepayment penalty(3)










3,395,335







General and administrative


2,498,724



2,229,970



1,041,030



227,208



164,032Total Expenses


16,217,416



11,485,690



11,721,461



4,251,720



2,408,451Net investment income (loss)


22,745,121



15,020,644



1,727,881



606,815



(2,149,422
)Net realized gain (loss) on investments


91,601



(3,262,966
)










Net unrealized appreciation (depreciation) on investments


(3,637,706
)


3,817,931



(2,965,175
)


(876,021
)


Net unrealized gain (loss) on interest rate swap


(775,326
)


12,961











Net income (loss)

$
18,423,690


$
15,588,570


$
(1,237,294
)

$
(269,206
)

$
(2,149,422
)Earnings (loss) per share, basic

$
0.99


$
1.10


$
(0.17
)

$
(0.07
)

$
(0.56
)Earnings (loss) per share, diluted

$
0.98


$
1.10


$
(0.17
)

$
(0.07
)

$
(0.56
)Weighted average shares outstanding, basic


18,670,904



14,145,200



7,253,632



3,847,902



3,847,902Weighted average shares outstanding, diluted


18,830,213



14,237,952



7,253,632



3,847,902



3,847,902 28




---



##### 



Year Ended December 31,Income Statement Data:

2007


2006


2005


2004


2003Balance Sheet Data:Total Investments, net of unearned income

$
384,203,478


$
257,248,376


$
137,951,659


$
65,603,830


$
28,687,831Total assets


397,856,533



270,522,505



150,655,993



72,038,863



35,116,998Total debt outstanding


164,900,000



98,380,000



21,650,000



42,645,458



9,400,000Stockholders equity


221,597,684



164,108,629



127,152,365



27,311,918



24,531,124Net asset value per common share

$
10.73


$
10.37


$
10.48


$
7.10


$
6.38Other Data:Weighted average yield on debt investments(4)


12.4
%


13.4
%


13.5
%


12.6
%


11.2
%Number of portfolio companies


36



26



15



9



3Number of employees


14



11



9



6



5     (1)
    
    On July 27, 2005, we terminated the consulting agreements
    pursuant to which we incurred these fees.(2)
    
    Our capital structure at December 31, 2004 reflected a
    higher percentage of leverage than we are permitted to maintain
    as a business development company. We used a portion of the net
    proceeds we received from our initial public offering to repay
    all of our outstanding indebtedness, including the
    $3.4 million prepayment penalty, at the time of our initial
    public offering. We are generally only allowed to borrow amounts
    such that our asset coverage, as defined in the 1940 Act, equals
    at least 200% after such borrowing.(3)
    
    The prepayment penalty was incurred in connection with the
    repayment in full and termination of our $120.0 million
    financing agreement.(4)
    
    Computed using actual interest income earned for the fiscal
    year, including amortization of deferred financing fees and
    original issue discount, divided by the weighted average fair
    value of debt investments.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K.
  Form 10-K
  Form 10-K Form 10-K, Form 10-K, Form 10-Q Form 8-K.
 29




---



##### 



General
    U.S.-based
    Current
    Market Conditions
    Portfolio
    Composition
   30




---



##### 



December 31,


December 31,2007


2006Beginning portfolio at fair value

$
260,859,260


$
141,390,954Investments in debt securities


191,391,250



154,876,598Investments in equity securities


8,925,000



3,074,997Investment repayments


(67,332,023
)


(37,627,269
)Increase in
    payment-in-kind
    interest/dividends


3,928,159



2,424,927Sale of investments


(5,374,749
)


(7,098,878
)Increase (decrease) in fair value of investments


(3,637,706
)


3,817,931Ending portfolio at fair value

$
388,759,191


$
260,859,260       December 31, 2007


December 31, 2006Investments at


Percentage of


Investments at


Percentage ofFair Value


Total Portfolio


Fair Value


Total PortfolioSenior secured revolving lines of credit

$
15,175,219



3.9
%

$
7,010,219



2.7
%Senior secured term loans


199,001,781



51.2



133,672,426



51.2Junior secured term loans


56,124,326



14.4



57,032,813



21.9Senior subordinated debt


104,993,134



27.0



59,298,927



22.7Investments in equity securities


13,464,731



3.5



3,844,875



1.5Totals

$
388,759,191



100.0
%

$
260,859,260



100.0
%      31




---



##### 



December 31, 2007


December 31, 2006Cost


%(1)


Fair Value


%(1)


Cost


%(1)


Fair Value


%(1)Machinery

$
53,448,966



13.6
%

$
54,635,424



14.1
%

$
13,559,438



5.2
%

$
13,561,938



5.2
%Personal & Nondurable Consumer Products


51,639,895



13.2



51,849,995



13.3



40,054,135



15.4



40,202,235



15.4Electronics


42,707,849



10.9



42,882,544



11.0



33,205,950



12.7



33,249,377



12.8Automobile


34,439,995



8.8



34,352,699



8.8



23,666,832



9.1



23,716,507



9.1Health Care, Education & Childcare


34,115,686



8.7



34,208,486



8.8















Grocery


23,417,059



6.0



23,555,259



6.1



16,925,593



6.5



16,925,593



6.5Metals & Minerals


23,288,159



5.9



23,288,159



6.0



23,278,278



8.9



23,278,278



8.9Printing & Publishing


19,419,441



4.9



16,419,480



4.2



19,337,136



7.4



18,992,336



7.3Ecological


15,716,250



4.0



14,516,300



3.7



13,850,000



5.3



13,678,500



5.2Textiles & Leather


13,129,378



3.3



13,236,278



3.4















Mining, Steel, Iron & Nonprecious Metals


10,920,823



2.8



10,900,573



2.8



10,524,057



4.0



10,525,007



4.0Chemicals, Plastic & Rubber


10,817,192



2.8



10,812,192



2.8



11,850,633



4.5



11,845,633



4.5Retail Stores


10,791,269



2.7



10,772,269



2.8



14,947,833



5.7



14,970,833



5.7Housewares & Durable Consumer Products


9,766,240



2.5



9,779,540



2.5















Diversified/Conglomerate Service


9,651,465



2.4



9,380,565



2.4



8,966,605



3.4



8,925,605



3.4Beverage, Food & Tobacco


9,000,000



2.3



9,000,000



2.3



18,402,868



7.1



18,549,118



7.1Buildings & Real Estate


4,852,328



1.2



4,852,328



1.2















Insurance


5,000,000



1.3



4,500,000



1.2



5,000,000



1.9



5,075,000



2.0Oil & Gas


3,850,000



1.0



3,850,000



1.0



3,850,000



1.5



3,850,000



1.5Personal, Food & Miscellaneous Services


3,000,000



0.8



2,910,000



0.8



3,000,000



1.2



3,007,500



1.2Containers, Packaging & Glass


2,985,000



0.8



2,895,500



0.7















Aerospace & Defense


463,168



0.1



161,600



0.1



463,168



0.2



505,800



0.2Total

$
392,420,163



100.0
%

$
388,759,191



100.0
%

$
260,882,526



100.0
%

$
260,859,260



100.0
%     (1)
    
    Represents percentage of total portfolio.   32




---



##### 



Asset
    Quality - Debt Portfolio
  and/or
    December 31, 2007


December 31, 2006Debt





DebtInvestments at


Percentage of


Investments at


Percentage ofInvestment Rating

Fair Value


Total Portfolio


Fair Value


Total Portfolio1

$
46,912,574



12.5
%

$
22,689,633



8.8
%2


255,508,303



68.1



198,127,878



77.13


58,204,103



15.5



36,196,874



14.14


14,669,480



3.9







5














Totals

$
375,294,460



100.0
%

$
257,014,385



100.0
%   Loans and
    Debt Securities on Non-Accrual Status
    Results
    of Operations
    Comparison
    of the year ended December 31, 2007 and December 31,
    2006
  Total
    Investment Income
     33




---



##### 



payment-in-kind payment-in-kind
    Expenses
      Realized
    Gain (Loss) on Sale of Investments
    Net
    Change in Unrealized Appreciation or Depreciation on
    Investments
   34




---



##### 



and/or
    (Earnings Before
    Interest, Taxes, Depreciation and Amortization)
     35




---



##### 



Unrealized
    Appreciation (Depreciation) on Interest Rate Swaps
    Net
    Income from Operations
    Comparison
    of the year ended December 31, 2006 and December 31,
    2005
  Total
    Investment Income
     36




---



##### 



payment-in-kind payment-in-kind
    Expenses
        Realized
    Gain (Loss) on Sale of Investments
    Net
    Change in Unrealized Appreciation or Depreciation on
    Investments
   37




---



##### 



and/or
      Unrealized
    Appreciation on Interest Rate Swaps
    Net
    Income from Operations
   38




---



##### 



Financial
    Condition, Liquidity and Capital Resources
  Cash,
    Cash Equivalents and Restricted Cash
      Liquidity
    and Capital Resources
       39




---



##### 



Borrowings
  Securitization Revolving Credit Facility. 364-day 364-day 24-month
 40




---



##### 



364-day 24-month
    Regulated
    Investment Company Status and Dividends
       41




