Can’t Sell Your Non-Traded BDC? What Investors Can Do

Non-Traded BDC Losses

If you own shares in a non-traded business development company and tried to cash out this year, you likely got only part of your money back, or none at all. Across the industry, these private credit funds have been receiving far more withdrawal requests than they allow, and most have held investors to a strict quarterly limit. For many people, that is the first time they have learned how hard it can be to get out of an investment they were told was a steady source of income.

A redemption limit on its own doesn’t prove anyone did anything wrong. But it often exposes a different problem: the investment may never have been right for the person who bought it. If your advisor put a large share of your savings into a product you cannot easily sell, an investment fraud lawyer can review whether that recommendation met the standard your advisor was required to follow.

What a Non-Traded BDC Is

A business development company, or BDC, is a fund that lends money to private, mid-sized companies, usually businesses that are too small or too heavily indebted to borrow from banks on good terms. Those loans tend to pay high interest, which is why BDCs are marketed as income investments and often advertise attractive monthly distributions.

Some BDCs trade on the stock exchange like any other stock. Non-traded BDCs do not. Their shares are sold through brokers and financial advisors, priced at the fund’s own estimate of what its loans are worth, and can only be sold back to the fund itself through periodic repurchase offers. Most of these funds limit those repurchases to about 5 percent of the fund’s shares each quarter. When more investors want out than the limit allows, the fund cuts requests pro rata, and the rest waits for the next quarter. Non-traded BDCs belong to the broader family of complex financial products that brokers sell to retail investors, alongside non-traded REITs and private placements, which carry many of the same liquidity risks.

What Has Happened to These Funds in 2026

For years, non-traded BDCs took in far more money than they paid out. That reversed in early 2026. According to data from Robert A. Stanger and Co., the first quarter was the segment’s first-ever net outflow quarter, as withdrawals exceeded new sales. The CAIA Association reported that in that same quarter, investors asked to withdraw 40.7 percent of the shares in Blue Owl’s technology-focused fund and 21.9 percent from its credit income funds, against the standard 5 percent cap.

The pressure has eased somewhat since then, but it has not gone away. In the third quarter of 2026, investors in the 19 largest non-traded BDCs asked for $13.8 billion back, about 11.5 percent of the funds’ value, according to Stanger data reported by AltsWire. Only about 40 percent of those requests were honored, leaving an estimated $8.2 billion in unmet withdrawals carried forward. Individual funds tell the same story. Requests at Blackstone Private Credit Fund ran around 10 percent of shares for the second straight quarter while repurchases stayed at the 5 percent cap, and Apollo Debt Solutions received requests for 14.7 percent of its shares against the same limit. Fitch reported that Blue Owl Technology Income Corp. faced requests equal to 39 percent of its shares.

In practical terms, an investor who asked for all of their money back this year may have received a third of it, with the rest stuck in a queue and no guarantee of when it will come out. And the category is likely to keep growing. In September 2026, the SEC proposed rule changes designed to make private market strategies easier for ordinary investors to buy through registered funds, which means more people may soon be offered products with the same kinds of limits.

A Redemption Cap Is Not Automatically Fraud

It is worth being clear about this, because it shapes whether you have a claim. The 5 percent quarterly limit is written into these funds’ offering documents. It exists to keep a wave of withdrawals from forcing the fund to sell loans at fire-sale prices, which would hurt the investors who stay. A fund that enforces its own disclosed limit is generally doing what it said it would do.

The legal question in most of these cases is not about the fund. It is about the person who sold it to you. Brokers who recommend investments to retail customers must, under Regulation Best Interest, act in the customer’s best interest at the time of the recommendation, including understanding the product’s risks and costs and making sure it fits the customer’s needs. A product can be perfectly legitimate and still be the wrong recommendation for a particular investor.

When the Sale Itself May Have Been the Problem

Certain patterns come up again and again in disputes over illiquid alternative investments, and they are worth checking against your own situation. The first is a liquidity mismatch. If you told your advisor you might need the money within a few years, for retirement, a home purchase, or medical costs, an investment that can lock up most of your principal for an unknown period was a questionable fit from the start.

The second is how the product was described. Non-traded BDCs are often pitched in terms of their distribution yield, and phrases like “semi-liquid” or “quarterly liquidity” can leave investors believing they can get out whenever they choose. If you were told you could access your money freely, or the redemption limits were never explained in plain terms, that may support a misrepresentation or omission claim.

The third is how much of your money went in. Even a suitable product becomes a problem when it makes up too large a share of an account, and putting a large portion of a retiree’s savings into one or more illiquid alternatives is a classic example of over-concentration. Older investors, investors with modest net worth relative to the amount invested, and investors who were sold several similar alternative products at once tend to draw the most scrutiny. Commissions matter, too. Non-traded alternatives have historically paid brokers more than ordinary stocks or bond funds, which is exactly the kind of conflict of interest Regulation Best Interest requires firms to manage.

What to Do If Your Money Is Stuck

Start by gathering your records: the account statements showing when you bought and how much, the subscription paperwork you signed, any marketing material your advisor gave you, and any emails or notes from conversations about the investment. Pay particular attention to anything that describes your goals and risk tolerance, since that is the standard against which your advisor’s recommendation will be measured.

Be cautious about offers to buy your shares on a secondary market. Some buyers specialize in purchasing illiquid fund shares, but they typically pay a steep discount to the fund’s stated value, and selling can lock in a loss that might otherwise be part of a claim. It is worth getting advice before you accept one.

Finally, pay attention to time. Claims against brokers and firms are usually brought through FINRA arbitration, which our guide to how FINRA arbitration works explains step by step. FINRA generally will not hear claims filed more than six years after the events in question, and state deadlines can be shorter, as we explain in our page on statutes of limitations. Many investors bought these funds during the rapid growth of the last several years, so for some, the clock started running well before the redemption problems began.

Frequently Asked Questions

Have I lost money if my BDC capped my redemption?

Not necessarily. A capped redemption means you could not withdraw as much as you asked for, not that your shares have lost value. Your remaining shares stay invested, and you can generally submit requests in future quarters. The concern is that you cannot access the money when you need it, and that the fund’s value may change before you can get out.

Can I sue the fund for limiting withdrawals?

Usually not, if the fund is following the limits described in its offering documents. Most claims in these situations are brought against the brokerage firm and advisor who recommended the investment, based on whether it was suitable for you and whether its risks were explained honestly.

What does it cost to have my BDC investment reviewed?

Nothing. Patil Law reviews investment loss claims on a contingency basis, so there is no upfront cost, and the initial consultation is free.

Talk to Someone About Your BDC Investment

If your advisor recommended a non-traded BDC or another private credit fund and you can no longer get your money out, it is worth finding out whether the recommendation should have been made at all.

Call Patil Law at 800-950-6553, email cp@patillaw.com, or reach out here for a free, no-pressure review of your account.

Chetan Patil

Chetan Patil is the founder and Managing Partner of Patil Law. He brings over 15 years of extensive experience in diverse complex disputes and transactions across the country. Mr. Patil specializes in litigation, trials, arbitrations, and appeals of complex securities, FINRA, financial, and business disputes, with an emphasis on securities, financial services, and financial regulatory law. Linkedin