Filed pursuant to Rule 497(c)
File No. 333-216665

PROSPECTUS SUPPLEMENT
(To Prospectus dated June 1, 2018)

Monroe Capital Corporation

$50,000,000

Common Stock



 

We are a specialty finance company focused on providing financing solutions primarily to lower middle-market companies in the United States and Canada. We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through investment in senior, unitranche and junior secured debt and, to a lesser extent, unsecured subordinated debt and equity investments. We use our extensive leveraged finance origination infrastructure and broad expertise in sourcing loans to invest in primarily senior, unitranche and junior secured debt of middle-market companies.

We invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities are often referred to as “high yield” or “junk.” In addition, many of the debt securities we hold do not fully amortize prior to maturity, which heightens the risk that we may lose all or a part of our investment.

Monroe Capital BDC Advisors, LLC serves as our investment advisor. Monroe Capital Management Advisors, LLC serves as our administrator. Each of Monroe Capital BDC Advisors, LLC and Monroe Capital Management Advisors, LLC is affiliated with Monroe Capital, LLC, a leading lender to middle-market companies.

We have entered into separate equity distribution agreements, each dated May 12, 2017, with B. Riley FBR, Inc., as successor by merger to FBR Capital Markets & Co. (“B. Riley FBR”), and JMP Securities LLC (“JMP Securities”). B. Riley FBR, together with JMP Securities, are herein referred to individually as a “Sales Agent” and together, the “Sales Agents.” The equity distribution agreement with JMP Securities and the equity distribution agreement with B. Riley FBR relate to the shares of common stock offered by this prospectus supplement and the accompanying prospectus. The equity distribution agreements provide that we may offer and sell up to $50,000,000 of our common stock from time to time through the Sales Agents in negotiated transactions or transactions that are deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act of 1933, as amended. As of the date of this prospectus supplement, we have not sold any shares of our common stock under the equity distribution agreements.

Our common stock is listed on The Nasdaq Global Select Market under the symbol “MRCC.” On June 6, 2018, the last reported sale price of our stock on The Nasdaq Global Select Market was $14.43 per share. Our net asset value as of March 31, 2018 was $13.49 per share.

Under the terms of the equity distribution agreements, the Sales Agents will receive a commission from us of up to 2.0% of the gross sales price of any shares of our common stock sold through the Sales Agents under the equity distribution agreements. The Sales Agents are not required to sell any specific number or dollar amount of common stock, but will use their commercially reasonable efforts consistent with their sales and trading practices to sell the shares of our common stock offered by this prospectus supplement and the accompanying prospectus. For all fees and expenses paid to the Sales Agents, see “Plan of Distribution” beginning on page S-46 of this prospectus supplement.

Shares of closed-end investment companies, including business development companies, frequently trade at a discount to their net asset value. If our shares trade at a discount to our net asset value, it will likely increase the risk of loss for purchasers in this offering. On June 21, 2017, our stockholders voted to allow us to issue common stock at a price below net asset value per share for a period of twelve months subject to certain conditions. Sales of common stock at prices below net asset value per share dilute the interests of existing stockholders, have the effect of reducing our net asset value per share and may reduce our market price per share. In addition, continuous sales of common stock below net asset value may have a negative impact on total returns and could have a negative impact on the market price of our shares of common stock. See “Sale of Common Stock Below Net Asset Value” in this prospectus supplement and “Risk Factors” and “Sales of Common Stock Below Net Asset Value” in the accompanying prospectus.

An investment in our securities is subject to risks, including a risk of total loss of investment. In addition, the companies in which we invest are subject to special risks. Substantially all of the debt instruments in which we invest (i) have and will have variable interest rate provisions that may make it more difficult for borrowers to make debt repayments to us in a rising interest rate environment and (ii) will likely have a principal amount outstanding at maturity, that may lead to a substantial loss to us if the borrower is unable to refinance or repay. See “Risk Factors” beginning on page 13 of the accompanying prospectus to read about factors you should consider, including the risk of leverage, before investing in our securities.

This prospectus supplement and the accompanying prospectus contain important information you should know before investing. Please read it before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission, or the SEC. This information is available free of charge by contacting us at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606, Attention: Investor Relations, by calling us collect at (312) 258-8300, or on our website at www.monroebdc.com. The SEC also maintains a website at www.sec.gov that contains such information.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 
B. Riley FBR   JMP Securities

Prospectus supplement dated June 7, 2018


 
 

TABLE OF CONTENTS

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

 
SUMMARY     S-1  
THE OFFERING     S-10  
FEES AND EXPENSES     S-12  
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS     S-15  
USE OF PROCEEDS     S-17  
CAPITALIZATION     S-18  
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS     S-19  
SELECTED CONSOLIDATED FINANCIAL DATA     S-20  
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA     S-22  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     S-23  
PLAN OF DISTRIBUTION     S-46  
SALE OF COMMON STOCK BELOW NET ASSET VALUE     S-47  
LEGAL MATTERS     S-48  
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     S-48  
AVAILABLE INFORMATION     S-48  

PROSPECTUS

 
ABOUT THIS PROSPECTUS     ii  
SUMMARY     1  
FEES AND EXPENSES     10  
RISK FACTORS     13  
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS     43  
USE OF PROCEEDS     44  
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS     45  
SELECTED CONSOLIDATED FINANCIAL DATA     47  
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA     49  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     50  
BUSINESS     81  
PORTFOLIO COMPANIES     94  
MANAGEMENT     102  
MANAGEMENT AND OTHER AGREEMENTS     109  
RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS     118  
CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS     121  
DETERMINATION OF NET ASSET VALUE     122  
SALES OF COMMON STOCK BELOW NET ASSET VALUE     124  
DIVIDEND REINVESTMENT PLAN     129  
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS     131  

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DESCRIPTION OF OUR CAPITAL STOCK     139  
DESCRIPTION OF OUR PREFERRED STOCK     145  
DESCRIPTION OF OUR SUBSCRIPTION RIGHTS     146  
DESCRIPTION OF OUR DEBT SECURITIES     148  
DESCRIPTION OF OUR WARRANTS     158  
REGULATION     160  
CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR     167  
BROKERAGE ALLOCATION AND OTHER PRACTICES     167  
PLAN OF DISTRIBUTION     168  
LEGAL MATTERS     170  
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     170  
AVAILABLE INFORMATION     170  
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS     F-1  

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ABOUT THIS PROSPECTUS SUPPLEMENT

This document is in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering of the common stock and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosures. For information about our common stock see “Description of Our Capital Stock” in the accompanying prospectus.

To the extent information differs between this prospectus supplement and the accompanying prospectus, you should rely only on such information in this prospectus supplement. You should read this prospectus supplement and the accompanying prospectus together with the additional information described under the heading “Available Information” before investing in our common stock.

You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. We have not, and B. Riley FBR and JMP Securities have not, authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. We are not, and B. Riley FBR and JMP Securities are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of their respective dates, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus or any sales of the securities. Our business, financial condition, results of operations and prospects may have changed since those dates.

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SUMMARY

This summary highlights some of the information in this prospectus supplement. This summary is not complete and may not contain all of the information that you may want to consider before investing in our common stock. You should read this entire prospectus supplement and the accompanying prospectus carefully, including, in particular, the more detailed information set forth under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

As used in this prospectus supplement, except as otherwise indicated, the terms:

“we,” “us” and “our” refer to Monroe Capital Corporation, a Maryland corporation;
MC Advisors refers to Monroe Capital BDC Advisors, LLC, our investment advisor and a Delaware limited liability company;
MC Management refers to Monroe Capital Management Advisors, LLC, our administrator and a Delaware limited liability company;
Monroe Capital refers to Monroe Capital LLC, a Delaware limited liability company, and its subsidiaries and affiliates;
SLF refers to MRCC Senior Loan Fund I, LLC, an unconsolidated Delaware limited liability company, in which we co-invest with NLV Financial Corporation (“NLV”) primarily in senior secured loans. SLF is capitalized as transactions are completed and all portfolio and investment decisions in respect of SLF must be approved by representatives of each of the members. As of March 31, 2018, we owned 50.0% of the LLC equity interests of SLF. As of March 31, 2018, SLF had LLC equity interest subscriptions from its members totaling $100.0 million, of which we have committed to fund $50.0 million;
MRCC SBIC refers to Monroe Capital Corporation SBIC, LP, a Delaware limited partnership, our wholly-owned subsidiary that operates as a small business investment company pursuant to a license received from the United States Small Business Administration; and
LIBOR refers to the one-month, three-month or six-month London Interbank Offered Rate as reported by the British Bankers’ Association. Unless stated otherwise herein, LIBOR refers to the one-month rate.

Monroe Capital Corporation

We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act, and that has elected to be treated as a regulated investment company, or RIC, for tax purposes under the U.S. Internal Revenue Code of 1986, as amended, or the Code, commencing with our taxable year ended December 31, 2012. We provide customized financing solutions to lower middle-market companies in the United States and Canada focused primarily on senior secured, junior secured and unitranche secured (a combination of senior secured and junior secured debt in the same facility in which we syndicate a “first out” portion of the loan to an investor and retain a “last out” portion of the loan) debt and, to a lesser extent, unsecured subordinated debt and equity, including equity co-investments in preferred and common stock and warrants.

Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through investment in senior, unitranche and junior secured debt and, to a lesser extent, unsecured subordinated debt and equity investments. We seek to use our extensive leveraged finance origination infrastructure and broad expertise in sourcing loans to invest in primarily senior, unitranche and junior secured debt of middle-market companies. We believe that our primary focus on lending to lower middle-market companies offers several advantages as compared to lending to larger companies, including more attractive economics, lower leverage, more comprehensive and restrictive covenants, more expansive events of default, relatively small debt facilities that provide us with enhanced influence over our borrowers, direct access to borrower management and improved information flow.

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In this prospectus supplement and the accompanying prospectus, the term “middle-market” generally refers to companies having annual revenue of between $20 million and $500 million and/or annual earnings before interest, taxes, depreciation and amortization, or EBITDA, of between $3 million and $50 million. Within the middle-market, we consider companies having annual revenues of less than $250 million and/or EBITDA of less than $25 million to be in the “lower middle-market.”

Portfolio Update

Since the consummation of the initial public offering in October 2012, we have grown the fair value of our portfolio of investments to approximately $496.0 million as of March 31, 2018. As of March 31, 2018, our portfolio consisted of 72 different portfolio companies, comprised of approximately 76.6% senior secured debt, 9.3% unitranche secured debt, 7.8% junior secured debt and 6.3% equity securities. As of March 31, 2018, the weighted average annualized effective yield on portfolio investments (which represents the expected annualized effective yield to be generated by us on our portfolio based on the composition of our portfolio as of such date) prior to leverage was 10.6% based on the par value of our debt investments and the cost basis of our preferred equity investments. For the quarter ended March 31, 2018, our total return based on net asset value was 0.5% and our total return based on market value was (8.1)%.

Our weighted average annualized effective yield on portfolio investments may be higher than an investor’s yield on an investment in shares of our common stock. The weighted average annualized effective yield on portfolio investments is a metric on the investment portfolio alone and does not represent a return to stockholders. This metric is not inclusive of our fees and expenses, the impact of leverage on the portfolio or sales load that may be paid by investors. In addition, total return figures disclosed above do not consider the effect of any sales load that may be incurred in connection with the sale of shares of our common stock. Our estimated weighted average annualized effective yield on portfolio investments and total return based on net asset value do not represent actual investment returns to stockholders. Our weighted average annualized effective yield on portfolio investments and total return figures are subject to change and, in the future, may be greater or less than the rates set forth above. See “Risk Factors” in the accompanying prospectus for a discussion of the uncertainties, risks and assumptions associated with these statements. See footnotes 4, 5 and 6 to the table included in “Selected Consolidated Financial Data” for information regarding the calculation of our total return based on market value, total return based on average net asset value, and weighted average annualized effective yield on portfolio investments, respectively.

Asset Coverage Approval

On March 27, 2018, our board of directors unanimously approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act (the “SBCAA”). As a result, our asset coverage requirements for senior securities will be changed from 200% to 150%, effective March 27, 2019. On March 27, 2018, our board of directors also recommended the submission of a proposal for stockholders to vote in favor of us to immediately become subject to a minimum asset coverage ratio of at least 150%, permitting us to double the amount of debt we may incur earlier than the current effective date of March 27, 2019, pursuant to the SBCAA. If this proposal is approved by stockholders at our annual stockholder meeting, we would become subject to an asset coverage ratio of at least 150% the day after such meeting instead of on March 27, 2019.

Our Investment Advisor

Our investment activities are managed by our investment advisor, MC Advisors. MC Advisors is responsible for sourcing potential investments, conducting research and due diligence on prospective investments and their private equity sponsors, analyzing investment opportunities, structuring our investments and managing our investments and portfolio companies on an ongoing basis. MC Advisors was organized in February 2011 and is a registered investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act.

Under the investment advisory and management agreement with MC Advisors, or the Investment Advisory Agreement, we pay MC Advisors a base management fee and an incentive fee for its services. See “Management and Other Agreements — Investment Advisory Agreement — Management and Incentive Fee” for a discussion of the base management fee and incentive fee payable by us to MC Advisors. While not

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expected to review or approve each investment, our independent directors periodically review MC Advisors’ services and fees as well as its portfolio management decisions and portfolio performance. In connection with these reviews, our independent directors consider whether our fees and expenses (including those related to leverage) remain appropriate.