---



##### 



Off-Balance
    Sheet Arrangements
      Contractual
    Obligations
    Payments Due by PeriodMore than 5Contractual Obligations

2008


2009


2010


2011


2012


YearsLong-term debt obligations(1)

$



$



$
34,354,000


$
82,450,000


$
48,096,000


$
Capital lease obligations






















Operating lease obligations


267,000



241,000



247,000



21,000







Purchase obligations






















Other long-term liabilities reflected on the balance sheet under
    GAAP






















Unused lending commitments(2)


29,325,000



















Total

$
29,592,000


$
241,000


$
34,601,000


$
82,471,000


$
48,096,000



  42




---



##### 



(1)
    
    Our amended and restated securitization credit facility permits
    draws under the facility until July 22, 2010, unless
    extended prior to such date for an additional
    364-day
    period with the consent of the lender. If the facility is not
    extended, any principal amounts then outstanding will be
    amortized over a
    24-month
    period following July 22, 2010 and interest will accrue on
    outstanding borrowings under the facility at the prime rate plus
    2.0%. This table assumes that we would repay all of our
    indebtedness under the facility at the time that we were no
    longer able to make draws under the facility. However, we cannot
    provide any assurance that we would be able to repay all of such
    outstanding indebtedness at such time.(2)
    
    Represents the unfunded commitment to extend credit to 18 of our
    portfolio companies.  Recent
    Developments
              Related
    Party Transactions
    Critical
    Accounting Policies
   43




---



##### 



Valuation
    of Portfolio Investments
      (Earnings Before
    Interest, Taxes, Depreciation and Amortization)
      Fee
    Income Recognition
  00-21 (EITF 00-21). EITF 00-21 EITF 00-21 states
 44




---



##### 



Payment-in-Kind
    or PIK Interest and Dividends
  payment-in-kind
   Fiscal YearEndedDecember 31,2007Beginning PIK balance

$
2,891,565PIK interest and dividends earned during the period


3,928,159PIK payments received during the period


(2,105,368
)Ending PIK balance

$
4,714,356   Interest
    and Dividend Income Recognition
    New
    Accounting Pronouncements
  07-1, (SOP 07-01). SOP 07-1 SOP 07-1 SOP 07-1
 45




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosure About Market Risk     46




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  Index to
    Consolidated Financial Statements
  Documents

PageReport of Independent Registered Public Accounting Firm


48Consolidated Balance Sheets at December 31, 2007 and 2006


49Consolidated Statements of Operations for the years ended
    December 31, 2007, 2006 and 2005


50Consolidated Statements of Cash Flows for the years ended
    December 31, 2007, 2006 and 2005


51Consolidated Statements of Changes in Net Assets for the years
    ended December 31, 2007, 2006 and 2005


52Consolidated Schedule of Investments at December 31, 2007
    and 2006


53Notes to Consolidated Financial Statements


58  47




---



##### 



Report of
    Independent Registered Public Accounting Firm     Internal Control-Integrated Framework
        Internal Control 
    Integrated Framework
      48




---



##### 



PATRIOT
    CAPITAL FUNDING, INC.
 Consolidated
    Balance Sheets  December 31,2007


2006ASSETSInvestments at fair value:Non-control/non-affiliate investments (cost of
    $297,661,308  2007, $251,915,321  2006)

$
293,058,636


$
251,933,655Affiliate investments (cost of $87,746,867  2007,
    $8,966,605  2006)


86,340,567



8,925,605Control investments (cost of $7,011,988  2007)


9,359,988



Unearned income


(4,555,713
)


(3,610,884
)Total investments


384,203,478



257,248,376Cash and cash equivalents


789,451



4,211,643Restricted cash


10,487,202



5,113,806Interest receivable


1,758,954



2,221,000Other assets


617,448



1,727,680TOTAL ASSETS

$
397,856,533


$
270,522,505LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESBorrowings

$
164,900,000


$
98,380,000Interest payable


821,124



523,709Dividends payable


6,814,650



4,904,818Accounts payable, accrued expenses and other


3,723,075



2,605,349TOTAL LIABILITIES


176,258,849



106,413,876STOCKHOLDERS EQUITYPreferred stock, $0.01 par value, 1,000,000 shares
    authorized; no shares issued and outstanding






Common stock, $0.01 par value, 49,000,000 shares
    authorized; 20,650,455 and 15,821,994 shares issued and
    outstanding at December 31, 2007 and 2006, respectively


206,504



158,220Paid-in-capital


233,722,593



171,957,327Accumulated net investment loss


(1,912,061
)


(1,912,061
)Distributions in excess of net investment income


(2,824,651
)


(2,821,587
)Net realized loss on investments


(3,171,365
)


(3,262,966
)Net unrealized appreciation (depreciation) on interest rate swaps


(762,365
)


12,961Net unrealized depreciation on investments


(3,660,971
)


(23,265
)TOTAL STOCKHOLDERS EQUITY


221,597,684



164,108,629TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
397,856,533


$
270,522,505NET ASSET VALUE PER COMMON SHARE

$
10.73


$
10.37    49




---



##### 



PATRIOT
    CAPITAL FUNDING, INC.
 Consolidated
    Statements of Operations  Year Ended December 31,2007


2006


2005INVESTMENT INCOMEInterest and dividends:Non-control/non-affiliate investments (less than 5% owned)

$
31,729,397


$
25,011,993


$
13,035,673Affiliate investments (5% to 25% owned)


4,947,294



375,716



Control investments (greater than 25% owned)


470,584







Total interest and dividend income


37,147,275



25,387,709



13,035,673Fees:Non-control/non-affiliate investments (less than 5% owned)


1,080,929



260,289



366,830Affiliate investments (5% to 25% owned)


93,419



9,887



Control investments (greater than 25% owned)


106,013







Total fee income


1,280,361



270,176



366,830Other investment income non-control/non-affiliate investments
    (less than 5% owned)


534,901



848,449



46,839Total Investment Income


38,962,537



26,506,334



13,449,342EXPENSESCompensation expense


5,410,075



3,877,525



2,481,761Consulting fees










554,796Interest


7,421,596



4,332,582



3,517,989Professional fees


887,021



1,045,613



730,550Prepayment penalty










3,395,335General and administrative


2,498,724



2,229,970



1,041,030Total Expenses


16,217,416



11,485,690



11,721,461Net Investment Income


22,745,121



15,020,644



1,727,881NET REALIZED GAIN AND (LOSS) AND NET UNREALIZED APPRECIATION
    (DEPRECIATION)Net realized gain (loss) on investments 
    non-control/non-affiliate investments (less than 5% owned)


91,601



(3,262,966
)


Net unrealized appreciation (depreciation) on
    investments  non-control/non-affiliate investments
    (less than 5% owned)


(4,620,406
)


3,858,931



(2,965,175
)Net unrealized depreciation on investments  affiliate
    investments (5% to 25% owned)


(1,365,300
)


(41,000
)


Net unrealized appreciation on investments  control
    investments (greater than 25% owned)


2,348,000







Net unrealized appreciation (depreciation) on interest rate swaps


(775,326
)


12,961



Net Realized Gain (Loss) and Net Unrealized Appreciation
    (Depreciation)


(4,321,431
)


567,926



(2,965,175
)NET INCOME (LOSS)

$
18,423,690


$
15,588,570


$
(1,237,294
)Income (loss) per share, basic

$
0.99


$
1.10


$
(0.17
)Income (loss) per share, diluted

$
0.98


$
1.10


$
(0.17
)Weighted average shares outstanding, basic


18,670,904



14,145,200



7,253,632Weighted average shares outstanding, diluted


18,830,213



14,237,952



7,253,632    50




---



##### 



PATRIOT
    CAPITAL FUNDING, INC.
 Consolidated
    Statements of Cash Flows  Year Ended December 31,2007


2006


2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
18,423,690


$
15,588,570


$
(1,237,294
)Adjustments to reconcile net income (loss) to net cash provided
    by (used for) operating activities:Depreciation and amortization


411,860



456,289



192,785Change in interest receivable


462,046



(1,353,525
)


(252,232
)Net realized loss (gain) on sale of investments


(91,601
)


3,262,966



Net change in unrealized depreciation (appreciation) on
    investments


3,637,706



(3,817,931
)


2,965,175Unrealized depreciation (appreciation) on interest rate swap


775,326



(12,961
)


Payment-in-kind
    interest and dividends


(3,928,159
)


(2,424,927
)


(1,825,755
)Stock based compensation expense


675,822



505,785



Change in unearned income


944,829



364,866



789,884Change in interest payable


297,415



463,375



(222,762
)Change in management fee payable










(916,666
)Change in other assets


93,868



(9,663
)


(83,849
)Change in accounts payable, accrued expenses and other


1,117,726



812,055



911,569Net cash provided by operating activities


22,820,528



13,834,899



320,855CASH FLOWS FROM INVESTING ACTIVITIES:Funded investments


(200,316,250
)


(157,951,595
)


(88,850,000
)Principal repayments on investments


67,332,023



37,627,269



14,572,867Proceeds from sales of investments


5,466,351



3,642,634



Purchase of furniture and equipment


(47,832
)


