Credit stress among business development companies is rising, with the number of pressured borrowers climbing 15% in the first quarter to 538, or 10.6% of roughly 5,000 portfolio companies, according to an LCD analysis of more than 170 BDCs. The dollar volume of first-lien term loan and unitranche investments under pressure jumped 44% to $35.4 billion. Software companies represent the largest share of stressed borrowers, accounting for 26% of investments at fair value as of the first quarter of 2026, up from 19% at the end of 2025. Half of the 538 companies on the watchlist did not use payment-in-kind income in the last 12 months, indicating most stressed borrowers are still paying cash.