MC Advisors seeks to capitalize on the significant deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Monroe Capital’s investment professionals. The senior management team of Monroe Capital, including Theodore L. Koenig and Aaron D. Peck, provides investment services to MC Advisors pursuant to a staffing agreement, or the Staffing Agreement, between MC Management, an affiliate of Monroe Capital, and MC Advisors. Messrs. Koenig and Peck have developed a broad network of contacts within the investment community and average more than 25 years of experience investing in debt and equity securities of lower middle-market companies. In addition, Messrs. Koenig and Peck have extensive experience investing in assets that constitute our primary focus and have expertise in investing throughout all periods of the economic cycle. MC Advisors is an affiliate of Monroe Capital and is supported by experienced investment professionals of Monroe Capital under the terms of the Staffing Agreement. Monroe Capital’s core team of investment professionals has an established track record in sourcing, underwriting, executing and monitoring transactions. From Monroe Capital’s formation in 2004 through March 31, 2018, Monroe Capital’s investment professionals invested in over 1,200 loan and related investments with an aggregate principal value of over $8.0 billion.

In addition to their roles with Monroe Capital and MC Advisors, Messrs. Koenig and Peck serve as interested directors. Mr. Koenig has more than 30 years of experience in structuring, negotiating and closing transactions on behalf of asset-backed lenders, commercial finance companies, financial institutions and private equity investors at organizations including Monroe Capital, which Mr. Koenig founded in 2004, and Hilco Capital LP, where he led investments in over 20 companies in the lower middle-market. Mr. Peck has more than 20 years of public company management, leveraged finance and commercial lending experience at organizations including Deerfield Capital Management LLC, Black Diamond Capital Management LLC and Salomon Smith Barney Inc.

Messrs. Koenig and Peck are joined on the investment committee of MC Advisors by Michael J. Egan and Jeremy T. VanDerMeid, each of whom is a senior investment professional at Monroe Capital. Mr. Egan has more than 30 years of experience in commercial finance, credit administration and banking at organizations including Hilco Capital, The CIT Group/Business Credit, Inc., The National Community Bank of New Jersey (The Bank of New York) and KeyCorp. Mr. VanDerMeid has more than 15 years of lending and corporate finance experience at organizations including Morgan Stanley Investment Management, Dymas Capital Management Company, LLC and Heller Financial.

About Monroe Capital

Monroe Capital, a Delaware limited liability company that was founded in 2004, is a leading lender to middle-market companies. As of March 31, 2018, Monroe Capital had approximately $5.5 billion in assets under management. Monroe Capital has maintained a continued lending presence in the lower middle-market throughout the most recent economic downturn. The result is an established lending platform that we believe generates consistent primary and secondary deal flow from a network of proprietary relationships and additional deal flow from a diverse portfolio of over 450 current investments. From Monroe Capital’s formation in 2004 through March 31, 2018, Monroe Capital’s investment professionals invested in over 1,200 loan and related investments with an aggregate principal value of over $8.0 billion. The senior investment team of Monroe Capital averages more than 25 years of experience and has developed a proven investment and portfolio management process that has performed through multiple market cycles. In addition, Monroe Capital’s investment professionals are supported by administrative and back-office personnel focused on operations, finance, legal and compliance, accounting and reporting, marketing, information technology and office management.

Market Opportunity

We invest primarily in senior, unitranche and junior secured debt issued to lower middle-market companies in the United States and, to a lesser extent and in accordance with the limitations on foreign investments in the 1940 Act, Canada. We believe that U.S. and Canadian lower middle-market companies comprise a large, growing and fragmented market that offers attractive financing opportunities. We believe that

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there exists a large number of prospective lending opportunities for lenders, which should allow us to generate substantial investment opportunities and build an attractive portfolio of investments.

Investment Strategy

Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation primarily through investments in senior, unitranche and junior secured debt and, to a lesser extent, unsecured subordinated debt and equity. We also seek to invest opportunistically in attractively priced, broadly syndicated loans, which should enhance our geographic and industry portfolio diversification and increase our portfolio’s liquidity. We do not target any specific industry, however, as of March 31, 2018, our investments in the healthcare & pharmaceuticals; banking, finance, insurance & real estate; and high tech industries represented approximately 13.2%, 12.2% and 10.3%, respectively, of the fair value of our portfolio. To achieve our investment objective, we utilize the following investment strategy:

Attractive Current Yield on Investment Portfolio.  We believe our sourcing network allows us to enter into transactions with attractive yields and investment structures. Based on current market conditions and our pipeline of new investments, we expect our target directly originated senior and unitranche secured debt will have an average maturity of three to five years and interest rates of 7% to 13%, and we expect our target directly originated junior secured debt and unsecured subordinated debt will have an average maturity of four to seven years and interest rates of 10% to 15%. In addition, based on current market conditions and our pipeline of new investments, we expect that our target debt investments will typically have a variable coupon (with a LIBOR floor), may include payment-in-kind, or PIK, interest (interest that is not received in cash, but added to the principal balance of the loan), and that we will typically receive upfront closing fees of 1% to 4%. We may also receive warrants or other forms of upside equity participation. Our transactions are generally secured and supported by a lien on all assets and/or a pledge of company stock in order to provide priority of return and to influence any corporate actions. Although we will target investments with the characteristics described in this paragraph, we cannot assure you that our new investments will have these characteristics and we may enter into investments with different characteristics as the market dictates. For a description of the characteristics of our current investment portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio and Investment Activity.” Until investment opportunities can be found, we may invest our undeployed capital in cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less from the date of investment. These temporary investments may have lower yields than our other investments and, accordingly, may result in lower distributions, if any, during such period. See “Use of Proceeds.”

Sound Portfolio Construction.  We strive to exercise discipline in portfolio creation and management and to implement effective governance throughout our business. Monroe Capital has been, and MC Advisors, which is comprised by substantially the same investment professionals who have operated Monroe Capital, is, and we believe will continue to be, conservative in the underwriting and structuring of covenant packages in order to enable early intervention in the event of weak financial performance by a portfolio company. We seek to pursue lending opportunities selectively and to maintain a diversified portfolio. We believe that exercising disciplined portfolio management through continued intensive account monitoring and timely and relevant management reporting allows us to mitigate risks in our debt investments. In addition, we have implemented rigorous governance processes through segregation of duties, documented policies and procedures and independent oversight and review of transactions, which we believe helps us to maintain a low level of non-performing loans. We believe that Monroe Capital’s proven process of thorough origination, conservative underwriting, due diligence and structuring, combined with careful account management and diversification, enabled it to protect investor capital, and we believe MC Advisors follows and will follow the same philosophy and processes in originating, structuring and managing our portfolio investments.

Predictability of Returns.  Beyond conservative structuring and protection of capital, we seek a predictable exit from our investments. We seek to invest in situations where there are a number of potential exit options that can result in full repayment or a modest refinance of our investment. We seek to structure the majority of our transactions as secured loans with a covenant package that provides for full or partial repayment upon the completion of asset sales and restructurings. Because we seek to structure these transactions to provide for contractually determined, periodic payments of principal and interest, we are less

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likely to depend on merger and acquisition activity or public equity markets to exit our debt investments. As a result, we believe that we can achieve our target returns even in a period when public markets are depressed.

Competitive Strengths

We believe that we represent an attractive investment opportunity for the following reasons:

Deep, Experienced Management Team.  We are managed by MC Advisors, which has access through the Staffing Agreement to Monroe Capital’s experienced team comprised of over 90 professionals, including seven senior partners that average more than 25 years of direct lending experience. We are led by our Chairman and Chief Executive Officer, Theodore L. Koenig, and Aaron D. Peck, our Chief Financial Officer and Chief Investment Officer. This extensive experience includes the management of investments with borrowers of varying credit profiles and transactions completed in all phases of the credit cycle. Monroe Capital’s senior investment professionals provide us with a difficult-to-replicate sourcing network and a broad range of transactional, financial, managerial and investment skills. This expertise and experience is supported by administrative and back office personnel focused on operations, finance, legal and compliance, accounting and reporting, marketing, information technology and office management. From Monroe Capital’s formation in 2004 through March 31, 2018, Monroe Capital’s investment professionals invested in more than 1,200 loan and related investments with an aggregate principal value of over $8.0 billion.

Differentiated Relationship-Based Sourcing Network.  We believe Monroe Capital’s senior investment professionals benefit from extensive relationships with commercial banks, private equity firms, financial intermediaries, management teams and turn-around advisors. We believe that this broad sourcing network differentiates us from our competitors and offers us a diversified origination approach that does not rely on a single channel and offers us consistent deal flow throughout the economic cycle. We also believe that this broad network allows us to originate a substantial number of non-private equity-sponsored investments.

Extensive Institutional Platform for Originating Middle-Market Deal Flow.  Monroe Capital’s broad network of relationships and significant origination resources enable us to review numerous lending opportunities, permitting us to exercise a high degree of selectivity in terms of loans to which we ultimately commit. Monroe Capital estimates that it reviewed approximately 2,000 investment opportunities during 2017. Monroe Capital’s over 1,200 previously executed transactions, over 450 of which are with current borrowers, offer us another source of deal flow, as these debt investments reach maturity or seek refinancing. We are also positioned to benefit from Monroe Capital’s established brand name, strong track record in partnering with industry participants and reputation for closing deals on time and as committed. Monroe Capital’s senior investment professionals are complemented by extensive experience in capital markets transactions, risk management and portfolio monitoring.

Disciplined, “Credit-First” Underwriting Process.  Monroe Capital has developed a systematic underwriting process that applies a consistent approach to credit review and approval, with a focus on evaluating credit first and then appropriately assessing the risk-reward profile of each loan. MC Advisors’ assessment of credit outweighs pricing and other considerations, as we seek to minimize potential credit losses through effective due diligence, structuring and covenant design. MC Advisors seeks to customize each transaction structure and financial covenant to reflect risks identified through the underwriting and due diligence process. We also seek to actively manage our origination and credit underwriting activities through personal visits and calls on all parties involved with an investment, including the management team, private equity sponsors, if any, or other lenders.

Established Credit Risk Management Framework.  We seek to manage our credit risk through a well-defined portfolio strategy and credit policy. In terms of credit monitoring, MC Advisors assigns each loan to a particular portfolio management professional and maintains an internal credit rating analysis for all loans. MC Advisors then employs ongoing review and analysis, together with monthly investment committee meetings to review the status of certain complex and challenging loans and a comprehensive quarterly review of all loan transactions. MC Advisors’ investment professionals also have significant turnaround and debt work-out experience, which gives them perspective on the risks and possibilities throughout the entire credit cycle. We believe this careful approach to investment and monitoring enables us to identify problems early and gives us an opportunity to assist borrowers before they face difficult liquidity constraints. By anticipating

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possible negative contingencies and preparing for them, we believe that we diminish the probability of underperforming assets and loan losses.

Credit Facility

We have a credit facility with ING Capital LLC, or the Lender, as agent, which as of March 31, 2018 consisted of a revolving line of credit of $200.0 million, which may be increased to up to $300.0 million pursuant to an accordion feature.

We may make draws under the revolver from time-to-time through December 2019 to make or purchase additional investments or for general working capital purposes until the maturity date of the credit facility, or the earliest to occur of (a) December 14, 2020, subject to extension as mutually agreed by us and the Lender, (b) the termination of the facility in accordance with its terms or (c) any other date mutually agreed to by us and the Lender. The revolving credit facility is secured by a lien on all of our assets, including cash on hand, but excluding the assets of our wholly-owned subsidiary, MRCC SBIC. The material terms of the credit facility are as follows:

total borrowing capacity currently equal to $200.0 million and up to $300.0 million pursuant to an accordion feature, subject to, among other things, availability under a defined borrowing base, which varies based on our portfolio characteristics and certain eligibility criteria and concentration limits, as well as valuation methodologies;
an interest rate equal to, at our election, (a) LIBOR (one-month, two-month, three-month or six-month at our discretion based on the term of the borrowing) plus 2.75% per annum, or (b) a daily rate equal to 1.75% per annum plus the greater of the prime interest rate, the federal funds rate plus 0.5% or LIBOR plus 1.0%;
in addition to the stated interest rate on borrowings under the revolving credit facility, we are required to pay a fee of 0.5% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is less than 65% of the then available maximum borrowing or a fee of 1.0% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is greater than or equal to 65% of the then available maximum borrowing; and
customary financial covenants and negative covenants and events of default.

As of March 31, 2018, we had U.S. dollar borrowings of $113.3 million and non-U.S. dollar borrowings denominated in Great Britain pounds of £8.8 million ($12.3 million in U.S. dollars) under our revolving credit facility and availability of $74.4 million.

MRCC SBIC

On February 28, 2014, our wholly-owned subsidiary, MRCC SBIC, received a license from the U.S. Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Company Act of 1958. MRCC SBIC commenced operations on September 16, 2013. As our wholly-owned subsidiary, MRCC SBIC relies on one or more exclusions from the definition of “investment company” under the 1940 Act and does not elect to be regulated as business development company under the 1940 Act. MRCC SBIC has an investment objective substantially similar to ours and makes similar types of investments in accordance with SBIC regulations.

On April 13, 2016, MRCC SBIC was approved by the SBA for an additional $75.0 million in SBA-guaranteed debentures, for a total of $115.0 million in available debentures. As of March 31, 2018, MRCC SBIC had $57.6 million in leverageable capital (approximately 11.2% of our total assets) and $112.8 million in SBA-guaranteed debentures outstanding.

We have received exemptive relief from the SEC to permit us to exclude the debt of our SBIC subsidiary guaranteed by the SBA from the definition of senior securities for the purposes of the asset coverage ratio we are required to maintain under the 1940 Act, which provides us with increased flexibility, but also increases our risks associated with leverage.