(269,436
)


(235,057
)Net cash used for investing activities


(127,565,708
)


(116,951,128
)


(74,512,190
)CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings


188,177,000



353,580,000



68,900,000Repayments on borrowings


(121,657,000
)


(276,850,000
)


(89,895,458
)Deferred offering costs






(159,620
)


Net proceeds from sale of common stock


60,517,044



36,652,098



106,288,919Dividends paid


(20,217,670
)


(10,885,371
)


(5,211,178
)Decrease (increase) in restricted cash


(5,373,396
)


2,692,522



(4,806,328
)Deferred financing costs


(122,990
)


(73,598
)


(1,204,256
)Net cash provided by financing activities


101,322,988



104,956,031



74,071,699NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(3,422,192
)


1,839,802



(119,636
)CASH AND CASH EQUIVALENTS AT:Beginning of year


4,211,643



2,371,841



2,491,477End of year

$
789,451


$
4,211,643


$
2,371,841Supplemental information:Interest paid

$
7,124,181


$
3,869,208


$
3,436,464Non-cash financing activities:Dividends reinvested in common stock

$
2,212,996


$
1,054,090


$
242,737Dividends declared but not paid

$
6,814,650


$
4,904,818


$
    51




---



##### 



PATRIOT
    CAPITAL FUNDING, INC.
 Consolidated
    Statements of Changes in Net Assets  2007


2006


2005Operations:Net investment income

$
22,745,121


$
15,020,644


$
1,727,881Net realized gain (loss) on investments


91,601



(3,262,966
)


Net unrealized appreciation (depreciation) on investments


(3,637,706
)


3,817,931



(2,965,175
)Net unrealized appreciation (depreciation) on interest rate swap


(775,326
)


12,961



Net increase (decrease) in net assets from operations


18,423,690



15,588,570



(1,237,294
)Shareholder transactions:Distributions to stockholders from net investment income


(22,745,121
)


(15,020,644
)


(1,727,881
)Tax return of capital


(1,592,314
)


(2,484,892
)


Distributions in excess of net investment income


(3,063
)


661,257



(3,483,297
)Net decrease in net assets from shareholder distributions


(24,340,498
)


(16,844,279
)


(5,211,178
)Capital share transactions:Issuance of common stock


60,517,045



36,652,098



106,046,182Issuance of common stock under dividend reinvestment plan


2,212,996



1,054,090



242,737Stock option compensation


675,822



505,785



Net increase in net assets from capital share transactions


63,405,863



38,211,973



106,288,919Total increase in net assets


57,489,055



36,956,264



99,840,447Net assets at beginning of period


164,108,629



127,152,365



27,311,918Net assets at end of period

$
221,597,684


$
164,108,629


$
127,152,365Net asset value per common share

$
10.73


$
10.37


$
10.48Common shares outstanding at end of period


20,650,455



15,821,994



12,136,655    52




---



##### 



PATRIOT
    CAPITAL FUNDING, INC.
 Consolidated Schedule of Investments
 December 31, 2007
  Company(1)

Company(Industry)

Description

Investment

Principal


Cost


ValueControl investments (greater than 25% owned):Fischbein, LLC (Machinery)

Designer and manufacturer of packaging equipment

Senior Subordinated Debt (16.5%, Due 5/13) (2) (3)
    Membership Interest  Class A (4)

$
4,211,988


$
4,211,988
    2,800,000


$
4,211,988
    5,148,000Total Control investments (represents 2.4% of total
    investments at fair value)





$
7,011,988


$
9,359,988Affiliate investments (5% to 25% owned):Aylward Enterprises, LLC(5) (Machinery)

Manufacturer of packaging equipment

Revolving Line of Credit (8.7%, Due 2/12) (3)
    Senior Secured Term Loan A (9.5%, Due 2/12) (3)

$
3,700,000
    8,292,188


$
3,700,000
    8,292,188


$
3,700,000
    8,292,188Senior Subordinated Debt (14.5%, Due 8/12) (2)


6,424,702



6,424,702



6,424,702Membership Interest (4)






1,250,000



KTPS Holdings, LLC (Textiles & Leather)

Manufacturer and distributor of specialty pet products

Revolving Line of Credit (8.2%, Due 1/12) (3)
    Senior Secured Term Loan A (8.4%, Due 1/12) (3)
    Senior Secured Term Loan B (12.0%, Due 1/12) (3)


300,000
    6,012,500
    1,985,000



300,000
    6,012,500
    1,985,000



300,000
    6,012,500
    1,985,000Senior Subordinated Debt (15.0%, Due 3/12) (2) (3)


4,081,878



4,081,878



4,081,878Membership Interest  Class A (4)






730,020



769,000Membership Interest  Common (4)






19,980



87,900Nupla Corporation (Home & Office Furnishings,
    Housewares & Durable Consumer Products)

Manufacturer and marketer of professional high-grade
    fiberglass-handled striking and digging tools

Revolving Line of Credit (9.5%, Due 9/12) (3)
    Senior Secured Term Loan A (8.8%, Due 9/12) (3)
    Senior Subordinated Debt (14.0%, Due 3/13) (2)
    Preferred Stock (4)
    Common Stock (4)


550,000
    5,678,125
    3,019,688



550,000
    5,678,125
    3,019,688
    493,427
    25,000



550,000
    5,678,125
    3,019,688
    493,427
    38,300Smart, LLC (5) (Diversified/Conglomerate Service)

Provider of tuition management services

Revolving Line of Credit (12.3%, Due 8/11) (3)
    Senior Secured Term Loan A (12.3%, Due 8/11) (3)
    Senior Secured Term Loan B (19.0%, Due 2/12) (2) (3)


870,000
    3,862,500
    3,668,965



870,000
    3,862,500
    3,668,965



870,000
    3,862,500
    3,668,965Convertible Subordinated Note (22.0%, Due 8/12)


250,000



250,000



250,000Membership Interest  Class B (4)






1,000,000



729,100Sport Helmets Holdings, LLC (5) (Personal &
    Nondurable Consumer Products)

Manufacturer of protective headgear

Senior Secured Term Loan A (9.0%, Due 12/13)
    Senior Secured Term Loan B (9.5%, Due 12/13)
    Senior Subordinated Debt (15.0%, Due 6/14) (2)
    Common Stock (4)


4,500,000
    7,500,000
    8,011,333



4,500,000
    7,500,000
    8,011,333
    2,000,00



4,500,000
    7,500,000
    8,011,333
    1,901,500Vince & Associates Clinic Research, Inc.
    (Healthcare, Education & Childcare)

Provider of clinical testing services

Senior Secured Term Loan (10.0%, Due 11/12) (2) (3)
    Senior Subordinated Debt (15.0%, Due 5/13) (2)
    Convertible Preferred Stock (4)


7,500,000
    5,521,561



7,500,000
    5,521,561
    500,000



7,500,000
    5,521,561
    592,900Total Affiliate investments (represents 22.2% of total
    investments at fair value)





$
87,746,867


$
86,340,567Non-control/non-affiliate investments (less than 5%
    owned):ADAPCO, Inc. (Ecological)

Distributor of specialty chemicals and contract application
    services

Revolving Line of Credit (9.0%, Due 7/11) (3)
    Senior Secured Term Loan A (10.5%, Due 6/11) (3)
    Common Stock (4)

$
2,200,000
    13,016,250


$
2,200,000
    13,016,250
    500,000


$
2,200,000
    12,316,300
    Aircraft Fasteners International, LLC (Machinery)

Distributor of fasteners and related hardware for use in
    aerospace, electronics and defense industries

Senior Secured Term Loan (8.3%, Due 11/12) (3)
    Senior Subordinated Debt (14.0%, Due 5/13) (2) (3)
    Convertible Preferred Stock (4)


6,800,000
    5,200,000



6,800,000
    5,200,000
    253,342



6,800,000
    5,200,000
    341,800Allied Defense Group, Inc. (Aerospace & Defense)

Diversified defense company

Common Stock (4)






463,168



161,600Arrowhead General Insurance Agency, Inc. (6) (Insurance)

Insurance agency and program specialist

Junior Secured Term Loan (12.1%, Due 2/13) (3)


5,000,000



5,000,000



4,500,000Borga, Inc. (Mining, Steel, Iron & Nonprecious
    Metals)

Manufacturer of pre-fabricated metal building systems

Senior Secured Term Loan A (8.8%, Due 3/09) (3)
    Senior Secured Term Loan B (11.8%, Due 5/10) (3)
    Senior Secured Term Loan C (16.0%, Due 5/10) (2) (3)
    Common Stock Warrants (4)


1,321,000
    1,785,250
    7,794,323



1,321,000
    1,785,250
    7,794,323
    20,250



1,321,000
    1,785,250
    7,794,323
    Caleel + Hayden, LLC (5) (Personal & Nondurable
    Consumer Products)

Provider of proprietary branded professional skincare and
    cosmetic products to physicians and spa communities

