Runway Growth Finance (RWAY) risk factors, 2025 10-K

Risks Related to the Economy

1. 01Political, social and economic uncertainty creates and exacerbates risks
2. 05Political, social and economic uncertainty creates and exacerbates risks
3. 06Disruption in the capital markets may cause unstable economic conditions. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business and operations
4. 07Significant changes in the capital markets may adversely affect the pace of our investment activity and economic activity generally
5. 08The current period of capital markets disruption and economic uncertainty may make it difficult to extend the maturity of, or refinance, our existing indebtedness or obtain new indebtedness and any failure to do so could have a material adverse effect on our business, financial condition or results of operations
6. 09Economic recessions or downturns could impair our portfolio companies and harm our operating results
7. 10Further downgrades of the U.S. credit rating could negatively impact our liquidity, financial conditions and earnings and the impact of any government budgetary disruptions
8. 11Global economic, political and market conditions may adversely affect our business, financial condition and results of operations, including our revenue growth and profitability
9. 12Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, negatively impact us

Risks Related to Our Investments

1. 02Our investments are very risky and highly speculative
2. 03Investing in high growth-potential, private companies involves a high degree of risk, and our financial results may be affected adversely if one or more of our significant portfolio investments defaults on its loans or fails to perform as we expect
3. 37Our investments are very risky and highly speculative
4. 38they may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding debt upon maturity
5. 39An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies and a greater vulnerability to economic downturns
6. 40Inflation may adversely affect our and our portfolio companies’ business, results of operations and financial condition
7. 41Our portfolio companies may have limited operating histories and financial resources
8. 42The financial projections of our portfolio companies could prove inaccurate
9. 43Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies
10. 44There may be circumstances in which our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims
11. 45Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us
12. 46We may be subject to risks associated with our investments in covenant-lite loans
13. 47The lack of liquidity in our investments may adversely affect our business
14. 48Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio
15. 49Our portfolio may lack diversification among portfolio companies, which subjects us to a risk of significant loss if one or more of these companies default on their repayment obligations under any of their debt instruments
16. 50Our portfolio may be concentrated in a limited number of industries, which will subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our investments are concentrated
17. 51Our portfolio may lack diversification among our Sponsored Growth Lending and Non-Sponsored Growth Lending strategies and among sponsors within the Sponsored Growth Lending strategy
18. 52We invest in sectors including technology, life sciences, healthcare information and services, business services, financial services, select consumer services and products and other high-growth industries, which are subject to specific risks related to each
19. 53We may be subject to risks associated with our investments in life sciences-related companies
20. 54Technology-related sectors, including those involving data processing and outsourced services, in which we invest are subject to many risks, including volatility, intense competition, decreasing life cycles, product obsolescence, changing consumer preferences and periodic downturns
21. 55Certain technology-related industries are subject to extensive government regulation, which exposes us to the risk of significant loss if any of these industry sectors experiences a downturn
22. 56Any of our portfolio companies operating in the healthcare information and services industry are subject to extensive government regulation and certain other risks particular to that industry
23. 57The internet retail industry is subject to many risks and is highly competitive
24. 58We may be subject to risks associated with our investments in the software industry
25. 59Our portfolio companies operating in the human resources and employment services industry operate in a complex regulatory environment, and failure to comply with applicable laws and regulations could adversely affect the business of our portfolio companies
26. 60Because we generally do not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments
27. 61Defaults by our portfolio companies will harm our operating results
28. 62If our portfolio companies are unable to commercialize their technologies, products, business concepts or services, the returns on our investments could be adversely affected
29. 63If our portfolio companies are unable to protect their intellectual property rights, our business and prospects could be harmed, and if portfolio companies are required to devote significant resources to protecting their intellectual property rights, the value of our investment could be reduced
30. 64Any unrealized losses we experience on our loan portfolio may be an indication of future realized losses, which could reduce our income available for distribution
31. 65Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity
32. 66Our investments in leveraged portfolio companies may be risky, and you could lose all or part of your investment
33. 67We may not realize gains from our equity investments
34. 68We may expose ourselves to risks if we engage in hedging transactions
35. 69Our investments in portfolio companies may expose us to environmental risks

Risks Related to Our Conflicts of Interest

1. 04There are significant potential conflicts of interest which could impact our investment returns
2. 70Our relationship with Oaktree may create conflicts of interest
3. 71RGC’s liability is limited under the Advisory Agreement and we have agreed to indemnify RGC against certain liabilities, which may lead RGC to act in a riskier manner on our behalf than it would when acting for its own account
4. 72The valuation process for certain of our investments may create a conflict of interest
5. 73We may pay the Adviser an incentive fee on certain investments that include a deferred interest feature