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Operating and Regulatory Structure

Our investment activities are managed by MC Advisors under the direction of our board of directors, a majority of whom are independent of us, MC Advisors and our and its respective affiliates.

As a business development company, we are required to comply with certain regulatory requirements. For example, while we are permitted to finance investments using leverage, which may include the issuance of notes, other borrowings and shares of preferred stock, our ability to use leverage is limited in significant respects. We are required to maintain an asset coverage ratio, as defined in the 1940 Act, of at least 200% until March 26, 2019 and an asset coverage ratio of 150% beginning on March 27, 2019. However, we may be able to maintain an asset coverage ratio of at least 150% prior to March 27, 2019 if stockholders approve a proposal for the authorization thereof at our annual meeting of stockholders. See “Regulation” in the accompanying prospectus. Any decision on our part to use leverage will depend upon our assessment of the attractiveness of available investment opportunities in relation to the costs and perceived risks of such leverage. The use of leverage to finance investments creates certain risks and potential conflicts of interest. See “Risk Factors — Risks Relating to Our Business and Structure — We maintain a revolving credit facility and may use other borrowed funds to make investments or fund our business operations, which exposes us to risks typically associated with leverage and increases the risk of investing in us” and “Risk Factors — Risks Relating to Our Business and Structure — Recent legislation may allow us to incur additional leverage, which could increase the risk of investing in us” in the accompanying prospectus.

Also, as a business development company, we are generally prohibited from acquiring assets other than “qualifying assets” unless, after giving effect to any acquisition, at least 70% of our total assets are qualifying assets. Qualifying assets generally include securities of “eligible portfolio companies,” cash, cash equivalents, U.S. government securities and high-quality debt instruments maturing in one year or less from the time of investment. Under the rules of the 1940 Act, “eligible portfolio companies” include (a) private domestic operating companies, (b) public domestic operating companies whose securities are not listed on a national securities exchange (e.g., The Nasdaq Global Market) or registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and (c) public domestic operating companies having a market capitalization of less than $250 million. Public domestic operating companies whose securities are quoted on the over-the-counter bulletin board or through Pink Sheets LLC are not listed on a national securities exchange and therefore are eligible portfolio companies. See “Regulation” in the accompanying prospectus. Additionally, to the extent we invest in the securities of companies domiciled in or with their principal places of business outside of the United States, we seek to limit those investments to companies domiciled or with their principal place of business in Canada. Any investments in Canadian companies will not be qualifying assets, meaning that in accordance with the 1940 Act, we cannot invest more than 30% of our assets in Canadian securities and other non-qualifying assets.

We have elected to be treated for U.S. federal income tax purposes as a RIC under the Code. In order to continue to qualify to be treated as a RIC, we must satisfy certain source of income, asset diversification and distribution requirements. See “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus.

Conflicts of Interests

Subject to certain 1940 Act restrictions on co-investments with affiliates, MC Advisors has agreed to offer us the right to participate in all investment opportunities that it determines are appropriate for us in view of our investment objective, policies and strategies and other relevant factors. These offers are subject to the exception that, in accordance with MC Advisors’ conflict of interest and allocation policies, we might not participate in each individual opportunity but are entitled, on an overall basis, to participate equitably with other entities sponsored or managed by MC Advisors and its affiliates.

Affiliates of MC Advisors manage other assets in five closed-end funds, two small business investment companies and 12 private funds that also have an investment strategy focused primarily on senior, unitranche and junior secured debt and, to a lesser extent, unsecured subordinated debt to lower middle-market companies. In addition, MC Advisors and/or its affiliates may manage other entities in the future with an investment focus similar to ours, including a closed-end non-diversified management company that intends to be regulated as a business development company, which has been formed but has not yet commenced

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operations. To the extent that we compete with entities managed by MC Advisors or any of its affiliates for a particular investment opportunity, MC Advisors seeks to allocate investment opportunities across the entities for which such opportunities are appropriate, consistent with (a) its internal conflict of interest and allocation policies, (b) the requirements of the Advisers Act and (c) certain restrictions under the 1940 Act and rules thereunder regarding co-investments with affiliates. MC Advisors’ allocation policies are intended to ensure that we may generally share equitably with other investment funds or other investment vehicles managed by MC Advisors or its affiliates in investment opportunities, particularly those involving a security with limited supply or involving differing classes of securities of the same issuer, which may be suitable for us and such other investment funds or other investment vehicles.

MC Advisors and/or its affiliates may in the future sponsor or manage investment funds, accounts or other investment vehicles with similar or overlapping investment strategies, and MC Advisors has put in place a conflict-resolution policy that addresses the co-investment restrictions set forth under the 1940 Act. MC Advisors seeks to ensure an equitable allocation of investment opportunities when we are able to invest alongside other accounts managed by MC Advisors and its affiliates. We received exemptive relief from the SEC on October 15, 2014 that permits us greater flexibility relating to co-investments, subject to certain conditions. When we invest alongside such other accounts as permitted under the 1940 Act, pursuant to SEC staff interpretations or our exemptive relief from the SEC that permits greater flexibility relating to co-investments, such investments will be made consistent with such relief and MC Advisors’ allocation policy. Under this allocation policy, a fixed percentage of each opportunity, which may vary based on asset class and from time to time, will be offered to us and similar eligible accounts, as periodically determined by MC Advisors and approved by our board of directors, including a majority of our independent directors. The allocation policy provides that allocations among us and other accounts will generally be made pro rata based on each account’s capital available for investment, as determined, in our case, by our board of directors, including a majority of our independent directors. It is our policy to base our determinations as to the amount of capital available for investment on such factors as the amount of cash on hand, existing commitments and reserves, if any, the targeted leverage level, the targeted asset mix and diversification requirements and other investment policies and restrictions set by our board of directors, or imposed by applicable laws, rules, regulations or interpretations. We expect that these determinations will be made similarly for other accounts. In situations where co-investment with other entities sponsored or managed by MC Advisors or its affiliates is not permitted or appropriate, such as when there is an opportunity to invest in different securities of the same issuer, MC Advisors will need to decide whether we or such other entity or entities will proceed with the investment. MC Advisors will make these determinations based on its policies and procedures, which will generally require that such opportunities be offered to eligible accounts on a basis that is fair and equitable over time, including, for example, through random or rotational methods.

Corporate History and Additional Information

We were incorporated under the laws of Maryland on February 9, 2011. Our principal executive offices are located at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606, and our telephone number is (312) 258-8300. We maintain a website at www.monroebdc.com and make all of our periodic and current reports, proxy statements and other information available, free of charge, on or through our website. Information on our website is not incorporated into or part of this prospectus supplement or the accompanying prospectus. You may also obtain such information free of charge by contacting us in writing at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606, attention: Investor Relations.

We have filed with the SEC a registration statement on Form N-2, of which this prospectus supplement is a part, under the Securities Act of 1933, as amended, or the Securities Act. This registration statement contains additional information about us and the securities being offered by this prospectus supplement. We also file periodic reports, current reports, proxy statements and other information with the SEC. This information is available at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549 and on the SEC’s website at www.sec.gov. Information on the operation of the SEC’s public reference room may be obtained by calling the SEC at 1-800-SEC-0330.

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Sale of Common Stock Below NAV

We may offer, and have in the past offered, shares of our common stock at a discount from our most recently determined net asset value per share pursuant to authority granted by our stockholders on June 21, 2017, July 14, 2016, June 24, 2015, June 27, 2014 and July 9, 2013. Our board of directors has in the past determined that it would be in our and our stockholders’ best interests to issue shares of our common stock below net asset value. See “Sale of Common Stock Below Net Asset Value” in this prospectus supplement, “Risk Factors” on page 13 of the accompanying prospectus and “Sales of Common Stock Below Net Asset Value” on page 124 of the accompanying prospectus.

Risk Factors

The value of our assets, as well as the market price of our shares will fluctuate. Our investments may be risky, and you may lose all or part of your investment in us. A material portion of our portfolio may have exposure to specific industries. See “Risk Factors” beginning on page 13 of the accompanying prospectus for a more detailed discussion of the material risks you should carefully consider before deciding to invest in our common stock.

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THE OFFERING

Common Stock Offered by Us    
    Shares of our common stock having an aggregate offering price of up to $50,000,000.
Manner of Offering    
    “At the market offerings” that may be made from time to time through B. Riley FBR, Inc. and JMP Securities LLC, each a “Sales Agent” and, collectively, the “Sales Agents,” using commercially reasonable efforts. See “Plan of Distribution.”
Use of Proceeds    
    We intend to use the net proceeds of this offering to invest in portfolio companies in accordance with our investment objectives and for general corporate purposes. We will also pay operating expenses, including management and administrative fees, and may pay other expenses from the net proceeds of this offering. Pending such investments, we intend to invest the net proceeds of this offering primarily in cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less from the date of investment. These temporary investments may have lower yields than our other investments and, accordingly, may result in lower distributions, if any, during such period. See “Use of Proceeds.”
Symbol on The Nasdaq Global Select
Market
   
    MRCC
Distributions    
    To the extent we have income and cash available, we intend to make quarterly distributions to our stockholders. Our quarterly distributions, if any, will be determined by our board of directors. Any distributions to our stockholders will be declared out of assets legally available for distribution.
Taxation    
    We have elected and intend to continue to qualify as a RIC under the Code. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any net ordinary income or capital gain that we distribute to our stockholders. To obtain and maintain RIC tax status, we must distribute at least 90% of our net ordinary income and net short-term capital gains in excess of our net long-term capital losses, if any. Because most of our income will not be attributable to dividends, such income will not be taxable at more favorable rates for qualified dividend income. Distributions made to you will generally be taxed as ordinary income or as capital gains.
Leverage    
    As a business development company, we are permitted under the 1940 Act to borrow funds to finance a portion of our investments. As a result, we may be exposed to the risks of leverage, which may be considered a speculative investment technique. Borrowings, also known as leverage, increase the potential for gain and loss on amounts invested and therefore increase the risks associated with investing in our securities. With certain limited exceptions, we are currently only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals, immediately after such borrowing, at least 200% until March 26, 2019 and 150% beginning on March 27, 2019. However, we may be able to maintain an asset coverage ratio of at least 150% prior to March 27, 2019 if stockholders approve a proposal for the authorization thereof at our annual meeting of stockholders. In

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    addition, the costs associated with our borrowings, if any, including any increase in the management fee payable to MC Advisors, will be borne by our common stockholders.
    We have received exemptive relief from the Securities and Exchange Commission to permit us to exclude the debt of our SBIC subsidiary guaranteed by the SBA from the definition of senior securities for the purposes of the asset coverage ratio we are required to maintain under the 1940 Act, which provides us with increased flexibility, but also increases our risks associated with leverage.
    As of March 31, 2018, we had debt outstanding under the revolving loan portion of the credit facility of approximately $125.6 million and SBA-guaranteed debentures outstanding of $112.8 million.
Trading    
    Shares of closed-end investment companies, including business development companies, frequently trade in the secondary market at a discount to their net asset value. The risk that our shares may trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our shares will trade above, at, or below net asset value.
Sales of common stock below net asset value    
    Generally, the offering price per share of our common stock, exclusive of any underwriting commissions or discounts, may not be less than the net asset value per share of our common stock at the time we make the offering except (1) in connection with a rights offering to our existing stockholders, (2) with the consent of the majority of our common stockholders and approval of our board of directors, including the approval of a majority of our independent directors, or (3) under such circumstances as the SEC may permit.
    On June 21, 2017, our stockholders voted to allow us to sell or otherwise issue common stock at a price below net asset value per share for a period of twelve months subject to approval by our board of directors. Sales or other issuances by us of our common stock at a discount from our net asset value pose potential risks for our existing stockholders whether or not they participate in the offering, as well as for new investors who participate in the offering.
Risk Factors    
    An investment in our common stock is subject to risks. See “Risk Factors” beginning on page 13 of the accompanying prospectus to read about factors you should consider before deciding to invest in shares of our common stock.

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FEES AND EXPENSES

The following table is intended to assist you in understanding the costs and expenses that an investor in our common stock will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and actual amounts and percentages may vary. Except where the context suggests otherwise, whenever this prospectus supplement and the accompanying prospectus contain a reference to fees or expenses paid by “you,” “us,” “the Company” or “Monroe Capital Corporation,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Monroe Capital Corporation.

 
Stockholder transaction expenses:
        
Sales load (as a percentage of offering price)     2.00 %(1) 
Offering expenses (as a percentage of offering price)     0.50 %(2) 
Dividend reinvestment plan expenses     %(3) 
Total stockholder transaction expenses (as a percentage of offering price)     2.50 % 
Estimated annual expenses (as a percentage of net assets attributable to common stock):
        
Base management fee     3.14 %(4) 
Incentive fees payable under the Investment Advisory Agreement     2.68 %(5) 
Interest payments on borrowed funds     3.92 %(6) 
Other expenses (estimated)     1.24 %(7) 
Acquired fund fees and expenses     0.06 %(8) 
Total annual expenses (estimated)     11.04 %(9) 

(1) Represents the commission with respect to the shares of common stock being sold in this offering. There is no guarantee that there will be any sales of our common stock pursuant to this prospectus supplement and the accompanying prospectus.
(2) The percentage reflects estimated offering expenses of approximately $250,000.
(3) The expenses of the dividend reinvestment plan are included in “other expenses.” See “Dividend Reinvestment Plan.”
(4) Our base management fee is 1.75% of our total assets (which includes assets purchased with borrowed amounts but does not include cash and cash equivalents). For the purposes of this table, we have assumed that the base management fee will remain at 1.75% as set forth in the Investment Advisory Agreement. We may from time to time decide it is appropriate to change the terms of the Investment Advisory Agreement. Under the 1940 Act, any material change to the Investment Advisory Agreement generally must be submitted to our stockholders for approval. The “base management fee” percentage is calculated as a percentage of net assets attributable to common stockholders, rather than total assets, including assets that have been funded with borrowed monies, because common stockholders bear all of this cost. The base management fee in the table above assumes the base management fee remains consistent with fees incurred for the three months ended March 31, 2018 of $2.2 million, based on average total assets (excluding cash) for the period of $501.4 million, as a percentage of our average net assets for the period of $275.9 million. See “Management and Other Agreements — Investment Advisory Agreement” in the accompanying prospectus.
(5) Estimated assuming that annual incentive fees earned by MC Advisors remains consistent with the incentive fees earned, gross of the Incentive Fee Limitation due to the total return requirement, for the three months ended March 31, 2018 of $1.8 million, as a percentage of our average net assets of $275.9 million for the period. For information about our Incentive Fee Limitation and incentive fee waiver, see “Management and Other Agreements — Investment Advisory Agreement” in the accompanying prospectus and “Consolidated Statements of Operations” in our financial statements included in this prospectus supplement.