Senior Secured Term Loan B (9.6%, Due 11/11) (3)
    Senior Subordinated Debt (14.5%, Due 11/12) (2) (3)
    Common Stock (4)


10,879,062
    6,250,000



10,879,062
    6,250,000
    750,000



10,879,062
    6,250,000
    1,058,600 53




---



##### 



Company(1)

Company(Industry)

Description

Investment

Principal


Cost


ValueCheeseworks, Inc. (Grocery)

Distributor of specialty cheese and food products

Revolving Line of Credit (7.6%, Due 6/11) (3)
    Senior Secured Term Loan (10.7%, Due 6/11) (3)


5,080,219
    10,648,560



5,080,219
    10,648,560



5,080,219
    10,648,560CS Operating, LLC (5) (Buildings & Real Estate)

Provider of maintenance, repair and replacement of HVAC,
    electrical, plumbing, and foundation repair

Senior Secured Term Loan A (9.1%, Due 7/12) (3)
    Senior Subordinated Debt (14.5%, Due 1/13) (2) (3)


2,325,000
    2,527,328



2,325,000
    2,527,328



2,325,000
    2,527,328Copperhead Chemical Company, Inc. (Chemicals,
    Plastics & Rubber)

Manufacturer of bulk pharmaceuticals

Senior Subordinated Debt (15.3%, Due 1/13) (2) (3)


3,540,943



3,540,943



3,540,943Custom Direct, Inc. (6) (Printing & Publishing)

Direct marketer of checks and other financial products and
    services

Junior Secured Term Loan (10.8%, Due 12/14) (3)


2,000,000



2,000,000



1,750,000Dover Saddlery, Inc. (Retail Stores)

Equestrian products catalog retailer

Common Stock (4)






148,200



129,200Eight OClock Coffee Company (6) (Beverage,
    Food & Tobacco)

Manufacturer, distributor, and marketer of coffee

Junior Secured Term Loan (11.4%, Due 7/13) (3)


9,000,000



9,000,000



9,000,000Employbridge Holding Company (5) (6) (Personal,
    Food & Miscellaneous Services)

A provider of specialized staffing services

Junior Secured Term Loan (11.8%, Due 10/13) (3)


3,000,000



3,000,000



2,910,000Encore Legal Solutions, Inc. (Printing &
    Publishing)

Legal document management services

Junior Secured Term Loan A (10.7%, Due 6/10) (2) (3)
    Junior Secured Term Loan B (10.8%, Due 6/10) (2) (3)
    Senior Subordinated Debt (15.0%, Due 6/10) (2) (3)
    Common Stock Warrants (4)


3,949,437
    7,193,143
    5,926,861



3,949,437
    7,193,143
    5,926,861
    350,000



3,949,437
    7,193,143
    3,526,900
    EXL Acquisition Corp. (Electronics)

Manufacturer of lab testing supplies

Senior Secured Term Loan A (8.4%, Due 3/11) (3)
    Senior Secured Term Loan B (8.9%, Due 3/12) (3)


4,800,000
    4,851,840



4,800,000
    4,851,840



4,800,000
    4,851,840Senior Secured Term Loan C (9.4%, Due 3/12) (3)


2,992,500



2,992,500



2,992,500Senior Secured Term Loan D (15.0%, Due 3/12) (3)


7,000,000



7,000,000



7,000,000Common Stock  Class A (4)






2,475



123,900Common Stock  Class B (2)






254,057



255,325Fairchild Industrial Products, Co. (Electronics)

Manufacturer of industrial controls and power transmission
    products

Senior Secured Term Loan A (8.3%, Due 7/10) (3)
    Senior Secured Term Loan B (10.0%, Due 7/11) (3)
    Senior Subordinated Debt (14.8%, Due 7/11) (2)
    Preferred Stock  Class A (2)


5,580,000
    9,325,000
    5,460,000



5,580,000
    9,325,000
    5,460,000
    327,879



5,580,000
    9,325,000
    5,460,000
    327,879Common Stock  Class B (4)






121,598



293,200Impact Products, LLC (Machinery)

Distributor of janitorial supplies

Junior Secured Term Loan B (9.5%, Due 9/12) (3)
    Junior Secured Term Loan C (13.5%, Due 9/12) (2) (3)


8,968,750
    5,547,996



8,968,750
    5,547,996



8,968,750
    5,547,996Innovative Concepts in Entertainment, Inc.
    (Personal & Nondurable Consumer Products)

Manufacturer of coin operated games

Senior Secured Term Loan A (9.0%, Due 2/11) (3)
    Senior Secured Term Loan B (9.5%, Due 2/11) (3)
    Senior Secured Term Loan C (13.0%, Due 8/11) (3)


4,312,500
    3,537,000
    3,900,000



4,312,500
    3,537,000
    3,900,000



4,312,500
    3,537,000
    3,900,000Keltner Enterprises, LLC(5) (Oil & Gas)

Distributor of automotive oils, chemicals and parts

Senior Subordinated Debt (14.0%, Due 12/11) (3)


3,850,000



3,850,000



3,850,000L.A. Spas, Inc. (Chemicals, Plastics & Rubber)

Manufacturer of above ground spas

Senior Subordinated Debt (15.5%, Due 1/10) (2) (3)
    Common Stock Warrants (4)


7,271,249



7,271,249
    5,000



7,271,249
    LHC Holdings Corp.

Provider of home healthcare services

Revolving Line of Credit (8.8%, Due 11/12) (3)
    Senior Secured Term Loan A (8.8%, Due 11/12) (3)


300,000
    5,100,000



300,000
    5,100,000



300,000
    5,100,000Senior Subordinated Debt (14.5%, Due 5/13)


4,565,000



4,565,000



4,565,000Membership Interest (4)






125,000



120,500Mac & Massey Holdings, LLC (Grocery)

Broker and distributor of ingredients to manufacturers of food
    products

Senior Subordinated Debt (16.5%, Due 2/13) (2)
    Common Stock (4)


7,438,280



7,438,280
    250,000



7,438,280
    388,200Metrologic Instruments, Inc. (6) (Electronics)

Manufacturer of imaging and scanning equipment

Senior Secured Term Loan (7.8%, Due 4/14) (3)
    Junior Secured Term Loan (11.1%, Due 4/15)


992,500
    1,000,000



992,500
    1,000,000



942,900
    930,000 54




---



##### 



Company(1)

Company(Industry)

Description

Investment

Principal


Cost


ValueNice-Pak Products, Inc. (6) (Containers,
    Packaging & Glass)

Manufacturer of pre-moistened wipes

Senior Secured Term Loan (8.5%, Due 6/14) (3)


2,985,000



2,985,000



2,895,500Northwestern Management Services, LLC (Healthcare,
    Education & Childcare)

Provider of dental services

Senior Secured Term Loan A (8.9%, Due 12/12) (3)
    Senior Secured Term Loan B (9.4%, Due 12/12) (3)
    Senior Subordinated Debt (15.0%, Due 6/13) (2)
    Common Stock (4)


6,000,000
    1,250,000
    2,754,125



6,000,000
    1,250,000
    2,754,125
    500,000



6,000,000
    1,250,000
    2,754,125
    504,400Prince Mineral Company, Inc. (Metals & Minerals)

Manufacturer of pigments

Junior Secured Term Loan (9.9%, Due 12/12) (3)
    Senior Subordinated Debt (14.0%, Due 7/13) (2) (3)


11,375,000
    11,913,159



11,375,000
    11,913,159



11,375,000
    11,913,159Quartermaster, Inc. (Retail Stores)

Retailer of uniforms and tactical equipment to law enforcement
    and security professionals

Revolving Line of Credit (9.5%, Due 12/10) (3)
    Senior Secured Term Loan A (9.4%, Due 12/10) (3)
    Senior Secured Term Loan B (10.6%, Due 12/10) (3)
    Senior Secured Term Loan C (15.0%, Due 12/11) (2) (3)


500,000
    4,276,250
    2,568,750
    3,298,069



500,000
    4,276,250
    2,568,750
    3,298,069



500,000
    4,276,250
    2,568,750
    3,298,069R-O-M Corporation (Automobile)

Manufacturer of doors, ramps and bulk heads for fire trucks and
    food transportation

Senior Secured Term Loan A (8.0%, Due 2/13) (3)
    Senior Secured Term Loan B (9.3%, Due 5/13) (3)
    Senior Subordinated Debt (15.0%, Due 8/13) (2)


7,440,000
    8,464,500
    9,100,000



7,440,000
    8,464,500
    9,100,000



7,440,000
    8,464,500
    9,100,000Sidumpr Trailer Company, Inc. (Automobile)

Manufacturer of side dump trailers

Revolving Line of Credit (9.8%, Due 1/11) (3)
    Senior Secured Term Loan A (8.5%, Due 1/11) (3)
    Senior Secured Term Loan B (11.5%, Due 1/11) (3)


1,675,000
    2,047,500
    2,320,625



1,675,000
    2,047,500
    2,320,625



1,675,000
    2,047,500
    2,320,625Senior Secured Term Loan C (15.0%, Due 7/11) (2) (3)


3,230,074



3,230,074



3,230,074Senior Subordinated Debt (12.0%, Due 1/12) (3)