Risks Related to Our Business and Structure

1. 13Our investment portfolio is recorded at fair value, with our Board of Directors determining, in good faith, the fair value of our investment portfolio and, as a result, there is uncertainty as to the value of our portfolio investments
2. 14Our ability to achieve our investment objective depends on our ability to effectively manage and deploy capital, which depends, in turn, on RGC’s ability to identify, originate, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria
3. 15We operate in a highly competitive market for investment opportunities and we may not be able to compete effectively
4. 16Our business model depends to a significant extent upon strong referral relationships. Any inability of RGC to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business
5. 17We are dependent upon RGC’s key personnel for our future success
6. 18Our success depends on the ability of RGC to attract and retain qualified personnel in a competitive environment
7. 19The compensation we pay to RGC and our Administrator was not determined on an arm’s-length basis. Thus, the terms of such compensation may be less advantageous to us than if such terms had been the subject of arm’s-length negotiations
8. 20Our management fee may induce RGC to purchase assets with borrowed funds and to use leverage despite any enhanced risk
9. 21The capital gains portion of our incentive fee may induce RGC to make speculative investments
10. 22A general increase in interest rates will likely have the effect of making it easier for RGC to receive incentive fees, without necessarily resulting in an increase in our net earnings
11. 23RGC and our Administrator have the right to resign upon not more than 60 days’ notice, and we may not be able to find a suitable replacement for either within that time, or at all, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations
12. 24We may need to raise additional capital to grow because we must distribute most of our income
13. 25Any failure on our part to maintain our status as a BDC or fail to qualify as a RIC would reduce our operating flexibility
14. 26Regulations governing our operation as a BDC affect our ability to raise additional capital and the way in which we do so. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage
15. 27common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss
16. 28We borrow money, which could magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us
17. 29Corresponding return to common stockholder(1)
18. 30Any defaults under our Credit Facility or other borrowings, including the 2026 or 2027 Notes, could adversely affect our business
19. 31If we are unable to obtain additional debt financing, or if our borrowing capacity is materially reduced, our business could be materially adversely affected
20. 32Changes in interest rates may affect our cost of capital, the ability of our portfolio companies to service their debt obligations and our net investment income
21. 33Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse
22. 34To the extent original issue discount and PIK-interest constitute a portion of our income, we are exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income
23. 35Even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is supposed to occur at the maturity of the obligation
24. 36We have and will continue to expend significant financial and other resources to comply with the requirements of being a public reporting entity

Risks Related to our Common Stock

1. 74Shares of our common stock have traded at a discount from net asset value and may do so in the future
2. 75A stockholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us
3. 76Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock
4. 77Investing in our common stock involves a high degree of risk
5. 78The market value of our common stock may fluctuate significantly
6. 79loss of a major funding source
7. 80Distributions on our common stock may exceed our taxable earnings and profits. Therefore, portions of the distributions that we pay may represent a return of capital to you
8. 81Stockholders may experience dilution in the net asset value of their shares if they do not participate in our Dividend Reinvestment Plan and if our shares are trading at a discount to net asset value
9. 82If we issue preferred stock or convertible debt securities, the net asset value of our common stock may become more volatile
10. 83Provisions of the MGCL and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock
11. 84Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners
12. 85Certain investors are limited in their ability to make significant investments in us
13. 86Our business and operations could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price

Risks Related to RIC Tax Treatment

1. 87We will be subject to U.S. federal income tax at corporate rates if we are unable to qualify as a RIC
2. 88We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income
3. 89Due to ongoing healthcare emergencies or other disruptions in the economy, we may reduce or defer our dividends and choose to incur U.S. federal excise tax in order preserve cash and maintain flexibility
4. 90We may choose to pay distributions in our own stock, including in connection with our Dividend Reinvestment Plan, in which case you may be required to pay U.S. federal income tax in excess of the cash you receive

General Risks

1. 91We may experience fluctuations in our quarterly and annual results
2. 92Government intervention in the credit markets could adversely affect our business
3. 93Political uncertainty could adversely affect our business
4. 94Terrorist attacks, acts of war or widespread health emergencies or natural disasters may affect any market for our common stock, impact the businesses in which we invest and harm our business, operating results and financial condition
5. 95We are subject to risks associated with the use of service providers, including custodians, administrators and other agents
6. 96cash held with a custodian may not be segregated from the custodian’s own cash, and we therefore may rank as unsecured creditors in relation thereto. The inability to recover assets from the custodian could have a material impact on our performance
7. 97Any such new or changed laws or regulations could have a material adverse effect on our business or the business of our portfolio companies. The legal, tax and regulatory environment for BDCs, investment advisers and the instruments that they utilize (including derivative instruments) is continuously evolving
8. 98Internal and external cyber threats, as well as other disasters, could impair our ability to conduct business effectively
9. 99Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, results of operations or financial condition
10. 100We are subject to risks related to corporate social responsibility
11. 101We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business