The incentive fee consists of two parts:

The first part of the incentive fee, payable quarterly in arrears, equals 20% of our pre-incentive fee net investment income (including interest that is accrued but not yet received in cash), subject to a 2% quarterly (8% annualized) rate of return on the value of our net assets, or hurdle rate, and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter,

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MC Advisors receives no incentive fee until our net investment income equals the hurdle rate of 2% but then receives, as a “catch-up,” 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, MC Advisors will receive 20% of our pre-incentive fee net investment income as if a hurdle rate did not apply. The first component of the incentive fee will be computed and paid on income that includes, in the case of investments with a deferred interest feature such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities, accrued income that we have not yet received in cash. Since the hurdle rate is fixed, as interest rates rise, it will be easier for the MC Advisors to surpass the hurdle rate and receive an incentive fee based on net investment income. The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of our pre-incentive fee net investment income will be payable except to the extent that 20% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. In other words, any ordinary income incentive fee that is payable in a calendar quarter will be limited to the lesser of (i) 20% of the amount by which our pre-incentive fee net investment income for such calendar quarter exceeds the 2% hurdle, subject to the “catch-up” provision, and (ii) (x) 20% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding calendar quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the sum of our pre-incentive fee net investment income, base management fees, realized gains and losses and unrealized appreciation and depreciation for the then current and 11 preceding calendar quarters.

The second part of the incentive fee, payable annually in arrears, equals 20% of our realized capital gains on a cumulative basis from inception through the end of the fiscal year, if any (or upon the termination of the Investment Advisory Agreement, as of the termination date), computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation, less the aggregate amount of any previously paid capital gain incentive fees. We will accrue (but not pay) an expense for potential payment of capital gain incentive fees with respect to any unrealized appreciation on our portfolio.

See “Management and Other Agreements — Investment Advisory Agreement” in the accompanying prospectus.

(6) We may borrow funds from time to time to make investments to the extent we determine that it is appropriate to do so. The costs associated with any outstanding borrowings are indirectly borne by our investors. The table assumes borrowings are consistent with the average borrowings for the three months ended March 31, 2018 of $232.5 million, no preferred stock issued or outstanding and average net assets of $275.9 million. For the three months ended March 31, 2018, we had interest expense of $2.7 million (including fees for unused portions of commitments). As of March 31, 2018, weighted average interest rate of our revolving credit facility (excluding debt issuance costs) was 4.6% and the weighted average interest rate on our SBA-guaranteed debentures (excluding debt issuance costs) was 3.3%. Although we do not have any current plans to issue debt securities or preferred stock in the next twelve months, we may issue debt securities or preferred stock, subject to our compliance with applicable requirements under the 1940 Act.
(7) Includes our estimated overhead expenses, including payments under the Administration Agreement based on our allocable portion of overhead and other expenses incurred by MC Management. The table above assumes “other expenses” remain consistent with the $0.9 million incurred during the three months ended March 31, 2018 and average net assets for the period of $275.9 million.
(8) Our stockholders indirectly bear the expenses of our investment in SLF. SLF does not pay any fees to MC Advisors or its affiliates; however, SLF has entered into an administration agreement with MC Management, pursuant to which certain loan servicing and administrative functions are delegated to MC Management. SLF may reimburse MC Management for its allocable share of overhead and other expenses incurred by MC Management. No such expenses have been incurred or charged to SLF for the three months ended March 31, 2018. The table above assumes “acquired fund fees and expenses” remain consistent with the $43 thousand of expenses incurred on an annualized basis for the three months ended March 31, 2018 and average net assets for the period of $275.9 million. Future expenses for SLF may be substantially higher or lower because certain expenses may fluctuate over time.

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(9) “Total annual expenses” as a percentage of consolidated net assets attributable to common stock are higher than the total annual expenses percentage would be for a company that is not leveraged. We borrow money to leverage our net assets and increase our total assets. We calculate the “total annual expenses” percentage as a percentage of net assets (defined as total assets less indebtedness and after taking into account any incentive fees payable during the period), rather than the total assets, including assets that have been purchased with borrowed amounts. The terms of our indebtedness may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Borrowings.” If the “total annual expenses” percentage were calculated instead as a percentage of consolidated total assets, our “total annual expenses” would be 6.36% of consolidated total assets. With certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of total assets after such borrowing (which coverage ratio may be lowered to 150% of total assets in certain circumstances in accordance with law). We have received exemptive relief from the SEC to permit us to exclude the debt of our SBIC subsidiary guaranteed by the SBA from the definition of senior securities for the purposes of the 200% asset coverage ratio. We have included our estimated leverage expenses (consistent with the assumptions in footnote (7)) for the twelve months following this offering in “total annual expenses.”

Example

The following example illustrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed we would have no additional leverage, that none of our assets are cash or cash equivalents and that our annual operating expenses would remain at the levels set forth in the table above.

       
You would pay the following expenses on a $1,000 investment   1 Year   3 Years   5 Years   10 Years
Assuming a 5% annual return (assumes no return from net realized capital gains or net unrealized capital appreciation)   $ 109     $ 276     $ 443     $ 861  
Assuming a 5% annual return (assumes entire return is from realized capital gains and thus subject to the capital gains incentive fee)   $ 119     $ 307     $ 498     $ 987  

This table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. As incentive fees vary based on the character of the 5% return, the example above provides (i) expenses assuming no return from capital gains (therefore not meeting the hurdle rate for the first part of the incentive fee) and (ii) expenses assuming the entire return is from realized capital gains (resulting in a capital gains incentive fee). For the three months ended March 31, 2018, our return included net realized and unrealized capital losses. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses, and returns to our investors, would be higher. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, if our board of directors authorizes and we declare a cash distribution, participants in our dividend reinvestment plan who have not otherwise elected to receive cash will receive a number of shares of our common stock, determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the distribution. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus supplement and the accompanying prospectus contain forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including:

our dependence on key personnel;
our ability to maintain or develop referral relationships;
the ability of MC Advisors to identify, invest in and monitor companies that meet our investment criteria;
actual and potential conflicts of interest with MC Advisors and its affiliates;
possession of material nonpublic information;
potential divergent interests of MC Advisors and our stockholders arising from our incentive fee structure;
restrictions on affiliate transactions;
competition for investment opportunities;
our ability to maintain our qualification as a RIC and as a business development company;
the impact of a protracted decline in the liquidity of credit markets on our business and portfolio investments;
the adequacy of our financing sources;
the timing, form and amount of any payments, dividends or other distributions from our portfolio companies;
our use of leverage;
changes in interest rates;
SBA regulations affecting MRCC SBIC or any other wholly-owned SBIC subsidiary;
uncertain valuations of our portfolio investments;
fluctuations in our quarterly operating results;
our ability to issue securities at a discount to net asset value per share;
changes in laws or regulations applicable to us or our portfolio companies; and
general economic and political conditions and their impact on the industries in which we invest.

We have based the forward-looking statements included in this prospectus supplement and the accompanying prospectus on information available to us on the date of this prospectus supplement. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus supplement. However, we will update this prospectus supplement to reflect any material changes to the information contained herein during the period of this offering.

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You should understand that, under Sections 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with any offering of securities pursuant to this prospectus supplement or in periodic reports we file under the Exchange Act.

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USE OF PROCEEDS

Sales of our common stock, if any, under this prospectus supplement and the accompanying prospectus may be made in negotiated transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act. There is no guarantee that there will be any sales of our common stock pursuant to this prospectus supplement and the accompanying prospectus. Actual sales, if any, of our common stock under this prospectus supplement and the accompanying prospectus may be less than as set forth in this paragraph depending on, among other things, the market price of our common stock at the time of any such sale. As a result, the actual net proceeds we receive may be more or less than the amount of net proceeds estimated in this prospectus supplement. Assuming the sale of all $50,000,000 of common stock offered under this prospectus supplement and the accompanying prospectus, we estimate that the net proceeds of this offering would be approximately $48.8 million, after deducting the estimated sales commission payable to the Sales Agents and our estimated offering expenses.

We intend to use all or substantially all of the net proceeds from the sale of our common stock to invest directly in portfolio companies in accordance with our investment objective and strategies and for general corporate purposes. We will also pay operating expenses, including management and administrative fees, and may pay other expenses from the net proceeds of this offering.

We anticipate that we will use substantially all of the net proceeds from this offering for the above purposes within approximately six months after the completion of this offering, depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions. It may take more or less time for us to identify, negotiate and enter into investments and fully deploy any proceeds we raise, and we cannot assure you that we will achieve our targeted investment pace.

Until such appropriate investment opportunities can be found, we will invest the net proceeds of any offering of our securities primarily in cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less from the date of investment. These temporary investments may have lower yields than our other investments and, accordingly, may result in lower distributions, if any, during such period. Our ability to achieve our investment objective may be limited to the extent that the net proceeds from an offering, pending full investment, are held in lower yielding interest-bearing deposits or other short-term instruments. See “Regulation — Temporary Investments” in the accompanying prospectus for additional information about temporary investments we may make while waiting to make longer-term investments in pursuit of our investment objective.

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CAPITALIZATION

The equity distribution agreements provide that we may offer and sell up to $50,000,000 of our common stock from time to time through our Sales Agents for the offer and sale of such common stock. The table below assumes that we will sell all of the $50,000,000 of our common stock at a price of $14.43 per share (the last reported sale price of our common stock on The Nasdaq Global Select Market on June 6, 2018), but there is no guarantee that there will be any sales of our common stock pursuant to this prospectus supplement and the accompanying prospectus. Actual sales, if any, of our common stock under this prospectus supplement and the accompanying prospectus may be less than as set forth in the table below. In addition, the price per share of any such sale may be greater or less than $14.43, depending on the market price of our common stock at the time of any such sale. The following table sets forth our capitalization as of March 31, 2018:

on an actual basis; and
on an as adjusted basis giving effect to the assumed sale of $50,000,000 million of our common stock at a price of $14.43 per share (the last reported sale price of our common stock on The Nasdaq Global Select Market on June 6, 2018) less commissions and expenses.

This table should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes thereto included in this prospectus supplement and the accompanying prospectus.

   
  As of March 31, 2018
     Actual   As Adjusted
     (unaudited)
(in thousands, except per share data)
Assets:
                 
Cash   $ 3,070     $ 51,820  
Restricted cash     7,117       7,117  
Investments at fair value     496,034       496,034  
Other assets     6,483       6,483  
Total assets   $ 512,704     $ 561,454  
Liabilities:
        
Debt   $ 233,916     $ 233,916  
Other liabilities     5,783       5,783  
Total liabilities   $ 239,699     $ 239,699  
Net Assets:
                 
Common stock, $0.001 par value, 100,000 shares authorized, actual; 20,240 shares issued and outstanding, actual; 23,705 shares issued and outstanding, as adjusted   $ 20     $ 23  
Capital in excess of par value     286,141       334,888  
Undistributed net investment income (accumulated distributions in excess of net investment income)     8,088       8,088  
Accumulated net realized gain (loss) on investments, secured borrowings and foreign currency transactions     (360 )      (360 ) 
Accumulated net unrealized gain (loss) on investments, secured borrowings and foreign currency borrowings     (20,884 )      (20,884 ) 
Total net assets   $ 273,005     $ 321,755  
Net asset value per share   $ 13.49     $ 13.57  

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

Our common stock began trading on The Nasdaq Global Market under the ticker symbol “MRCC” on October 25, 2012. Prior to that date, there was no established trading market for our common stock. Our common stock is now traded on the Nasdaq Global Select Market. Our common stock has historically traded both above and below net asset value (“NAV”).

The following table sets forth the high and low closing sales prices of our common stock, the closing sales price as a percentage of our NAV and the dividends declared by us since January 1, 2016.