75,000



75,000



75,000Preferred Stock (2)






87,271



Common Stock (4)






25



Total Non-control/non-affiliate investments (represents 75.4%
    of total investments at fair value)





$
297,661,308


$
293,058,636Total Investments









$
392,420,163


$
388,759,191Unearned Income










(4,555,713
)


(4,555,713
)Total Investments Net of Unearned Income







$
387,864,450


$
384,203,478   (1)
    
    Affiliate investments are generally
    defined under the Investment Company Act of 1940, as amended
    (the 1940 Act) as companies in which the Company
    owns at least 5% but not more than 25% of the voting securities
    of the company. Controls investments are generally defined under
    the 1940 Act as companies in which the Company owns at more than
    25% of the voting securities of the company.(2)
    
    Amount includes
    payment-in-kind
    (PIK) interest or dividends.(3)
    
    Pledged as collateral under the
    Companys Securitization Facility. See Note 4 to
    Consolidated Financial Statements.(4)
    
    Non-income producing.(5)
    
    Some of the investments listed are
    issued by an affiliate of the listed portfolio company.(6)
    
    Syndicated investment which has
    been originated by another financial institution and broadly
    distributed.   55




---



##### 



PATRIOT
    CAPITAL FUNDING, INC.
    Consolidated Schedule of Investments
    December 31, 2006
  Company(1)(Industry)

Company Description

Investment

Principal


Cost


ValueAffiliate investments (5% to 25% owned):Smart, LLC (5) (Diversified/Conglomerate Service)

Provider of tuition management services

Senior Secured Term Loan A (10.4%, Due 6/11) (3)
    Senior Secured Term Loan B (16.5%, Due 2/12) (2) (3)
    Membership Interest  Class B (4)

$
4,425,000
    3,541,605


$
4,425,000
    3,541,605
    1,000,000


$
4,425,000
    3,541,605
    959,000Total Affiliate investments (represents 3.4% of total
    investments at fair value)





$
8,966,605


$
8,925,605Non-control/non-affiliate investments (less than 5%
    owned):ADAPCO, Inc (Ecological)

Distributor of specialty chemicals and contract application
    services

Senior Secured Term Loan A (10.9%, Due 6/11) (3)
    Common Stock (4)

$
13,350,000


$
13,350,000
    500,000


$
13,350,000
    328,500Agent Media Corporation (Printing & Publishing)

Publisher of insurance industry periodicals

Senior Secured Term Loan A (10.1%, Due 9/08) (3)
    Senior Secured Term Loan B (12.4%, Due 9/09) (3)
    Common Stock Warrants (4)


1,000,000
    2,130,105



1,000,000
    2,130,105
    31,000



1,000,000
    2,130,105
    36,200Allied Defense Group, Inc. (Aerospace & Defense)

Diversified defense company

Common Stock Warrants (4)






463,168



505,800Arrowhead General Insurance Agency, Inc. (6) (Insurance)

Insurance agency and program specialist

Junior Secured Term Loan (12.6%, Due 2/13) (3)


5,000,000



5,000,000



5,075,000Borga, Inc. (Mining, Steel, Iron & Nonprecious
    Metals)

Manufacturer of pre-fabricated metal building systems

Senior Secured Term Loan A (8.9%, Due 3/09) (3)
    Senior Secured Term Loan B (11.9%, Due 5/10) (3)
    Senior Secured Term Loan C (16.0%, Due 5/10) (2) (3)
    Common Stock Warrants (4)


1,208,500
    1,810,250
    7,485,057



1,208,500
    1,810,250
    7,485,057
    20,250



1,208,500
    1,810,250
    7,485,057
    21,200Caleel + Hayden, LLC (5) (Personal & Nondurable
    Consumer Products)

Provider of proprietary branded professional skincare and
    cosmetic products to physicians and spa communities

Senior Secured Term Loan A (8.1%, Due 11/10)
    Senior Secured Term Loan B (10.1%, Due 11/11) (3)
    Senior Subordinated Debt (14.5%, Due 11/12) (2) (3)
    Common Stock (4)


5,000,000
    11,000,000
    6,272,135



5,000,000
    11,000,000
    6,272,135
    750,000



5,000,000
    11,000,000
    6,272,135
    858,100Cheeseworks, Inc. (Grocery)

Distributor of specialty cheese and food products

Revolving Line of Credit (8.0%, Due 6/11) (3)
    Senior Secured Term Loan (11.0%, Due 6/11) (3)


5,080,219
    11,845,374



5,080,219
    11,845,374



5,080,219
    11,845,374Copperhead Chemical Company, Inc. (Chemicals,
    Plastics & Rubber)

Manufacturer of bulk pharmaceuticals

Senior Subordinated Debt (15.3%, Due 11/10) (2) (3)


4,824,790



4,824,790



4,824,790Dover Saddlery, Inc. (Retail Stores)

Equestrian products catalog retailer

Senior Subordinated Debt (11.5%, Due 9/09) (3)
    Common Stock (4)


3,000,000



3,000,000
    148,200



3,000,000
    171,200Eight OClock Coffee Company (6) (Beverage,
    Food & Tobacco)

Manufacturer, distributor, and marketer of coffee

Junior Secured Term Loan (11.9%, Due 7/13) (3)


9,000,000



9,000,000



9,146,250Employbridge Holding Company (5) (6) (Personal,
    Food & Miscellaneous Services)

A provider of specialized staffing services

Junior Secured Term Loan (12.4%, Due 10/13) (3)


3,000,000



3,000,000



3,007,500Encore Legal Solutions, Inc. (Printing &
    Publishing)

Legal document management services

Junior Secured Term Loan A (10.6%, Due 12/09) (3)
    Junior Secured Term Loan B (10.8%, Due 12/09) (3)
    Senior Subordinated Debt (15.0%, Due 5/10) (2) (3)
    Common Stock Warrants (4)


3,819,500
    6,907,625
    5,098,906



3,819,500
    6,907,625
    5,098,906
    350,000



3,819,500
    6,907,625
    5,098,906
    EXL Acquisition Corp. (Electronics)

Manufacturer of lab testing supplies

Senior Secured Term Loan A (8.6%, Due 3/11) (3)
    Senior Secured Term Loan B (9.1%, Due 3/12) (3)
    Senior Secured Term Loan D (15.0%, Due 3/12) (2) (3)


7,100,000
    2,382,000
    5,000,833



7,100,000
    2,382,000
    5,000,833



7,100,000
    2,382,000
    5,000,833Common Stock  Class A (4)






2,475



86,300Common Stock  Class B (2)






267,466



268,266Fairchild Industrial Products, Co. (Electronics)

Manufacturer of industrial controls and power transmission
    products

Senior Secured Term Loan A (9.4%, Due 7/10) (3)
    Senior Secured Term Loan B (11.4%, Due 7/11) (3)
    Senior Subordinated Debt (15.5%, Due 7/11) (2)
    Preferred Stock  Class A (2)


9,770,000
    2,793,750
    5,368,427



9,770,000
    2,793,750
    5,368,427
    399,401



9,770,000
    2,793,750
    5,368,427
    399,401Common Stock  Class B (4)






121,598



80,400Impact Products, LLC (Machinery)

Distributor of janitorial supplies

Junior Secured Term Loan B (9.6%, Due 9/12) (3)
    Junior Secured Term Loan C (13.5%, Due 9/12) (2) (3)


7,462,500
    5,596,938



7,462,500
    5,596,938



7,462,500
    5,596,938 56




---



##### 



Company(1)(Industry)

Company Description

Investment

Principal


Cost


ValueInnovative Concepts in Entertainment, Inc.
    (Personal & Nondurable Consumer Products)

Manufacturer of coin operated games

Senior Secured Term Loan A (9.4%, Due 2/11) (3)
    Senior Secured Term Loan B (9.9%, Due 2/11) (3)
    Senior Secured Term Loan C (13.0%, Due 8/11) (3)


5,550,000
    3,582,000
    3,900,000



5,550,000
    3,582,000
    3,900,000



5,550,000
    3,582,000
    3,900,000Keltner Enterprises, LLC(5) (Oil & Gas)

Distributor of automotive oils, chemicals and parts

Senior Subordinated Debt (14.0%, Due 12/11)  (3)


3,850,000



3,850,000



3,850,000L.A. Spas, Inc. (Chemicals, Plastics & Rubber)

Manufacturer of above ground spas

Senior Subordinated Debt (15.5%, Due 1/10) (2) (3)
    Common Stock Warrants (4)


7,020,843



7,020,843
    5,000
    



7,020,843Natural Products Group, LLC (5) (6) (Personal &
    Nondurable Consumer Products)

Manufacturer and marketer of branded personal care products

Junior Secured Term Loan (11.9%, Due 12/13)  (3)


4,000,000



4,000,000



4,040,000Prince Mineral Company, Inc. (Metals & Minerals)

Manufacturer of pigments

Junior Secured Term Loan (10.3%, Due 12/12) (3)
    Senior Subordinated Debt (14.0%, Due 7/13) (2) (3)


