Prospect Capital is a business development company that lends to middle-market companies in the United States. The company prioritizes the lower middle market, targeting companies where it can secure first lien senior secured loans. Prospect Capital argues this segment provides higher interest spreads and better covenant protections than larger market tiers. While the core business is lending, Prospect Capital also holds equity positions in consumer finance businesses like First Tower Finance, which it manages as tax-efficient partnerships. The company is actively selling its real estate holdings and exiting its positions in CLO notes to refocus capital on senior secured lending. Prospect Capital earns most of its revenue from interest income, profiting from the spread between its loan yields and its own cost of debt. To fund its portfolio, Prospect Capital uses a mix of floating-rate revolving credit and fixed-rate unsecured bonds. As a regulated investment company, Prospect Capital avoids corporate income taxes by distributing the majority of its earnings to shareholders. Prospect Capital Management externally manages the firm, charging fees based on gross assets and investment performance. The company differentiates its portfolio by maintaining low exposure to software and ARR loans, which management views as a credit quality advantage.