           
  NAV(1)   Closing Sales Price   Premium
(Discount) of
High Sales
Price to
NAV(2)
  Premium
(Discount) of
Low Sales
Price to
NAV(2)
  Declared
Distributions(3)
     High   Low
Year ending December 31, 2018
                                                     
Second Quarter (through June 6, 2018)     (4)    $ 14.52     $ 12.31       (4)      (4)    $ 0.35 (5)(6) 
First Quarter   $ 13.49     $ 14.28     $ 12.20       5.9 %      (9.6 )%    $ 0.35 (6) 
Year ending December 31, 2017
                                                     
Fourth Quarter   $ 13.77     $ 14.70     $ 13.75       6.8 %      (0.1 )%    $ 0.35 (7) 
Third Quarter   $ 14.01     $ 15.22     $ 13.50       8.6 %      (3.6 )%    $ 0.35 (7) 
Second Quarter   $ 14.05     $ 16.14     $ 14.92       14.9 %      6.2 %    $ 0.35 (7) 
First quarter   $ 14.34     $ 16.09     $ 15.18       12.2 %      5.9 %    $ 0.35 (7) 
Year ending December 31, 2016
                                                     
Fourth Quarter   $ 14.52     $ 15.63     $ 13.77       7.6 %      (5.2 )%    $ 0.35 (8) 
Third Quarter   $ 14.42     $ 16.25     $ 14.91       12.7 %      3.4 %    $ 0.35 (8) 
Second Quarter   $ 14.50     $ 14.83     $ 13.11       2.3 %      (9.6 )%    $ 0.35 (8) 
First Quarter   $ 14.45     $ 14.32     $ 10.82       (0.9 )%      (25.1 )%    $ 0.35 (8) 

(1) NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.
(2) Calculated by taking the respective high or low closing sales price divided by the quarter end NAV and subtracting 1.
(3) Represents the distribution declared in the specified quarter. We have adopted an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions. See “Dividend Reinvestment Plan” in the accompanying prospectus.
(4) NAV calculation is not yet available.
(5) On June 1, 2018, we declared a quarterly distribution of $0.35 per share, to be paid June 29, 2018 to shareholders of record as of June 15, 2018.
(6) Our management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent that our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders. The tax character of distributions will be determined at the end of the fiscal year.
(7) There was no return of capital for tax purposes for the year ended December 31, 2017.
(8) There was no return of capital for tax purposes for the year ended December 31, 2016.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 are derived from our consolidated financial statements that have been audited by RSM US LLP, our independent registered public accounting firm. We derived the selected consolidated financial data as of and for the three months ended March 31, 2018 and 2017 from our unaudited interim consolidated financial statements. In the opinion of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been made. Interim results are subject to variation and are not indicative of the results of operations to be expected for a full fiscal year. This consolidated financial data should be read in conjunction with our consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus supplement.

             
             
  As of and for
the three
months ended
March 31,
2018
  As of and for
the three
months ended
March 31,
2017
  As of and for
the year
ended
December 31,
2017
  As of and for
the year
ended
December 31,
2016
  As of and for
the year
ended
December 31,
2015
  As of and for
the year
ended
December 31,
2014
  As of and for
the year
ended
December 31,
2013
     (unaudited)   (unaudited)          
Consolidated statements of operations data:
                                            
Total investment income   $ 14,950     $ 12,006     $ 51,107     $ 45,018     $ 36,898     $ 29,913     $ 18,213  
Base management fees     2,163       1,805       7,726       6,347       5,129       4,091       2,752  
Incentive fees, net of incentive fee waiver(1)     761       1,290       5,378       5,504       4,685       3,512       1,544  
All other
expenses
    3,561       2,877       11,999       10,661       8,343       7,235       5,267  
Net investment income     8,465       6,034       26,004       22,506       18,741       15,075       8,650  
Net realized gain (loss) on investments, secured borrowings and foreign currency transactions     12       167       (372 )      587       304       299       247  
Net change in unrealized gain (loss) on investments, secured borrowings and foreign currency borrowings     (7,087 )      (3,632 )      (13,480 )      1,272       (1,153 )      (1,465 )      869  
Net increase (decrease) in
net assets resulting from operations
  $ 1,390     $ 2,569     $ 12,152     $ 24,365     $ 17,892     $ 13,909     $ 9,766  
Per share data (basic and diluted):
                                                              
Net asset value   $ 13.49     $ 14.34     $ 13.77     $ 14.52     $ 14.19     $ 14.05     $ 13.92  
Net investment income     0.42       0.36       1.40       1.55       1.60       1.57       1.13  
Net realized gain (loss) on investments, secured borrowings and foreign currency transactions           0.01       (0.03 )      0.04       0.03       0.03       0.03  
Net change in unrealized gain (loss) on investments, secured borrowings and foreign currency borrowings     (0.35 )      (0.22 )      (0.72 )      0.09       (0.10 )      (0.15 )      0.12  
Net increase (decrease) in
net assets resulting from operations
  $ 0.07     $ 0.15     $ 0.65     $ 1.68     $ 1.53     $ 1.45     $ 1.28  
Distributions declared:
                                            
From net investment income   $ 0.35 (2)    $ 0.32     $ 1.37     $ 1.40     $ 1.37     $ 1.36     $ 1.15  
From capital gains     (2)      0.03       0.03             0.03              
From return of capital     (2)                                    0.21  
Total distributions declared   $ 0.35     $ 0.35     $ 1.40     $ 1.40     $ 1.40     $ 1.36     $ 1.36  

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  As of and for
the three
months ended
March 31,
2018
  As of and for
the three
months ended
March 31,
2017
  As of and for
the year
ended
December 31,
2017
  As of and for
the year
ended
December 31,
2016
  As of and for
the year
ended
December 31,
2015
  As of and for
the year
ended
December 31,
2014
  As of and for
the year
ended
December 31,
2013
     (unaudited)   (unaudited)          
Consolidated statements of assets and liabilities data at period end:
                                                              
Investments, at fair value   $ 496,034     $ 418,149     $ 494,138     $ 412,920     $ 341,091     $ 233,535     $ 207,920  
Cash     3,070       5,483       4,332       5,958       5,278       4,561       14,214  
Restricted cash     7,117       10,555       2,867       2,373       8,588       1,176       389  
Other assets     6,483       4,510       6,095       3,294       2,353 (3)      1,834 (3)      1,067 (3) 
Total assets     512,704       438,697       507,432       424,545       357,310 (3)      241,106 (3)      223,590 (3) 
Total debt     233,916       193,047       221,942       177,869       162,607 (3)      103,829 (3)      81,852 (3) 
Other liabilities     5,783       6,044       6,791       5,826       10,168 (3)      3,539 (3)      3,646 (3) 
Total liabilities     239,699       199,091       228,733       183,695       172,775 (3)      107,368 (3)      85,498 (3) 
Total net assets   $ 273,005     $ 239,606     $ 278,699     $ 240,850     $ 184,535     $ 133,738     $ 138,092  
Other data:
                                            
Total return based on market value(4)     (8.1 )%      4.6 %      (1.8 )%      29.0 %      (0.2 )%      30.7 %      (9.3 )% 
Total return based on net asset value(5)     0.5 %      1.1 %      4.6 %      11.7 %      11.0 %      10.3 %      9.2 % 
Weighted average annualized effective yield at period end(6)     10.6 %      9.7 %      10.0 %      9.6 %      10.6 %      11.6 %      10.7 % 
Number of portfolio company investments at period end     72       65       72       70       55       40       42  
Purchases of investments for the period   $ 32,479     $ 41,536     $ 264,393     $ 147,780     $ 193,631     $ 132,183     $ 138,781  
Principal payments and sales of investments for the period   $ 25,559     $ 33,844     $ 173,446     $ 81,446     $ 88,379     $ 107,073     $ 65,165  

(1) For the three months ended March 31, 2018 and 2017, no incentive fees were waived. During the years ended December 31, 2017, 2016, 2015, 2014 and 2013, MC Advisors waived part one incentive fees (based on net investment income) of $0.3 million, $0.3 million, zero, zero and zero, respectively.
(2) Our management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent that our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders. The tax character of distributions will be determined at the end of the fiscal year.
(3) In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the statements of assets and liabilities as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. We adopted ASU 2015-03 during the year ended December 31, 2016 and the consolidated statement of assets and liabilities for prior years was also revised to reflect this presentation.
(4) Total return based on market value is calculated assuming a purchase of common shares at the market value on the first day and a sale at the market value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under our dividend reinvestment plan (“DRIP”). Total return based on market value does not reflect brokerage commissions.
(5) Total return based on average net asset value is calculated by dividing the net increase in net assets from operations by the average net asset value.
(6) The weighted average annualized effective yield on portfolio investments at year end is computed by dividing (a) interest income on debt investments and preferred equity investments (with a stated coupon rate) at the period end effective rate for each investment by (b) the par value of our debt investments and the cost basis of our preferred equity investments. The weighted average annualized effective yield on portfolio investments is a metric on the investment portfolio alone and does not represent a return to stockholders. This metric is not inclusive of our fees and expenses, the impact of leverage on the portfolio or sales load that may be paid by investors.

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SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA

The following table sets forth certain unaudited quarterly financial information for the quarter ended March 31, 2018 and each quarter in our two most recent fiscal years, which were the calendar years ended December 31, 2017 and 2016. This information was derived from our unaudited consolidated financial statements. Results for any quarter are not necessarily indicative of results for the full year or for any future quarter.

         
  For the quarter ended
     March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
     (in thousands, except per share data)
Total investment income   $ 14,950     $ 13,364     $ 13,469     $ 12,268     $ 12,006  
Net investment income   $ 8,465     $ 6,995     $ 6,887     $ 6,088     $ 6,034  
Net gain (loss) on investments, secured borrowings, foreign currency transactions and foreign currency borrowings   $ (7,075 )    $ (4,754 )    $ (569 )    $ (5,064 )    $ (3,465 ) 
Net increase (decrease) in net assets resulting from operations   $ 1,390     $ 2,241     $ 6,318     $ 1,024     $ 2,569  
Net investment income per share – basic and diluted   $ 0.42     $ 0.35     $ 0.34     $ 0.35     $ 0.36  
Net increase (decrease) in net assets resulting from operations per share – basic and diluted   $ 0.07     $ 0.11     $ 0.31     $ 0.06     $ 0.15  
Net asset value per share at period end   $ 13.49     $ 13.77     $ 14.01     $ 14.05     $ 14.34  

       
  For the quarter ended
     December 31,
2016
  September 30,
2016
  June 30,
2016
  March 31,
2016
     (in thousands, except per share data)
Total investment income   $ 11,233     $ 11,128     $ 11,118     $ 11,539  
Net investment income   $ 5,377     $ 5,583     $ 5,759     $ 5,787  
Net gain (loss) on investments and secured borrowings   $ 2,155     $ (1,971 )    $ (482 )    $ 2,157  
Net increase (decrease) in net assets resulting from operations   $ 7,532     $ 3,612     $ 5,277     $ 7,944  
Net investment income per share – basic and diluted   $ 0.32     $ 0.36     $ 0.44     $ 0.44  
Net increase (decrease) in net assets resulting from operations per share – basic and diluted   $ 0.45     $ 0.23     $ 0.41     $ 0.61  
Net asset value per share at period end   $ 14.52     $ 14.42     $ 14.50     $ 14.45  

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

Except as otherwise specified, references to “we,” “us,” and “our” refer to Monroe Capital Corporation and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in our annual report on Form 10-K (the “Annual Report”) for the year ended December 31, 2017, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 14, 2018. The information contained in this section should also be read in conjunction with our unaudited consolidated financial statements and related notes and other financial information appearing elsewhere in this prospectus supplement and accompanying prospectus.

Overview

Monroe Capital Corporation is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes, we have elected to be treated as a regulated investment company (“RIC”) under the subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). We were incorporated under the Maryland General Corporation Law on February 9, 2011. We are a specialty finance company focused on providing financing solutions primarily to lower middle-market companies in the United States and Canada. We provide customized financing solutions focused primarily on senior secured, junior secured and unitranche secured (a combination of senior secured and junior secured debt in the same facility in which we syndicate a “first out” portion of the loan to an investor and retain a “last out” portion of the loan) debt and, to a lesser extent, unsecured subordinated debt and equity, including equity co-investments in preferred and common stock, and warrants.

Our shares are currently listed on the NASDAQ Global Select Market under the symbol “MRCC”.

Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through investment in senior, unitranche secured and junior secured debt and, to a lesser extent, subordinated debt and equity investments. We seek to use our extensive leveraged finance origination infrastructure and broad expertise in sourcing loans to invest in primarily senior, unitranche secured and junior secured debt of middle-market companies. Our investments in senior, unitranche and junior secured debt and other investments generally will range between $2.0 million and $18.0 million each, although this investment size may vary proportionately with the size of our capital base. As of March 31, 2018, our portfolio included approximately 76.6% senior secured debt, 9.3% unitranche secured debt, 7.8% junior secured debt and 6.3% equity securities, compared to December 31, 2017, when our portfolio included approximately 78.5% senior secured debt, 8.2% unitranche secured debt, 7.8% junior secured debt and 5.5% equity securities. We expect that the companies in which we invest may be leveraged, often as a result of leveraged buy-outs or other recapitalization transactions, and, in certain cases, will not be rated by national ratings agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor’s system) from the national rating agencies.

While our primary focus is to maximize current income and capital appreciation through debt investments in thinly traded or private U.S. companies, we may invest a portion of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments in high-yield bonds, distressed debt, private equity or securities of public companies that are not thinly traded and securities of middle-market companies located outside of the United States. We expect that these public companies generally will have debt securities that are non-investment grade.

On February 28, 2014, our wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limited partnership, received a license from the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Act of 1958. MRCC SBIC commenced operations on September 16, 2013. As of March 31, 2018, MRCC SBIC had $57.6 million in leverageable capital and $112.8 million in SBA-guaranteed debentures outstanding. See “SBA Debentures” below for more information.