11,475,000
    11,803,278



11,475,000
    11,803,278



11,475,000
    11,803,278Quartermaster, Inc. (Retail Stores)

Retailer of uniforms and tactical equipment to law enforcement
    and security professionals

Senior Secured Term Loan A (9.9%, Due 12/10) (3)
    Senior Secured Term Loan B (11.2%, Due 12/10) (3)
    Senior Secured Term Loan C (15.0%, Due 12/11) (2) (3)


6,000,000
    2,600,000
    3,199,633



6,000,000
    2,600,000
    3,199,633



6,000,000
    2,600,000
    3,199,633R-O-M Corporation (Automobile)

Manufacturer of doors, ramps and bulk heads for fire trucks and
    food transportation

Revolving Line of Credit (9.1%, Due 12/09) (3)
    Senior Secured Term Loan A (9.0%, Due 12/09) (3)
    Senior Secured Term Loan B (9.4%, Due 12/10) (3)
    Senior Subordinated Debt (16.0%, Due 12/10) (2) (3)


1,500,000
    2,958,000
    3,374,500
    7,082,680



1,500,000
    2,958,000
    3,374,500
    7,082,680



1,500,000
    2,958,000
    3,374,500
    7,082,680Robert Rothschild Farm, Inc. (Beverage, Food &
    Tobacco)

Manufacturer of specialty food products

Senior Secured Term Loan B (9.1%, Due 7/11) (3)
    Senior Subordinated Debt (16.3%, Due 1/12) (2) (3)


4,500,000
    4,902,868



4,500,000
    4,902,868



4,500,000
    4,902,868Sidumpr Trailer Company, Inc. (Automobile)

Manufacturer of side dump trailers

Revolving Line of Credit (10.8%, Due 1/11) (3)
    Senior Secured Term Loan A (9.0%, Due 1/11) (3)
    Senior Secured Term Loan B (12.0%, Due 1/11) (3)


430,000
    2,660,000
    2,344,125



430,000
    2,660,000
    2,344,125



430,000
    2,660,000
    2,344,125Senior Secured Term Loan C (14.0%, Due 7/11) (2) (3)


3,161,694



3,161,694



3,161,694Senior Subordinated Debt (12.0%, Due 1/12) (3)


75,000



75,000



75,000Preferred Stock (2)


80,808



80,808



80,808Common Stock (4)


25



25



49,700Stolle Machinery Company, LLC (6) (Machinery)

Provider of capital equipment used in the production of aluminum
    or steel beverage and food cans

Junior Secured Term Loan (11.4%, Due 9/13)


500,000



500,000



502,500Total Non-control/non-affiliate investments (represents 96.6%
    of total investments at fair value)





$
251,915,921


$
251,933,655Total Investments









$
260,882,526


$
260,859,260Unearned Income










(3,610,884
)


(3,610,884
)Total Investments Net of Unearned Income







$
257,271,642


$
257,248,376   (1)
    
    The Company does not
    control, and, except with respect to Smart, LLC, is
    not an affiliate of, any of its portfolio companies,
    each as defined in the Investment Company Act of 1940, as
    amended (the 1940 Act). In general, under the 1940
    Act, the Company controls a portfolio company if it
    owns 25% or more of its voting securities and is an
    affiliate of a portfolio company if the Company owns
    5% or more of its voting securities.(2)
    
    Amount includes
    payment-in-kind
    (PIK) interest or dividends.(3)
    
    Pledged as collateral under the
    Companys Securitization Facility. See Note 4 to
    Consolidated Financial Statements.(4)
    
    Non-income producing.(5)
    
    Some of the investments listed are
    issued by an affiliate of the listed portfolio company.(6)
    
    Syndicated investment which has
    been originated by another financial institution and broadly
    distributed.   57




---



##### 



Patriot
    Capital Funding, Inc.
  Notes
    to Consolidated Financial Statements
  Note 1.
    Organization      Note 2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
  U.S.-based
    Use of
    Estimates
    Cash
    and Cash Equivalents
    Restricted
    Cash
    Concentration
    of Credit Risk
   58




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Investment
    Valuation
            Property,
    Equipment and Leasehold Improvements
    Debt
    Issuance Costs
   59




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Interest
    Income Recognition
      Fee
    Income Recognition
   60




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    00-21 (EITF 00-21). EITF 00-21
      2007


2006Beginning unearned income balance

$
3,610,884


$
3,439,295Net fees received


3,647,472



2,254,649Unearned income recognized


(2,702,643
)


(2,083,060
)Ending unearned income balance

$
4,555,713


$
3,610,884   Payment
    in Kind Interest/Dividends
      2007


2006Beginning of period PIK balance

$
2,891,565


$
2,174,974PIK interest and dividends earned during the year


3,928,159



2,424,927Sales of investments






(383,946
)Payments received during the year


(2,105,368
)


(1,324,390
)Ending PIK balance

$
4,714,356


$
2,891,565     Realized
    Gain or Loss and Unrealized Appreciation or Depreciation of
    Investments
   61




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Stock
    Options
    Accounting for Stock Issued to Employees.
   62




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          For the Year EndedDecember 31, 2005Net loss, as reported

$
(1,237,294
)Deduct: Total stock-based compensation expense determined under
    fair value based method for all awards


162,687Pro forma net loss

$
(1,399,981
)Loss per share, as reported  basic and diluted

$
(0.17
)Loss per share, pro forma  basic and diluted

$
(0.19
)     Management
    Fees
    Federal
    Income Taxes
   63




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Dividends
    Paid
      Recent
    Accounting Pronouncements
  07-1, (SOP 07-01). SOP 07-1 SOP 07-1 SOP 07-1
     64




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Reclassifications
    Note 3.
    Investments    December 31, 2007


December 31, 2006Cost


Fair Value


Cost


Fair ValueInvestments in debt securities

$
379,443,471


$
375,294,460


$
256,743,135


$
257,014,385Investments in equity securities


12,976,692



13,464,731



4,139,391



3,844,875Subtotal


392,420,163



388,759,191



260,882,526



260,859,260Unearned income


(4,555,713
)


(4,555,713
)


(3,610,884
)


(3,610,884
)Total

$
387,864,450


$
384,203,478


$
257,271,642


$
257,248,376       December 31, 2007


December 31, 2006Cost


%(1)


Fair Value


%(1)


Cost


%(1)


Fair Value


%(1)Senior Secured Debt

$
215,016,050



54.8
%

$
214,177,000



55.1
%

$
140,682,645



53.9
%

$
140,682,645



53.9
%Junior Secured Debt


57,034,326



14.5



56,124,326



14.4



56,761,563



21.8



57,032,813



21.9Subordinated Debt


107,393,095



27.4



104,993,134



27.0



59,298,927



22.7



59,298,927



22.7Warrants/Equity


12,976,692



3.3



13,464,731



3.5



4,139,391



1.6



3,844,875



1.5Total

$
392,420,163



100.0
%

$
388,759,191



100.0
%

$
260,882,526



100.0
%

$
260,859,260



100.0
%     (1)
    
    Represents percentage of total portfolio. 65




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    December 31, 2007


December 31, 2006Cost


%(1)


Fair Value


%(1)


Cost


%(1)


Fair Value


%(1)Machinery

$
53,448,966



13.6
%

$
54,635,424



14.1
%

$
13,559,438



5.2
%

$
13,561,938



5.2
%Personal & Nondurable Consumer Products


51,639,895



13.2



51,849,995



13.3



40,054,135



15.4



40,202,235



15.4Electronics


42,707,849



10.9



42,882,544



11.0



33,205,950



12.7



33,249,377



12.8Automobile


34,439,995



8.8



34,352,699



8.8



23,666,832



9.1



23,716,507



9.1Health Care, Education & Childcare


34,115,686



8.7



34,208,486



8.8















Grocery


23,417,059



6.0



23,555,259



6.1



16,925,593



6.5



16,925,593



6.5Metals & Minerals


23,288,159



5.9



23,288,159



6.0



23,278,278



8.9



23,278,278



8.9Printing & Publishing


19,419,441



4.9



16,419,480



4.2



19,337,136



7.4



18,992,336



7.3Ecological


15,716,250



4.0



14,516,300



3.7



13,850,000



5.3



13,678,500



5.2Textiles & Leather


13,129,378



3.3



13,236,278



3.4















Mining, Steel, Iron & Nonprecious Metals


10,920,823



2.8



10,900,573



2.8



10,524,057



4.0



10,525,007



4.0Chemicals, Plastic & Rubber


10,817,192



2.8



10,812,192



2.8



11,850,633



4.5



11,845,633



4.5Retail Stores


10,791,269



2.7



10,772,269



2.8



14,947,833



5.7



14,970,833



5.7Housewares & Durable Consumer Products


9,766,240



2.5



9,779,540



2.5















Diversified/Conglomerate Service


9,651,465



2.4



9,380,565



2.4



8,966,605



3.4



8,925,605



3.4Beverage, Food & Tobacco


9,000,000



2.3



9,000,000



2.3



18,402,868



7.1



18,549,118



7.1Buildings & Real Estate


4,852,328



1.2



4,852,328



1.2















Insurance


5,000,000



1.3



4,500,000



1.2



5,000,000



1.9



5,075,000



2.0Oil & Gas


3,850,000



1.0



3,850,000



1.0



3,850,000



1.5



3,850,000



1.5Personal, Food & Miscellaneous Services


3,000,000



0.8



2,910,000



0.8



3,000,000



1.2



3,007,500



1.2Containers, Packaging & Glass


2,985,000



0.8



2,895,500



0.7















Aerospace & Defense


463,168



0.1



161,600



0.1



463,168



0.2



505,800



0.2Total

$
392,420,163



100.0
%

$
388,759,191



100.0
%

$
260,882,526



100.0
%

$
260,859,260



100.0
%     (1)
    
