SLR Investment (SLRC) risk factors, FY2024 10-K

Risks Relating to Our Investments

1. 01We operate in a highly competitive market for investment opportunities
2. 02We invest primarily in leveraged middle-market companies in the form of senior secured loans, financing leases and to a lesser extent, unsecured loans and equity securities
3. 03we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience
4. 04The lack of liquidity in our investments may make it difficult for us to dispose of our investments at a favorable price, which may adversely affect our ability to meet our investment objectives
5. 05Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies performs poorly or defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry
6. 06Our investments in securities rated below investment grade are speculative in nature and are subject to additional risk factors such as the increased possibility of default, illiquidity of the security, and changes in value based on changes in interest rates
7. 07Economic sanction laws in the United States and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies
8. 08If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending and investment activities, our net asset value could decrease and our level of distributions and liquidity could be affected adversely
9. 09We may suffer a loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient
10. 10The business, financial condition and results of operations of our portfolio companies could be adversely affected by worldwide economic conditions, as well as political and economic conditions in the countries in which they conduct business
11. 11Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio
12. 12Where we 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
13. 13Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity
14. 14We structure the debt investments in our portfolio companies to include business and financial covenants placing affirmative and negative obligations on the operation of the company’s business and its financial condition
15. 15In addition, some of the loans in which we may invest may be “covenant-lite” loans. We use the term “covenant-lite” loans to refer generally to loans that do not have a complete set of financial maintenance covenants
16. 16Our loans could be subject to equitable subordination by a court which would increase our risk of loss with respect to such loans
17. 17An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns
18. 18Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies
19. 19Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments
20. 20We may expose ourselves to risks if we engage in hedging transactions
21. 21Our Investment Adviser may not be able to achieve the same or similar returns as those achieved for other funds it currently manages or by our senior investment professionals while they were employed at prior positions
22. 22We may be exposed to higher risks with respect to our investments that include original issue discount or PIK interest

Risks Relating to an Investment in Our Securities

1. 23Our shares may trade at a substantial discount from net asset value and may continue to do so over the long term
2. 24Our common stock price may be volatile and may decrease substantially
3. 25Our businesses may be adversely affected by litigation and regulatory proceedings
4. 26There is a risk that investors in our equity securities may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital
5. 27We may reduce or defer our dividends and choose to incur U.S. federal excise tax in order to preserve cash and maintain flexibility
6. 28We may choose to pay distributions in our own common stock, in which case our stockholders may be required to pay U.S. federal income taxes in excess of the cash distributions they receive
7. 29Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock
8. 30We may be unable to invest the net proceeds raised from any offerings on acceptable terms or allocate net proceeds from any offering of our securities in ways with which you may not agree
9. 31The net asset value per share of our common stock may be diluted if we issue or sell shares of our common stock at prices below the then current net asset value per share of our common stock or securities to subscribe for or that are convertible into shares of our common stock
10. 32If we were to issue or sell shares of our common stock below our then current net asset value per share, such issuances or sales would result in an immediate dilution to the net asset value per share of our common stock
11. 33If we issue preferred stock, the net asset value and market value of our common stock may become more volatile
12. 34Our 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
13. 35To the extent we use debt or preferred stock to finance our investments, changes in interest rates will affect our cost of capital and net investment income
14. 36We may in the future determine to fund a portion of our investments with preferred stock, which would magnify the potential for loss and the risks of investing in us in a similar way as our borrowings
15. 37Our stock repurchase program could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock

Risks Relating to Our Business and Structure

1. 38We are dependent upon SLR Capital Partners’ key personnel for our future success
2. 39A disruption in the capital markets and the credit markets could negatively affect our business
3. 40Our financial condition and results of operations will depend on SLR Capital Partners’ ability to manage our future growth effectively by identifying, investing in and monitoring companies that meet our investment criteria
4. 41We may need to raise additional capital to grow because we must distribute most of our income
5. 42Any failure on our part to maintain our status as a BDC would reduce our operating flexibility and we may be limited in our investment choices as a BDC
6. 43Regulations governing our operation as a BDC affect our ability to, and the way in which we will, raise additional capital. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage
7. 44Our credit ratings may not reflect all risks of an investment in our debt securities
8. 45Our stockholders may experience dilution in their ownership percentage if they opt out of our dividend reinvestment plan
9. 46We have and will continue to borrow money, which would magnify the potential for loss on amounts invested and may increase the risk of investing in us
10. 47It is likely that the terms of any current or future long-term or revolving credit or warehouse facility we may enter into in the future could constrain our ability to grow our business
11. 48Our quarterly and annual operating results are subject to fluctuation as a result of the nature of our business, and if we fail to achieve our investment objective, the net asset value of our common stock may decline
12. 49Our investments may be in portfolio companies that may have limited operating histories and financial resources
13. 50There will be uncertainty as to the value of our portfolio investments, which may impact our net asset value
14. 51Our equity ownership in a portfolio company may represent a control investment. Our ability to exit an investment in a timely manner because we are in a control position or have access to inside information in the portfolio company could result in a realized loss on the investment
15. 52Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited
16. 53We may be obligated to pay our Investment Adviser incentive compensation even if we incur a loss
17. 54Our incentive fee may induce SLR Capital Partners to pursue speculative investments
18. 55We may become subject to corporate-level U.S. federal income tax if we are unable to qualify and maintain our qualification for tax treatment as a regulated investment company under Subchapter M of the Code
19. 56The income source requirement will be satisfied if we obtain at least 90% of our income for each year from certain passive investments, including interest, dividends, gains from the sale of stock or securities, or similar sources
20. 57We may have difficulty satisfying the Annual Distribution Requirement in order to qualify and maintain RIC tax treatment if we recognize income before or without receiving cash representing such income
21. 58Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock
22. 59The failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively
23. 60We, our Investment Adviser and our portfolio companies are subject to risks associated with cyber-attacks
24. 61There is a risk that encryption and other protective measures against cyber-attacks may be circumvented, particularly to the extent that new computing technologies increase the speed and computing power available
25. 62We can be highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay distributions
26. 63These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay distributions to our stockholders
27. 64Any inability or perceived inability to adequately address privacy concerns, or comply with applicable laws and regulations, even if unfounded, may result in adverse consequences to the Company
28. 65Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval
29. 66Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affect our business and financial results
30. 67Changes in laws or regulations governing our operations may adversely affect our business
31. 68Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us
32. 69Our Investment Adviser can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations
33. 70Volatility or a prolonged disruption in the credit markets could materially damage our business
34. 71Global economic, regulatory and market conditions may adversely affect our business, results of operations and financial condition, including our revenue growth and profitability
35. 72market and economic disruptions could negatively impact the operating results of our portfolio companies. This could in turn materially reduce our net asset value and dividends and adversely affect our financial prospects and condition
36. 73Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of our operations
37. 74The continued uncertainty related to the sustainability and pace of economic recovery in the U.S. and globally could have a negative impact on our business
38. 75There is uncertainty surrounding potential legal, regulatory and policy changes by new presidential administrations in the United States that may directly affect financial institutions and the global economy
39. 76The London Interbank Offered Rate (“LIBOR”) is an index rate that historically was widely used in lending transactions and was a common reference rate for setting the floating interest rate on private loans. LIBOR was typically the reference rate used in floating-rate loans extended to our portfolio companies
40. 77Inflation and a rising interest rate environment may adversely affect the business, results of operations and financial condition of us and our portfolio companies
41. 78Inflation may cause the real value of our investments to decline
42. 79Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could have a material adverse effect on us, the Investment Adviser and our portfolio companies
43. 80Technological innovations and industry disruptions may negatively impact us
44. 81We are subject to risks associated with artificial intelligence and machine learning technology
45. 82We are subject to risks related to corporate social responsibility
46. 83constrain our investment opportunities. Such scrutiny of both ESG and DEI related practices could expose our Investment Adviser to the risk of litigation, investigations or challenges by federal or state authorities or result in reputational harm
47. 84The effect of global climate change may impact the operations of our portfolio companies
48. 85We cannot predict how changes in tax law will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business
49. 86Uncertainty about U.S. government initiatives could negatively impact our business, financial condition and results of operations