The phrase “nothing gets done in an election year” sums up what most onlookers think about Washington when the presidency is on the line.

When nothing else is getting done, it might be hard to imagine something like business development companies getting their regulations modernized. But Brett Palmer, president the Small Business Investor Alliance, thinks it can happen.

Congress created business development companies, or BDCs, in 1980 as alternative sources of debt and equity capital for small and medium-sized companies. They are required to have at least 70 percent of their total assets invested in privately issued securities, cash, office equipment and real estate interests controlled by companies that do not have any securities listed on a national exchange.

Investors are likely attracted to BDCs, which are traded openly on exchanges, because of their tax advantages and yield -- the IRS treats them as registered investment companies, the same as ETFs and most mutual funds, but in return they are required to distribute at least 90 percent of their income to shareholders to avoid paying a corporate-level tax.

Similar to venture capital funds, they provide investors with the chance to invest in smaller, growing companies, but allow a larger pool of investors to purchase shares. Because they have to pay out most of their income to shareholders, capital is raised in continual private offerings, similar to non-traded REITs.

One nagging problem, says Palmer, is that BDCs are overseen with regulations written during the Jimmy Carter administration and have many of the bureaucratic requirements of an operating company (for instance, they must file periodic 10-Q and 10-K reports with the SEC). These companies are also required to control or to provide significant managerial assistance to the small companies they invest in, and are limited in the amount of assets they are permitted to invest into any single name.

Palmer’s association argues that these rules place heavy burdens on firms offering a BDC, including voluminous paperwork, extended filing times for offering registration and limits on communication and information-sharing between BDCs, analysts and investors.

This year, Palmer is promoting the passage of the Small Business Credit Availability Act of 2015 in the House of Representatives and Senate. While the reforms have previously faced headwinds from regulators, advocacy groups and politicians uncertain about expanding opaque and illiquid products, this year the Small Business Investment Association is attempting to overcome partisan politics.

“Washington’s dysfunction is not overblown, but there are moments of progress,” Palmer says. “We’ve been able to take advantage of those to get some things across the finish line. In an election year, it’s going to be hard, but we’ve got a decent shot.”

The most controversial element of the association’s proposals is the possible expansion of the amount of money BDCs would be able to borrow to make investments. The bill would expand the amount of leverage available to BDCs from a 1:1 debt-to-equity ratio to a 2:1 ratio, and it would streamline some of the offering requirements for BDCs.

Foes have argued that BDCs should lower their expenses and fees, which can go to almost 15 percent of an initial investment, to attract more inflows, but Palmer says that this is best achieved by easing some of the regulatory restrictions.

"There are some efficiencies of scales that BDCs could take advantage of if they could go to a 2:1 ratio," Palmer says. "There have already been a number of traded BDCs who have lowered their fees, and I would expect to see that broaden if they were able to get bigger."

Facing a legislative calendar shortened by the election cycle and major parties reluctant to pass any legislation for fear of political blowback, Palmer is still confident that the SBIA, an industry group representing over half of the BDCs and small business investment companies in the U.S., will prevail in 2016.

“One of the things that makes our strategy effective is that we try to win the argument before we win the vote,” Palmer says. “In the current regulatory environment, policy makers are concerned about banks, private equity and investing in general, so we make a straight-and-narrow case that people can get behind and agree to.”

Late last year, the bill passed the House Financial Services Committee by a bipartisan 53-4 vote. To encourage consensus on the bill, a number of investor protections were added, including a provision that BDCs would need board or shareholder approval before increasing their leverage ratio.

“In the last Congress, it passed committee in a vote that was along party lines, and then the clock ran out before it was voted on by the entire House,” Palmer says. “This year, we even got Maxine Waters’ support for our bill, which is a nice improvement.”

Waters, a representative from California and a staunch liberal, is the Democratic Party’s ranking member on the House Financial Services Committee. The bill’s passage faces some opposition from regulators, including SEC Chairwoman Mary Jo White, who panned the proposal in testimony to the committee last year. White was particularly alarmed at a provision that would allow BDCs to invest in small financial firms, like RIAs, explaining that conflicts of interest could arise in some scenarios.

But according to Palmer: “Entity-owned investment advisors already exist, and they get exemptive relief from the SEC to do it. … In any case, we feel it’s better to have some consistency so that investors know what they’re getting.”

As part of last year’s budgetary process, Palmer and the his association won a few legislative battles as Congress increased the capital gains exclusions for SBICs and BDCs and made permanent a foreign investor withholding exemption for BDCs.

Modernizing BDC regulations could provide some much needed stimulus in the heart of the American economy, says Palmer.

“These are not do-or-die pieces of legislation, so one of the challenges is that doing the right thing is always a lower priority than dealing with a crisis,” Palmer says. “However, it makes sense to help the middle market perform more efficiently and effectively. The banking industry still has handcuffs on and is not lending to this segment, but the demand for capital hasn’t gone away. The more efficient we can make the models that serve this part of the market, the better off the economy is at large.”

As part of its work, the Small Business Investment Association also pitches BDCs and their smaller cousins, small business investment companies, as sound investments. Palmer cites data from the National Center for the Middle Market that finds almost 60 percent of middle-market companies are growing, and around one-third plan on growing their payrolls in 2016.

“They’re higher-yielding products that seem to have a consistent yield,” Palmer says. “They represent part of the market that is not going away. There’s a lot of room for growth there.”

While Palmer isn’t worried about partisan gridlock slowing down the SBIA or BDCs, he is worried about presidential politics.

“Any American paying attention who isn’t horrified by something they’ve heard from each one of the presidential candidates is probably not paying attention,” Palmer says. “It’s a whipsaw between galling, horrifying and nauseating. There’s nothing targeted at BDCs, but there’s a lot of troubling economic policy being bandied about; whether it be demonizing anyone involved in finance, raising capital gains taxes or removing the deductibility of interest for small business, there’s a laundry list of bad ideas out there.”