    Represents percentage of total portfolio.   66




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 4.
    Borrowings    364-day 364-day 24-month 364-day 24-month
 67




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31,2007


2006


2005Interest charges

$
7,044,208


$
3,753,153


$
3,083,563Amortization of debt issuance costs


261,614



365,855



276,623Unused facility fees


115,774



213,574



157,803Total

$
7,421,596


$
4,332,582


$
3,517,989       Note 5.
    Employee
    Benefit Plan    Note 6.
    Common
    Stock Transactions     68




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
            Date Declared

Record Date

Payment Date

Amount2007November 1, 2007

December 14, 2007

January 16, 2008

$
0.33August 2, 2007

September 14, 2007

October 17, 2007


0.32April 30, 2007

June 15, 2007

July 17, 2007


0.32February 23, 2007

March 15, 2007

April 18, 2007


0.32Total  2007





$
1.292006November 10, 2006

December 15, 2006

January 17, 2007

$
0.31August 7, 2006

September 15, 2006

October 17, 2006


0.31May 9, 2006

June 2, 2006

July 17, 2006


0.29February 28, 2006

March 21, 2006

April 11, 2006


0.29Total  2006





$
1.202005November 8, 2005

November 30, 2005

December 30, 2005

$
0.27September 7, 2005

September 30, 2005

October 31, 2005


0.16Total  2005





$
0.43  69




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 7.
    Share
    Data    Year Ended December 31,2007


2006


2005Weighted average common shares outstanding, basic


18,670,904



14,145,200



7,253,632Effect of dilutive stock options


159,309



92,752



Weighted average common shares outstanding, diluted


18,830,213



14,237,952



7,253,632     Note 8.
    Commitments
    and Contingencies        Note 9.
    Concentrations
    of Credit Risk     70




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 10.
    Related
    Party Transactions      Note 11.
    Income
    Taxes      January 1, 2007


August 1, 2006


August 1, 2007to


to


toDecember 31, 2007


July 31, 2007


December 31, 2007GAAP Net Investment Income

$
22,745,000


$
19,407,000


$
10,224,000Tax timing differences of:Origination fees, net


1,649,000



883,000



1,223,000Stock compensation expense, bonus accruals, original issue
    discount and other


(173,000
)


846,000



(37,000
)Tax Distributable Income

$
24,221,000


$
21,136,000


$
11,410,000      71




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    August 1, 2006


August 1, 2007to


toJuly 31, 2007


December 31, 2007Distributions paid from:Ordinary income

$
21,136,000


$
11,410,000Long-term capital gains






Subtotal


21,136,000



11,410,000Tax return of capital


335,000



1,258,000Total distributions

$
21,471,000


$
12,668,000   Form 1099-DIV. Form 1099-DIV. Form 1099-DIV.
      Distributable ordinary income

$
6,138,000Bonuses accrued  deductible for tax when paid in 2008


(1,566,000
)Other book/tax temporary differences


(4,670,000
)Unrealized depreciation


(4,423,000
)Accumulated capital and other losses


(3,171,000
)   Form 1099-DIV,
   72




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 12.
    Financial
    Highlights  For the Year Ended December 31,2007


2006


2005Per Share Data:Net asset value at beginning of year

$
10.37


$
10.48


$
7.10Net investment income


1.22



1.06



.24Net realized gain (loss) on investments


.01



(.23
)


Net change in unrealized appreciation (depreciation) on
    investments


(.20
)


.27



(.41
)Net change in swap depreciation


(.04
)






Issuance of common stock


12.99



10.23



12.83Tax return of capital


(.08
)


(.18
)


(.29
)Distributions from net investment income


(1.22
)


(1.06
)


(.14
)Distributions in excess of net investment income






.05



Stock based compensation expense


.03



.03



Dilutive effect of share issuance


(12.35
)


(10.28
)


(8.85
)Net asset value at end of year

$
10.73


$
10.37


$
10.48Total Net Asset Value Return(1)


16.1
%


10.4
%


3.7
%Per share market value, beginning of period

$
14.49


$
12.20


$
14.00
(3)Per share market value, end of period

$
10.09


$
14.49


$
12.20Total Market Value Return(2)


(21.4
)%


28.6
%


(9.8
)%Shares outstanding at end of year


20,650,455



15,821,994



12,136,655Ratios and Supplemental Data:Net assets at end of year

$
221,598,000


$
164,109,000


$
127,152,000Average net assets


202,531,000



149,790,000



70,188,000Ratio of operating expenses to average net assets


8.0
%


7.7
%


16.7
%Ratio of net investment income to average net assets


11.2
%


10.0
%


2.5
%Weighted average borrowings outstanding

$
106,034,000


$
55,469,000


$
30,877,000Average amount of borrowings per share

$
5.13


$
3.51


$
2.54     (1)
    
    The total net asset value return reflects the change in net
    asset value of a share of stock plus dividends from beginning of
    year to end of year. On July 27, 2005, Wilton merged with
    and into the Company and the Company then effected a stock
    split. As a result, the Companys financial statements
    reflect 3,847,902 shares issued and outstanding from
    January 1, 2005. On August 2, 2005, the Company closed
    its initial public offering of 7,190,477 shares of common
    stock and on August 15, 2005, the underwriters exercised
    their option to purchase an additional 1,078,572 shares of
    common stock.(2)
    
    The total market value return (not annualized for
    2005) reflects the change in the ending market value per
    share plus dividends, divided by the beginning market value per
    share.(3)
    
    Share price as of August 2, 2005, the date the Company
    closed its initial public offering. 73




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Note 13.
    Selected
    Quarterly Data (Unaudited)    Year Ended December 31, 2007Quarter


Quarter


Quarter


QuarterEnded


Ended


Ended


EndedDecember 31


September 30


June 30


March 31Total Investment Income

$
11,142,679


$
9,752,882


$
9,089,653


$
8,977,323Net Investment Income


6,507,150



5,500,985



5,391,708



5,345,278Net Realized and Unrealized Gains (Losses) on Investments and
    Interest Rate Swap


(3,146,414
)


(1,494,112
)


291,156



27,939Net Income


3,360,736



4,006,873



5,682,864



5,373,217Net Income Per Share, Basic

$
0.16


$
0.22


$
0.31


$
0.31Net Income Per Share, Diluted

$
0.16


$
0.22


$
0.31


$
0.30Weighted Average Shares Outstanding, Basic


20,589,650



18,284,737



18,246,987



17,532,896Weighted Average Shares Outstanding, Diluted


20,748,959



18,476,049



18,466,510



17,724,026   Year Ended December 31, 2006Quarter


Quarter


Quarter


QuarterEnded


Ended


Ended


EndedDecember 31


September 30


June 30


March 31Total Investment Income

$
7,595,548


$
6,879,633


$
5,807,865


$
6,223,288Net Investment Income


4,119,939



4,096,455



3,094,715



3,709,535Net Realized and Unrealized Gains (Losses) on Investments and
    Interest Rate Swap


402,445



(569,280
)


1,489,896



(755,135
)Net Income


4,522,384



3,527,175



4,584,611



2,954,400Net Income Per Share, Basic

$
0.29


$
0.22


$
0.36


$
0.24Net Income Per Share, Diluted

$
0.28


$
0.22


$
0.36


$
0.24Weighted Average Shares Outstanding, Basic


15,815,485



15,781,525



12,788,727



12,136,655Weighted Average Shares Outstanding, Diluted


15,908,237



15,836,416



12,788,727



12,136,655  74




---



##### 



Patriot
    Capital Funding, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 14.
    Subsequent
    Events (Unaudited)             75




---



##### 



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosures    Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures.
  Form 10-K), Rule 13a-15(e) 15d-15(e)
  Managements
    Annual Report on Internal Control Over Financial
    Reporting.
    
