One type of business that income-focused investors might have come across is the business development company (BDC), which invests in the debt and equity of middle-market companies. However, BDCs can employ very different strategies and not all are created equal.

Let's look at two popular BDCs, Hercules Capital (NYSE: HTGC) and PennantPark Investment (NYSE: PNNT), to see which is better for your portfolio.

Hercules Capital mostly invests in high-growth technology and life-sciences companies before their initial public offerings. Nearly 89% of its debt investments are first lien, senior secured (meaning no other obligation has priority if there is a default, and the loan is backed by collateral). And about 96% of its debt investments are at floating rates.

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Source Fool.com