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Investment income

We generate interest income on the debt investments in portfolio company investments that we originate or acquire. Our debt investments, whether in the form of senior, junior or unitranche secured debt, typically have an initial term of three to seven years and bear interest at a fixed or floating rate. In some instances we receive payments on our debt investment based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. In some cases, our investments provide for deferred interest of payment-in-kind (“PIK”) interest. In addition, we may generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts as interest income. We record prepayment premiums and prepayment gains (losses) on loans as interest income. As the frequency or volume of the repayments which trigger these prepayment premiums and prepayment gains (losses) may fluctuate significantly from period to period, the associated interest income recorded may also fluctuate significantly from period to period. Interest and fee income is recorded on the accrual basis to the extent we expect to collect such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. All other income is recorded into income when earned. We record fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recognized as fee income in the period earned.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies. Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. The frequency and volume of the distributions on common equity securities and LLC and LP investments may fluctuate significantly from period to period.

Expenses

Our primary operating expenses include the payment of fees to MC Advisors under the Investment Advisory and Management Agreement (management and incentive fees), and the payment of fees to Monroe Capital Management Advisors, LLC (“MC Management”) for our allocable portion of overhead and other expenses under the Administration Agreement and other operating costs. See Note 6 to our consolidated financial statements and “Related Party Transactions” below for additional information on our Investment Advisory and Management Agreement and Administration agreement. Our expenses also include interest expense on our revolving credit facility, our SBA-guaranteed debentures and our secured borrowings. We bear all other out-of-pocket costs and expenses of our operations and transactions.

Net gain (loss) on investments, secured borrowings and foreign currency transactions

We recognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and the cost basis of the investment without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments, secured borrowings, and foreign currency transactions within net change in unrealized gain (loss) on investments, secured borrowings, and foreign currency borrowings in the consolidated statements of operations.

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Portfolio and Investment Activity

During the three months ended March 31, 2018, we invested $4.9 million in one new portfolio company and $27.6 million in 12 existing portfolio companies and had $25.6 million in aggregate amount of sales and principal repayments, resulting in net investments of $6.9 million for the period.

During the three months ended March 31, 2017, we invested $27.3 million in two new portfolio companies and $14.2 million in 14 existing portfolio companies and had $33.8 million in aggregate amount of sales and principal repayments, resulting in net investments of $7.7 million for the period.

The following table shows yield by debt and preferred equity security type:

       
  March 31, 2018   December 31, 2017
     Weighted
Average
Annualized
Contractual
Coupon
Yield(1)
  Weighted
Average
Annualized
Effective
Yield(2)
  Weighted
Average
Annualized
Contractual
Coupon
Yield(1)
  Weighted
Average
Annualized
Effective
Yield(2)
Senior secured loans     10.0 %      10.5 %      9.6 %      9.6 % 
Unitranche secured loans     10.4       11.6       9.3       11.3  
Junior secured loans     9.8       9.8       9.4       9.4  
Preferred equity securities     10.8       10.8       10.8       10.8  
Total     10.0 %      10.6 %      9.8 %      10.0 % 

(1) The weighted average annualized contractual coupon yield at period end is computed by dividing (a) the interest income on debt investments and preferred equity investments (with a stated coupon rate) at the period end contractual coupon rate for each investment by (b) the par value of our debt investment and the cost basis of our preferred equity investments.
(2) The weighted average annualized effective yield on portfolio investments at period end is computed by dividing (a) interest income on debt investments and preferred equity investments (with a stated coupon rate) at the period end effective rate for each investment by (b) the par value of our debt investments and the cost basis of our preferred equity investments. The weighted average annualized effective yield on portfolio investments is a metric on the investment portfolio alone and does not represent a return to stockholders. This metric is not inclusive of our fees and expenses, the impact of leverage on the portfolio or sales load that may be paid by investors.

The following table shows the composition of the investment portfolio (dollars in thousands):

       
  March 31, 2018   December 31, 2017
Fair Value:
                                   
Senior secured loans   $ 380,115       76.6 %    $ 387,874       78.5 % 
Unitranche secured loans     45,976       9.3       40,295       8.2  
Junior secured loans     38,578       7.8       38,549       7.8  
LLC equity interest in SLF     16,333       3.3       9,640       1.9  
Equity securities     15,032       3.0       17,780       3.6  
Total   $ 496,034       100.0 %    $ 494,138       100.0 % 

Our March 31, 2018 portfolio composition remained relatively consistent with December 31, 2017, with the largest shift in portfolio composition a result of the additional investments made in SLF during the three months ended March 31, 2018. The increase in contractual interest rates is primarily a result of general increases in LIBOR. The increase in effective yield was also influenced by discount amortization on our investment in Gibson Brands, Inc., which was purchased at a significant discount.

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The following table shows the portfolio composition by industry grouping at fair value (dollars in thousands):

       
  March 31, 2018   December 31, 2017
     Investments at
Fair Value
  Percentage of
Total Portfolio
  Investments at
Fair Value
  Percentage of
Total Portfolio
Aerospace & Defense   $ 5,000       1.0 %    $ 5,000       1.0 % 
Banking, Finance, Insurance & Real Estate     60,526       12.2       61,407       12.4  
Beverage, Food & Tobacco     17,566       3.5       17,770       3.6  
Chemicals, Plastics & Rubber     10,461       2.1       8,860       1.8  
Construction & Building     18,573       3.7       18,049       3.6  
Consumer Goods: Durable     11,693       2.4       11,808       2.4  
Consumer Goods: Non-Durable     29,768       6.0       26,546       5.4  
Containers, Packaging & Glass     4,967       1.0       4,928       1.0  
Energy: Oil & Gas     2,273       0.5       2,352       0.5  
Environmental Industries     4,397       0.9       4,457       0.9  
Healthcare & Pharmaceuticals     65,645       13.2       65,582       13.3  
High Tech Industries     50,967       10.3       46,239       9.4  
Hotels, Gaming & Leisure     33,241       6.7       42,744       8.6  
Investment Funds & Vehicles     16,333       3.3       9,640       2.0  
Media: Advertising, Printing & Publishing     23,048       4.6       23,264       4.7  
Media: Broadcasting & Subscription     15,742       3.2       15,965       3.2  
Media: Diversified & Production     5,006       1.0       5,006       1.0  
Retail     35,157       7.1       39,815       8.1  
Services: Business     34,152       6.9       33,732       6.8  
Services: Consumer     21,463       4.3       21,474       4.3  
Telecommunications     2,985       0.6       3,152       0.6  
Utilities: Electric     2,797       0.6       2,792       0.6  
Wholesale     24,274       4.9       23,556       4.8  
Total   $ 496,034       100.0 %    $ 494,138       100.0

Portfolio Asset Quality

MC Advisors’ portfolio management staff closely monitors all credits, with senior portfolio managers covering agented and more complex investments. MC Advisors segregates our capital markets investments by industry. The MC Advisors’ monitoring process and projections developed by Monroe Capital both have daily, weekly, monthly and quarterly components and related reports, each to evaluate performance against historical, budget and underwriting expectations. MC Advisors’ analysts will monitor performance using standard industry software tools to provide consistent disclosure of performance. MC Advisors also monitors our investment exposure using a proprietary trend analysis tool. When necessary, MC Advisors will update our internal risk ratings, borrowing base criteria and covenant compliance reports.

As part of the monitoring process, MC Advisors regularly assesses the risk profile of each of our investments and rates each of them based on an internal proprietary system that uses the categories listed below, which we refer to as MC Advisors’ investment performance rating. For any investment rated in grades 3, 4 or 5, MC Advisors will increase its monitoring intensity and prepare regular updates for the investment committee, summarizing current operating results and material impending events and suggesting recommended actions. MC Advisors monitors and, when appropriate, changes the investment ratings assigned to each investment in our portfolio. In connection with our valuation process, MC Advisors reviews these

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investment ratings on a quarterly basis, and our board of directors (the “Board”) reviews and affirms such ratings. A definition of the rating system follows:

 
Investment
Performance
Risk Rating
  Summary Description
Grade 1   Includes investments exhibiting the least amount of risk in our portfolio. The issuer is performing above expectations or the issuer’s operating trends and risk factors are generally positive.
Grade 2   Includes investments exhibiting an acceptable level of risk that is similar to the risk at the time of origination. The issuer is generally performing as expected or the risk factors are neutral to positive.
Grade 3   Includes investments performing below expectations and indicates that the investment’s risk has increased somewhat since origination. The issuer may be out of compliance with debt covenants; however, scheduled loan payments are generally not past due.
Grade 4   Includes an issuer performing materially below expectations and indicates that the issuer’s risk has increased materially since origination. In addition to the issuer being generally out of compliance with debt covenants, scheduled loan payments may be past due (but generally not more than six months past due). For grade 4 investments, we intend to increase monitoring of the issuer.
Grade 5   Indicates that the issuer is performing substantially below expectations and the investment risk has substantially increased since origination. Most or all of the debt covenants are out of compliance or payments are substantially delinquent. Investments graded 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we expect to recover.

Our investment performance risk ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or reflect or represent any third-party assessment of any of our investments.

In the event of a delinquency or a decision to rate an investment grade 4 or grade 5, the applicable analyst, in consultation with a member of the investment committee, will develop an action plan. Such a plan may require a meeting with the borrower’s management or the lender group to discuss reasons for the default and the steps management is undertaking to address the under-performance, as well as required amendments and waivers that may be required. In the event of a dramatic deterioration of a credit, MC Advisors intends to form a team or engage outside advisors to analyze, evaluate and take further steps to preserve its value in the credit. In this regard, we would expect to explore all options, including in a private equity sponsored investment, assuming certain responsibilities for the private equity sponsor or a formal sale of the business with oversight of the sale process by us. Several of Monroe Capital’s professionals are experienced in running work-out transactions and bankruptcies.

The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale as of March 31, 2018 (dollars in thousands):

   
Investment Performance Rating   Investments at
Fair Value
  Percentage of
Total Investments
1   $ 3,548       0.7 % 
2     406,650       82.0  
3     51,139       10.3  
4     30,508       6.2  
5     4,189       0.8  
Total   $ 496,034       100.0 % 

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The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale as of December 31, 2017 (dollars in thousands):

   
Investment Performance Rating   Investments at
Fair Value
  Percentage of
Total Investments
1   $ 3,445       0.7 % 
2     415,094       84.0  
3     57,547       11.6  
4     18,052       3.7  
5            
Total   $ 494,138       100.0 % 

As of March 31, 2018, we had two borrowers with loans and preferred equity securities on non-accrual status (Millennial Brands LLC and TPP Operating, Inc.), which comprised 0.8% of our total investments at fair value. As of December 31, 2017, we had two borrowers with loans and preferred equity securities on non-accrual status (Millennial Brands LLC and TPP Operating, Inc.), which comprised 1.7% of our total investments at fair value. Loans or preferred equity securities are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected.

Results of Operations

Operating results were as follows (in thousands):

   
  Three months ended
March 31,
     2018   2017
Total investment income   $ 14,950     $ 12,006  
Total expenses     6,485       5,972  
Net investment income     8,465       6,034  
Net realized gain (loss) on investments           167  
Net realized gain (loss) on foreign currency transactions     12        
Net change in unrealized gain (loss) on investments     (6,645 )      (3,631 ) 
Net change in unrealized gain (loss) on secured borrowings           (1 ) 
Net change in unrealized gain (loss) on foreign currency borrowings     (442 )       
Net increase (decrease) in net assets resulting from operations   $ 1,390     $ 2,569  

Investment Income

The composition of our investment income was as follows (in thousands):

   
  Three months ended
March 31,
     2018   2017
Interest income   $ 12,626     $ 10,388  
Dividend income     435       250  
Fee income     724       328  
Prepayment gain (loss)     133       652  
Accretion of discounts and amortization of premium     1,032       388  
Total investment income   $ 14,950     $ 12,006  

The increase in investment income of $2.9 million during the three months ended March 31, 2018 as compared to the three months ended March 31, 2017, is primarily due to an increase in average outstanding loan balances and an increase in the effective rate on the portfolio. The increase in the effective rate on the portfolio is driven in part by increases in underlying LIBOR rates as well as an increase in net accretion of discounts. These increases were partially offset by a decrease in prepayment gain (loss) as a result of a reduction in the volume of loan payoff activity. The increase in dividend income during the three months ended March 31, 2018, as compared to the prior year period, is driven by an increase in dividend income from our investment in SLF of $0.2 million.

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Operating Expenses

The composition of our operating expenses was as follows (dollars in thousands):

   
  Three months ended
March 31,
     2018   2017
Interest and other debt financing expenses   $ 2,706     $ 2,010  
Base management fees     2,163       1,805  
Incentive fees(1)     761       1,290  
Professional fees     307       291  
Administrative service fees     324       330  
General and administrative expenses     176       209  
Excise taxes     11        
Directors’ fees     37       37  
Total expenses   $ 6,485     $ 5,972  

(1) During the three months ended March 31, 2018 and 2017, no incentive fees were waived. Incentive fees during the three months ended March 31, 2018 were limited by $1.1 million due to the Incentive Fee Limitation. During the three months ended March 31, 2017, incentive fees were not limited. See Note 6 in our attached consolidated financial statements for additional information on the Incentive Fee Limitation.

The composition of our interest and other debt financing expenses was as follows (dollars in thousands):

   
  Three months ended
March 31,
     2018   2017
Interest expense – revolving credit facility   $ 1,557     $ 1,345  
Interest expense – SBA guaranteed debentures     868       406  
Amortization of deferred financing costs     281       231  
Interest expense – secured borrowings           21  
Other           7  
Total interest and other debt financing expenses   $ 2,706     $ 2,010  

The increase in expenses of $0.5 million during the three months ended March 31, 2018 as compared to the three months ended March 31, 2017, is primarily due to an increase in base management fees due to the growth in invested assets and an increase in interest expense as a result of additional borrowings (including SBA-guaranteed debentures) required to support the growth of the portfolio, partially offset by a decrease in incentive fees due to the Incentive Fee Limitation during the three months ended March 31, 2018.