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and the
    dispositions of assets;
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with appropriate authorizations; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on our
    financial statements.      Attestation
    Report of Registered Public Accounting Firm on Internal Control
    Over Financial Reporting.
  Form 10-K.
 76




---



##### 



Change in
    Internal Control Over Financial Reporting
    Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    http://www.patcapfunding.com. Form 8-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence     77




---



##### 



Item 14.
    Principal
    Accounting Fees and Services   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules.                  2.
    The following financial statement schedules is filed herewith:
    Schedule 12-14 
    Patriot Capital Funding, Inc. Schedule of Investments In and
    Advances to Affiliates.  Regulation S-K.
  Regulation S-K):
  ExhibitNumber

Description of Document3
.1

Restated Certificate of Incorporation (Incorporated by reference
    to Exhibit 3.1 of Patriot Capital Fundings
    Form 10-Q
    filed with the SEC on August 10, 2006).3
.2

Form of Certificate of Amendment to Restated Certificate of
    Incorporation (Incorporated by reference to Exhibit (a)(2) filed
    with Patriot Capital Fundings
    Form N-2
    filed with the SEC on July 27, 2005).3
.3

Restated Bylaws (Incorporated by reference to Exhibit
    (b) filed with Patriot Capital Fundings
    Form N-2
    filed with the SEC on July 13, 2005).4
.1

Form of Stock Certificate (Incorporated by reference to Exhibit
    (d) filed with Patriot Capital Fundings
    Form N-2
    filed with the SEC on July 13, 2005).10
.1**

Dividend Reinvestment Plan.10
.2

Patriot Capital Funding, Inc. Amended Stock Option Plan
    (Incorporated by reference to Appendix B to Patriot Capital
    Fundings definitive proxy statement filed with the SEC on
    May 1, 2006).10
.3

Form of Stock Option Agreement for Officers (Incorporated by
    reference to Exhibit (i)(2) filed with Patriot Capital
    Fundings
    Form N-2
    filed with the SEC on July 13, 2005).10
.4

Custodian Agreement with Wells Fargo, National Association
    (Incorporated by reference to Exhibit (k)(9) filed with
    Patriot Capital Fundings Form N-2 filed with the SEC
    on August 1, 2005). 78




---



##### 



ExhibitNumber

Description of Document10
.5

Employment Agreement between Patriot Capital Funding and Richard
    P. Buckanavage (Incorporated by reference to Exhibit (k)(4)
    filed with Patriot Capital Fundings
    Form N-2
    filed with the SEC on July 13, 2005).10
.6

Employment Agreement between Patriot Capital Funding and Timothy
    W. Hassler (Incorporated by reference to Exhibit (k)(5) filed
    with Patriot Capital Fundings
    Form N-2
    filed with the SEC on July 13, 2005).10
.7

Employment Agreement between Patriot Capital Funding and William
    E. Alvarez, Jr. (Incorporated by reference to Exhibit 10.1
    filed with Patriot Capital Fundings
    Form 10-Q
    filed with the SEC on August 7, 2007).10
.8

Employment Agreement between Patriot Capital Funding and Matthew
    R. Colucci (Incorporated by reference to Exhibit 10.3 filed
    with Patriot Capital Fundings
    Form 8-K
    filed with the SEC on December 21, 2005).10
.9

Second Amendment to Amended and Restated Loan Funding and
    Servicing Agreement by and among the Patriot Capital Funding,
    Inc., Patriot Capital Funding LLC I, Fairway Finance
    Company, LLC, BMO Capital Markets Corp. and Wells Fargo Bank,
    National Association (Incorporated by reference to
    Exhibit 10.1 filed with Patriot Capital Fundings
    Form 8-K
    filed with the SEC on September 6, 2007).10
.10

Purchase and Sale Agreement by and between the Registrant and
    Patriot Capital Funding LLC I (Incorporated by reference to
    Exhibit (k)(10) filed with Patriot Capital Fundings
    Post-Effective Amendment No. 1 to
    Form N-2
    filed with the SEC on August 1, 2005).10
.11

Securities Account Control Agreement by and among the
    Registrant, Patriot Capital Funding LLC I, Harris Nesbitt
    Corp. and Wells Fargo Bank, National Association (Incorporated
    by reference to Exhibit (k)(11) filed with Patriot Capital
    Fundings Post-Effective Amendment No. 1 to
    Form N-2
    filed with the SEC on August 1, 2005).10
.12

Intercreditor and Concentration Account Administration Agreement
    by and among the Registrant, U.S. Bank National Association and
    Wells Fargo, National Association (Incorporated by reference to
    Exhibit (k)(12) filed with Patriot Capital Fundings
    Post-Effective Amendment No. 1 to
    Form N-2
    filed with the SEC on August 1, 2005).21


Subsidiaries of Patriot Capital Funding and jurisdiction of
    incorporation/organizations:Patriot Capital Funding LLC I  Delaware23 **


Consent of Grant Thornton LLP, independent registered public
    accounting firm.31
.1**

Certification of Chief Executive Officer Pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934.31
.2**

Certification of Chief Financial Officer Pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934.32
.1**

Certification of Chief Executive Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S. C.
    1350).32
.2**

Certification of Chief Financial Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S. C.
    1350).     **
    
    Filed Herewith 79




---



##### 



SIGNATURES      By:
    /s/  Richard
    P. Buckanavage    Chief Executive Officer and President
  By:
    /s/  William
    E. Alvarez, Jr.    Executive Vice President, Chief
 Financial Officer and Secretary
    Signature

Title(Capacity)

Date/s/  RICHARD
    P. BUCKANAVAGERichard
    P. Buckanavage

Chief Executive Officer and Director (Principal Executive
    Officer)

March 4, 2008/s/  WILLIAM
    E. ALVAREZ, JR.William
    E. Alvarez, Jr.

Chief Financial Officer (Principal Financial and Accounting
    Officer)

March 4, 2008/s/  TIMOTHY
    W. HASSLERTimothy
    W. Hassler

Chief Operating and Compliance Officer and Director

March 4, 2008/s/  MEL
    P. MELSHEIMERMel
    P. Melsheimer

Chairman and Director

March 4, 2008/s/  STEVEN
    DROGINSteven
    Drogin

Director

March 4, 2008/s/  DENNIS
    C. ODOWDDennis
    C. ODowd

Director

March 4, 2008/s/  RICHARD
    A. SEBASTIAORichard
    A. Sebastiao

Director

March 4, 2008  80




---



##### 



Exhibit Index  Exhibit

Description10
.1

Dividend Reinvestment Plan23


Consent of Grant Thornton LLP, independent registered public
    accounting firm.31
.1

Certification of Chief Executive Officer Pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934.31
.2

Certification of Chief Financial Officer Pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934.32
.1

Certification of Chief Executive Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S. C.
    1350).32
.2

Certification of Chief Financial Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S. C.
    1350).  81




---



##### 



Report of
    Independent Registered Public Accounting Firm
     Form 10-K.
      82




---



##### 



Schedule 12-14
  PATRIOT
    CAPITAL FUNDING, INC.
    SCHEDULE OF INVESTMENTS IN AND ADVANCES TO
    AFFILIATES
  Amount of Interestor Dividends


December 31,








December 31,Credited


2006


Gross


Gross


2007Portfolio Company

Investment(1)

to Income


Fair Value


Additions(2)


Reductions(3)


Fair ValueCompanies More Than 25% Owned:Fischbein, LLC

Subordinated Debt

$
470,584


$



$
4,211,988


$



$
4,211,988Membership Interest(4)










5,148,000







5,148,000Total companies more than 25% owned



$
470,584


$



$
9,359,988


$



$
9,359,988Companies 5% to 25% Owned:Aylward Enterprises, LLC

Senior Debt

$
1,076,369


$



$
12,992,188


$
(1,000,000
)

$
11,992,188Subordinated Debt


864,669







6,424,703







6,424,703Membership Interest(4)










1,250,000



(1,250,000
)


KTPS Holdings, LLC

Senior Debt


627,067







9,497,500



(1,200,000
)


8,297,500Subordinated Debt


418,472







4,081,878







4,081,878Membership Interest(4)










856,900







856,900Nupla Corporation

Senior Debt


200,830







7,128,125



(900,000
)


6,228,125Subordinated Debt


140,615







3,019,688







3,019,688Preferred Stock


18,427







493,427







493,427Common Stock(4)










38,300







38,300Smart, LLC

Senior Debt


1,259,877



7,966,605



1,684,860



(1,250,000
)


8,401,465Subordinated Note


3,361







250,000







250,000Membership Interest(4)






959,000







(229,900
)


729,100Sport Helmets

Senior Debt


59,001







12,000,000







12,000,000Holdings, LLC

Subordinated Debt


60,937







8,011,333







8,011,333Common Stock(4)










2,000,000



(98,500
)


1,901,500Vince & Associates

Senior Debt


105,645







7,500,000







7,500,000Clinic Research, Inc

Subordinated Debt


112,023







5,521,561







5,521,561Preferred Stock(4)










592,900







592,900Total companies 5% to 25% owned



$
4,947,293


$
8,925,605


$
83,343,363


$
(5,928,400
)

$
86,340,568       (1)
    
    All investments listed are restricted securities
    within the meaning of Rule 144 under the Securities Act of
    1933.(2)
    
    Gross additions include increases in investments resulting from
    new portfolio company investments and
    paid-in-kind
    interest or dividends. Gross additions also include net
    increases in unrealized appreciation or net decreases in
    unrealized depreciation.(3)
    
    Gross reductions include decreases in investments resulting from
    principal collections related to investment repayments. Gross
    reductions also include net increases in unrealized depreciation
    or net decreases in unrealized appreciation.(4)
    
    Non-income producing. 83