Net Realized Gain (Loss) on Investments and Foreign Currency Transactions

During the three months ended March 31, 2018 and 2017, we had sales of investments of zero and $2.1 million, respectively, resulting in zero and $0.2 million of net realized gains (losses), respectively.

During the three months ended March 31, 2018 and 2017, we had $12 thousand and zero of net realized gains on foreign currency transactions, respectively.

Net Change in Unrealized Appreciation (Depreciation) on Investments, Secured Borrowings and Foreign Currency Borrowings

For the three months ended March 31, 2018 and 2017, our investments had ($6.6) million and ($3.6) million of net change in unrealized gain (loss), respectively. The net change in unrealized gain (loss) includes both unrealized gain on investments in our portfolio with mark-to-market gains during the period and unrealized loss on investments in our portfolio with mark-to-market losses during the period. The largest contributor to the net unrealized mark-to-market losses during the three months ended March 31, 2018 was our common equity ownership in Rockdale Blackhawk, LLC of ($2.3) million, and our debt investment in TPP Operating, Inc. of ($4.8) million.

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For the three months ended March 31, 2018 and 2017, our secured borrowings had zero and ($1) thousand of net change in unrealized gain (loss), respectively.

For the three months ended March 31, 2018 and 2017, our foreign currency borrowings had ($442) thousand and zero of net change in unrealized gain (loss), respectively.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended March 31, 2018 and 2017, the net increase in net assets from operations was $1.4 million and $2.6 million, respectively. Based on the weighted average shares of common stock outstanding for the three months ended March 31, 2018 and 2017, our per share net increase in net assets resulting from operations was $0.07 and $0.15, respectively. The $1.2 million decrease during the three months ended March 31, 2018 as compared to the three months ended March 31, 2017, is primarily the result of an increase in net unrealized mark-to-market losses on investments in the portfolio partially offset by an increase in net investment income.

Liquidity and Capital Resources

As of March 31, 2018, we had $3.1 million in cash, $7.1 million in cash at MRCC SBIC, $125.6 million of total debt outstanding on our revolving credit facility and $112.8 million in outstanding SBA-guaranteed debentures. We had $74.4 million available for additional borrowings on our revolving credit facility and $2.2 million in available SBA-guaranteed debentures. See “Borrowings” below for additional information.

Cash Flows

For the three months ended March 31, 2018 and 2017, we experienced a net increase in cash and restricted cash of $3.0 million and $7.7 million, respectively. For the three months ended March 31, 2018, operating activities used $1.2 million, primarily as a result of purchases of portfolio investments, partially offset by sales of and principal repayments on portfolio investments. For the three months ended March 31, 2017, operating activities used $3.4 million, primarily as a result of purchases of portfolio investments, partially offset by sales of and principal repayments on portfolio investments. During the three months ended March 31, 2018, we generated $4.2 million from financing activities, primarily as a result of net proceeds from net borrowings on our revolving credit facility and SBA debenture borrowings, partially offset by distributions to stockholders. During the three months ended March 31, 2017, we generated $11.1 million from financing activities primarily as a result of net proceeds from capital raises, borrowings on our revolving credit facility and SBA debentures, partially offset by distributions to stockholders.

Capital Resources

As a BDC, we distribute substantially all of our net income to our stockholders and have an ongoing need to raise additional capital for investment purposes. We intend to generate additional cash primarily from future offerings of securities, future borrowings and cash flows from operations, including income earned from investments in our portfolio companies. On both a short-term and long-term basis, our primary use of funds will be to invest in portfolio companies and make cash distributions to our stockholders.

As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if our Board, including independent directors, determines that such sale is in the best interests of us and our stockholders, and if our stockholders have approved such sales. On July 14, 2016, our stockholders voted to allow us to sell or otherwise issue common stock at a price below net asset value per share for a period of one year, subject to certain limitations. On July 21, 2017 our stockholders once again voted to allow us to sell or otherwise issue common stock at a price below net asset value per share for a period of one year, subject to certain limitations. As of March 31, 2018 and December 31, 2017, we had 20,239,957 and 20,239,957 shares outstanding, respectively.

On June 24, 2015, our stockholders approved a proposal to authorize us to issue warrants, options or rights to subscribe to, convert to, or purchase our common stock in one or more offerings. This is a standing authorization and does not require annual re-approval by our stockholders.

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On March 27, 2018, our Board approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, the asset coverage ratio test applicable to us will be decreased from 200% to 150%, effective March 27, 2019 (or prior to March 27, 2019 if stockholders approve a proposal authorizing a minimum asset coverage ratio of at least 150% at our annual meeting of stockholders). As of March 31, 2018 and December 31, 2017, our asset coverage ratio was 313.8% and 334.0%, respectively.

Stock Issuances:  On July 1, 2016, we amended the ATM securities offering program with MLV & Co. LLC (“MLV”) and JMP Securities LLC (“JMP”) to replace MLV with FBR Capital Markets & Co. (“FBR”), an affiliate of MLV (the “Prior ATM Program”). On May 12, 2017, we entered into new equity distribution agreements with each of FBR and JMP that reference our current registration statement (the “ATM Program”). All other material terms of the Prior ATM Program remain unchanged under the ATM Program. During the three months ended March 31, 2017, we sold 113,600 shares at an average price of $15.70 per share for gross proceeds of $1.8 million under the Prior ATM program. Aggregate underwriters’ discounts and commissions were $27 thousand and offering costs were $21 thousand, resulting in net proceeds of approximately $1.7 million. There were no stock issuances during the three months ended March 31, 2018.

Borrowings

Revolving Credit Facility:  As of March 31, 2018, we had U.S. dollar borrowings of $113.3 million and non-U.S. dollar borrowings denominated in Great Britain pounds of £8.8 million ($12.3 million in U.S. dollars) under our revolving credit facility with ING Capital LLC, as agent, to finance the purchase of our assets. The borrowings denominated in Great Britain pounds may be positively or negatively affected by movements in the rate of exchange between the U.S. dollar and the Great Britain pound. These movements are beyond our control and cannot be predicted. The borrowings denominated in Great Britain pounds are translated into U.S. dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign currency borrowings is included in net change in unrealized gain (loss) on foreign currency borrowings in our consolidated statements of operations and totaled ($0.4) million and zero for the three months ended March 31, 2018 and 2017, respectively. As of December 31, 2017, we had U.S. dollar borrowings of $105.2 million and non-U.S. dollar borrowings denominated in Great Britain pounds of £8.8 million ($11.9 million in U.S. dollars) under our revolving credit facility. As of March 31, 2018, the maximum amount we were able to borrow was $200.0 million and this borrowing can be increased to $300.0 million pursuant to an accordion feature (subject to maintaining 200% asset coverage, as defined by the 1940 Act). On February 22, 2017, we closed a $40.0 million upsize to the revolving credit facility, bringing the maximum amount we are able to borrow from $160.0 million to the now current maximum amount of $200.0 million, in accordance with the facility’s accordion feature. The maturity date on the facility is December 14, 2020.

The revolving credit facility is secured by a lien on all of our assets, including cash on hand, but excluding the assets of our wholly-owned subsidiary, MRCC SBIC. Our ability to borrow under the revolving credit facility is subject to availability under a defined borrowing base, which varies based on portfolio characteristics and certain eligibility criteria and concentration limits, as well as required valuation methodologies. We may make draws under the revolving credit facility to make or purchase additional investments through December 2019 and for general working capital purposes until the maturity date of the revolving credit facility. Borrowings under the revolving credit facility bear interest, at our election, at an annual rate of LIBOR (one-month, two-month, three-month or six-month at our discretion based on the term of the borrowing) plus 3.00% (or 2.75% if our net worth (excluding investments in MRCC SBIC) exceeds $225.0 million) or at a daily rate equal to 2.00% (or 1.75% if our net worth (excluding investments in MRCC SBIC) exceeds $225.0 million) per annum plus the greater of the prime interest rate, the federal funds rate plus 0.5% or LIBOR plus 1.0%. In addition to the stated interest rate on borrowings under the revolving credit facility, we are required to pay a fee of 0.5% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is less than 65% of the then available maximum borrowing or a fee of 1.0% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is greater than or equal to 65% of the then available maximum borrowing. As of March 31, 2018 and December 31, 2017, the outstanding borrowings were accruing at a weighted average interest rate of 4.6% and 4.4%, respectively. The weighted average interest rate of the revolving credit facility borrowings (excluding

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debt issuance costs) for the three months ended March 31, 2018 and 2017 was 4.6% and 4.1%, respectively. The weighted average fee rate on the unused portion of the revolving credit facility for the three months ended March 31, 2018 and 2017 was 0.5% and 0.5%, respectively.

Our ability to borrow under the revolving credit facility is subject to availability under the borrowing base, which permits us to borrow up to 70% of the fair market value of our portfolio company investments depending on the type of the investment we hold and whether the investment is quoted. Our ability to borrow is also subject to certain concentration limits, and our continued compliance with the representations, warranties and covenants given by us under the facility. The revolving credit facility contains certain financial and restrictive covenants, including, but not limited to, our maintenance of: (1) a minimum consolidated total net assets at least equal to the greater of (a) 40% of the consolidated total assets on the last day of each quarter or (b) $120.0 million plus 65% of the net proceeds to us from sales of our securities after December 14, 2015; (2) a ratio of total assets (less total liabilities other than indebtedness) to total indebtedness of not less than 2.1 times; and (3) a ratio of earnings before interest and taxes to interest expense of at least 2.5 times. The revolving credit facility also requires us to undertake customary indemnification obligations with respect to ING Capital LLC and other members of the lending group and to reimburse the lenders for expenses associated with entering into the credit facility. The revolving credit facility also has customary provisions regarding events of default, including events of default for nonpayment, change in control transactions at both Monroe Capital Corporation and MC Advisors, failure to comply with financial and negative covenants, and failure to maintain our relationship with MC Advisors. If we incur an event of default under the revolving credit facility and fail to remedy such default under any applicable grace period, if any, then the entire revolving credit facility could become immediately due and payable, which would materially and adversely affect our liquidity, financial condition, results of operations and cash flows.

Our revolving credit facility also imposes certain conditions that may limit the amount of our distributions to stockholders. Distributions payable in our common stock under the DRIP are not limited by the revolving credit facility. Distributions in cash or property other than common stock are generally limited to 115% of the amount of distributions required to maintain our status as a RIC.

See “Recent Developments” for additional disclosure regarding an amendment to the revolving credit facility which occurred on April 25, 2018.

SBA Debentures:  On February 28, 2014, our wholly-owned subsidiary, MRCC SBIC, received a license from the SBA to operate as a SBIC under Section 301(c) of the Small Business Investment Act of 1958, as amended. MRCC SBIC commenced operations on September 16, 2013.

The SBIC license allows MRCC SBIC to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a leverage commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis (pooling date) at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, has a superior claim to MRCC SBIC’s assets over our stockholders in the event we liquidate MRCC SBIC or the SBA exercises its remedies upon an event of default.

SBA regulations currently limit the amount that an individual SBIC may borrow to a maximum of $150.0 million when it has at least $75.0 million in regulatory capital, receives a leverage commitment from the SBA and has been through an audit examination by the SBA subsequent to licensing. The SBA also historically limited a related group of SBICs (commonly referred to as a “family of funds”) to a maximum of $225.0 million in total borrowings. On December 18, 2015, this family of funds limitation was raised to $350.0 million in total borrowings. As we have other affiliated SBICs already in operation, MRCC SBIC was historically limited to a maximum of $40.0 million in borrowings. Pursuant to the increase in the family of funds limitation, we submitted a commitment application to the SBA and on April 13, 2016 we were approved for $75.0 million in additional SBA-guaranteed debentures for MRCC SBIC for a total of $115.0 million in available debentures.

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As of March 31, 2018, MRCC SBIC had $57.6 million in leverageable capital and $112.8 million in SBA-guaranteed debentures outstanding. As of December 31, 2017, MRCC SBIC had $57.6 million in leverageable capital and $109.5 million in SBA-guaranteed debentures outstanding. As of March 31, 2018, we have made all required leverageable capital contributions to MRCC SBIC in order to access the remaining $2.2 million in available SBA-guaranteed debentures.

As of March 31, 2018, MRCC SBIC had the following SBA-guaranteed debentures outstanding (dollars in thousands):

   
Maturity Date   Interest Rate   Amount
September 2024     3.4 %    $ 12,920  
March 2025     3.3 %      14,800  
March 2025     2.9 %      7,080  
September 2025     3.6 %      5,200  
March 2027     3.5 %      20,000  
September 2027     3.2 %      32,100  
March 2028     3.2 %      18,520  
September 2028     3.3 %(1)      2,180  
Total         $ 112,800  

(1) Represents an interim rate of interest as the SBA-guaranteed debentures had not yet pooled.

As of December 31, 2017, MRCC SBIC had the following SBA-guaranteed debentures outstanding (dollars in thousands):

   
Maturity Date   Interest Rate   Amount
September 2024     3.4 %    $ 12,920  
March 2025     3.3 %      14,800  
March 2025     2.9 %      7,080  
September 2025     3.6 %      5,200  
March 2027     3.5 %      20,000  
September 2027     3.2 %      32,100  
March 2028     2.5 %(1)      9,160  
March 2028     2.6 %(1)      2,780  
March 2028     2.7 %(1)      5,480  
Total         $ 109,520  

(1) Represents an interim rate of interest as the SBA-guaranteed debentures had not yet pooled.

On October 2, 2014, the Company was granted exemptive relief from the SEC for permission to exclude the debt of MRCC SBIC guaranteed by the SBA from the 200% asset coverage test under the 1940 Act. The receipt of this exemption for this SBA-guaranteed debt increases flexibility under the 200% asset coverage test.

Secured Borrowings:  Certain partial loan sales do not qualify for sale accounting under Accounting Standards Codification (“ASC”) Topic 860 — Transfers and Servicing (“ASC Topic 860”) because these sales do not meet the definition of a “participating interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain as an investment on the accompanying consolidated statements of assets and liabilities and the portion sold is recorded as a secured borrowing in the liabilities section of the consolidated statements of assets and liabilities. For these partial loan sales, the interest earned on the entire loan balance is recorded within “interest income” and the interest earned by the buyer in the partial loan sale is recorded within “interest and other debt financing expenses” in the accompanying consolidated statements of operations. As of March 31, 2018 and December 31, 2017, there were no secured borrowings.

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Distribution Policy

Our Board will determine the timing and amount, if any, of our distributions. We intend to pay distributions on a quarterly basis. In order to avoid corporate-level tax on the income we distribute as a RIC, we must distribute to our stockholders at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, on an annual basis out of the assets legally available for such distributions. In addition, we also intend to distribute any realized net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) at least annually out of the assets legally available for such distributions. Distributions to stockholders for the three months ended March 31, 2018 and 2017, totaled $7.1 million ($0.35 per share) and $5.8 million ($0.35 per share), respectively. The tax character of such distributions is determined at the end of the fiscal year. However, if the character of such distributions were determined as of March 31, 2018 and 2017, no portion of these distributions would have been characterized as a tax return of capital to stockholders.

We have adopted an “opt out” dividend reinvestment plan (“DRIP”) for our common stockholders. As a result, if we declare a distribution, our stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock unless a stockholder specifically “opts out” of our DRIP. If a stockholder opts out, that stockholder will receive cash distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions, stockholders participating in our DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes.

MRCC Senior Loan Fund I, LLC

We co-invest with NLV Financial Corporation (“NLV”) in senior secured loans through SLF, an unconsolidated Delaware limited liability company. SLF is capitalized as underlying investment transactions are completed, taking into account available debt and equity commitments available for funding these investments. All portfolio and investment decisions in respect to SLF must be approved by the SLF investment committee, consisting of one representative of each of us and NLV. SLF may cease making new investments upon notification of either member, but operations will continue until all investments have been sold or paid-off in the normal course of business. Investments held by SLF are measured at fair value using the same valuation methodologies as described below. The Company’s investment is illiquid in nature as SLF does not allow for withdrawal from the LLC or the sale of a member’s interest unless approved by the board of members of SLF. The full withdrawal of a member would result in an orderly wind-down of SLF.

SLF’s profits and losses are allocated to us and NLV in accordance with the respective ownership interests. As of March 31, 2018, we and NLV owned 50.0% and 50.0%, respectively, of the LLC equity interests. As of March 31, 2018, SLF had $100.0 million in commitments from its members (in the aggregate), of which $31.5 million was funded. As of December 31, 2017, we and NLV owned 50.0% and 50.0%, respectively, of the LLC equity interests. As of December 31, 2017, SLF had $100.0 million in commitments from its members (in the aggregate), of which $19.0 million was funded.

SLF has entered into a senior secured revolving credit facility (as amended, the “SLF Credit Facility”) with Capital One, N.A., through its wholly-owned subsidiary MRCC Senior Loan Fund I Financing SPV, LLC (“SLF SPV”), which as of March 31, 2018 allowed SLF SPV to borrow up to $100.0 million at any one time outstanding, subject to leverage and borrowing base restrictions. Borrowings under the SLF Credit Facility bear interest at an annual rate of LIBOR (three-month) plus 2.25%. The maturity date on the SLF Credit Facility is March 22, 2023.

SLF does not pay any fees to MC Advisors or its affiliates; however, SLF has entered into an administration agreement with MC Management, pursuant to which certain loan servicing and administrative functions are delegated to MC Management. SLF may reimburse MC Management for its allocable share of overhead and other expenses incurred by MC Management. No such expenses have been incurred or charged to SLF through March 31, 2018. There are no agreements or understandings by which we guarantee any SLF obligations.

As of March 31, 2018 and December 31, 2017, SLF had total assets at fair value of $60.5 million and $41.6 million, respectively. As of March 31, 2018 and December 31, 2017, SLF had zero and zero portfolio

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company investments on non-accrual status, respectively. The portfolio companies in SLF are in industries and geographies similar to those in which we may invest directly. Additionally, as of March 31, 2018 and December 31, 2017, SLF had commitments to fund various undrawn revolving credit and delayed draw loans to its portfolio companies totaling $3.8 million and $2.1 million, respectively.

Below is a summary of SLF’s portfolio, followed by a listing of the individual investments in SLF’s portfolio as of March 31, 2018 and December 31, 2017 (in thousands):

   
  As of
     March 31,
2018
  December 31,
2017
Senior secured loans(1)     58,207       29,438  
Weighted average current interest rate on senior secured loans(2)     7.4 %      7.1 % 
Number of borrowers in SLF     17       8  

(1) Represents outstanding principal amount, excluding unfunded commitments.
(2) Computed as the (a) annual stated interest rate on accruing senior secured loans divided by (b) total senior secured loans at outstanding principal amount.

MRCC SENIOR LOAN FUND I, LLC
SCHEDULE OF INVESTMENTS
March 31, 2018
(in thousands)

         
Portfolio Company(a)   Spread Above
Index(b)
  Interest
Rate(b)
  Maturity   Principal   Fair
Value
Non-Controlled/Non-Affiliate Company Investments
                                            
Senior Secured Loans
                                            
Banking, Finance, Insurance & Real Estate
                                            
MTC Intermediate Holdco, Inc.     L+4.75 %      6.63 %      1/30/2023       5,000     $ 4,998  
                         5,000       4,998  
Beverage, Food & Tobacco
                                            
Il Fornaio (America) Corporation     L+6.50 %      8.38 %      11/10/2022       4,973       4,973  
US Salt, LLC     L+4.75 %      6.63 %      11/30/2023       3,500       3,500  
                         8,473       8,473  
Chemicals, Plastics & Rubber
                                            
Loparex International B.V.(c)     L+4.25 %      6.13 %      4/09/2025       500       498  
Peach State Labs, LLC, and Flow Polymers, LLC     L+6.25 %      7.92 %      6/30/2021       2,876       2,891  
                         3,376       3,389  
Construction & Building
                                            
Fastener Acquisition, Inc.(c)     L+4.25 %      6.13 %      3/23/2025       1,333       1,338  
                         1,333       1,338  
Consumer Goods: Non-Durable
                                            
Solaray, LLC     L+6.50 %      8.53 %      9/09/2023       1,621       1,621  
Solaray, LLC (Delayed Draw)(d)     L+6.50 %      8.53 %      9/09/2023       1,875       838  
                         3,496       2,459  

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Portfolio Company(a)   Spread Above
Index(b)
  Interest
Rate(b)
  Maturity   Principal   Fair
Value
Healthcare & Pharmaceuticals
                                            
LSCS Holdings, Inc.(c)     L+4.25 %      6.40 %      3/16/2025       2,800       2,786  
LSCS Holdings, Inc. (Delayed Draw)(c)(d)     L+4.25 %      6.40 %      3/16/2025       700        
Radiology Partners Holdings, LLC     L+5.75 %      7.69 %      12/04/2023       1,701       1,704  
Radiology Partners Holdings, LLC (Delayed Draw)(d)     L+5.75 %      7.69 %      12/04/2023       1,170       396  
                         6,371       4,886  
High Tech Industries
                                            
Gigamon, Inc.     L+4.50 %      6.80 %      12/19/2024       2,993       3,022  
                         2,993       3,022  
Media: Diversified & Production
                                            
Research Now Group, Inc. and Survey Sampling International, LLC     L+5.50 %      7.86 %      12/06/2024       6,983       6,950  
                         6,983       6,950  
Services: Business
                                            
Engage2Excel, Inc.     L+6.50 %      8.54 %      3/07/2023       4,375       4,288  
Engage2Excel, Inc. (Revolver)(d)     L+6.50 %      8.21 %      3/07/2023       545       98  
Output Services Group, Inc.(c)     L+4.25 %      6.13 %      3/27/2024       4,145       4,166  
Output Services Group, Inc. (Delayed Draw)(c)(d)     L+4.25 %      6.13 %      3/27/2024       855        
                         9,920       8,552  
Services: Consumer
                                            
EWC Ventures, LLC     L+5.50 %      7.17 %      1/18/2023       3,350       3,358  
LegalZoom.com, Inc.     L+4.50 %      6.34 %      11/21/2024       1,995       2,012  
Zenith Merger Sub, Inc.     L+5.50 %      7.80 %      12/13/2023       3,741       3,741  
                         9,086       9,111  
Wholesale
                                            
BMC Acquisition, Inc.     L+5.25 %      7.70 %      12/28/2024       4,988       5,000  
                         4,988       5,000  
TOTAL INVESTMENTS                           $ 58,178  

(a) All investments are U.S. companies, except Loparex International B.V.
(b) The majority of investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime” or “P”) which reset daily, quarterly or semiannually. The Company has provided the spread over LIBOR or Prime and the current contractual rate of interest in effect at March 31, 2018. Certain investments are subject to a LIBOR or Prime interest rate floor.
(c) Investment position or portion thereof unsettled as of March 31, 2018.
(d) All or a portion of this commitment was unfunded as of March 31, 2018. Principal reflects the commitment outstanding.

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MRCC SENIOR LOAN FUND I, LLC
SCHEDULE OF INVESTMENTS
December 31, 2017
(in thousands)

         
Portfolio Company(a)   Spread Above
Index(b)
  Interest
Rate(b)
  Maturity   Principal   Fair
Value
Non-Controlled/Non-Affiliate Company Investments
                                            
Senior Secured Loans
                                            
Banking, Finance, Insurance & Real Estate
                                            
Clearent Holdings LLC and Clearent, LLC(c)     P+3.75 %      8.25 %      1/02/2024       1,056     $ 1,045  
Clearent Holdings LLC and Clearent, LLC(c)     P+3.75 %      8.25 %      1/02/2024       1,257       1,244  
Clearent Holdings LLC and Clearent, LLC(c)(d)     P+3.75 %      8.25 %      1/02/2024       208        
                         2,521       2,289  
Beverage, Food & Tobacco
                                            
Il Fornaio (America) Corporation     L+6.50 %      8.07 %      11/10/2022       5,000       5,008  
US Salt, LLC(c)     L+4.75 %      6.18 %      11/30/2023       3,500       3,500  
                         8,500       8,508  
Consumer Goods: Non-Durable
                                            
Solaray, LLC     L+6.50 %      8.02 %      9/09/2023       1,625       1,625  
Solaray, LLC (Delayed Draw)(d)     L+6.50 %      8.02 %      9/09/2023       1,875        
                         3,500       1,625  
High Tech Industries
                                            
Gigamon, Inc.(c)     L+4.50 %      6.03 %      12/19/2024       3,000       2,985  
                         3,000       2,985  
Media: Diversified & Production
                                            
Research Now Group, Inc. and Survey Sampling International, LLC(c)     L+5.50 %      7.13 %      12/06/2024       7,000       6,714  
                         7,000       6,714  
Services: Consumer
                                            
LegalZoom.com, Inc.(c)     L+4.50 %      5.94 %      11/21/2024       2,000       2,005  
                         2,000       2,005  
Wholesale
                                            
BMC Acquisition, Inc.(c)     L+5.25 %      6.94 %      12/28/2024       5,000       5,000  
                         5,000       5,000  
TOTAL INVESTMENTS                           $ 29,126  

(a) All investments are U.S. companies.
(b) The majority of investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime” or “P”) which reset daily, quarterly or semiannually. The Company has provided the spread over LIBOR or Prime and the current contractual rate of interest in effect at December 31, 2017. Certain investments are subject to a LIBOR or Prime interest rate floor.
(c) Investment position or portion thereof unsettled as of December 31, 2017.

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(d) All or a portion of this commitment was unfunded as of December 31, 2017. Principal reflects the commitment outstanding.

As of March 31, 2018 and December 31, 2017, we have committed to fund $50.0 million and $50.0 million of LLC equity interest subscriptions to SLF, respectively. As of March 31, 2018 and December 31, 2017, $15.8 million and $9.5 million of our LLC equity interest subscriptions to SLF had been called and contributed, respectively. For the three months ended March 31, 2018 and 2017, we received $0.2 million and zero dividend income from the SLF LLC equity interests, respectively.

Below is certain summarized financial information for SLF as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 (dollars in thousands):

   
  March 31,
2018
  December 31,
2017
Assets
                 
Investments, at fair value   $ 58,178     $ 29,126  
Cash     858       12,504  
Restricted cash     1,287        
Receivable for open trades     48        
Interest receivable     139       11  
Total assets   $ 60,510     $ 41,641  
Liabilities
                 
Revolving credit facility   $ 20,297     $  
Less: Unamortized deferred financing costs     (1,310 )       
Total debt, less unamortized deferred financing costs     18,987        
Payable for open trades     8,735       22,304  
Interest payable     36        
Accounts payable and accrued expenses     87       57  
Total liabilities     27,845       22,361  
Members’ capital     32,665       19,280  
Total liabilities and members’ capital