Note 5 – Fair Value of Financial Instruments

The Company’s assets recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC 820. Refer to "Note 2 – Summary of Significant Accounting Policies" for a discussion of the Company’s policies.

Investments measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations as of December 31, 2025 and 2024 (in thousands):


	Level 1		Level 2			Level 3		Measured at Net Asset Value(1)		Total
As of December 31, 2025
Portfolio Investments
Senior Secured Loans	$	-	$	-		$	853,893	$	-	$	853,893
Second Lien Loans		-		-			6,434		-		6,434
Preferred Stock/Units		-		-			36,264		-		36,264
Common Stock/Units		42		-			18		-		60
Equity Interest		-		-			1,493		13,253		14,746
Warrants		-		423			15,582		-		16,005
Total Portfolio Investments		42		423			913,684		13,253		927,402
Cash equivalents		2,849		-			-		-		2,849
Foreign Currency Forward Contract		-		(711	)		-		-		(711	)
Total	$	2,891	$	(288	)	$	913,684	$	13,253	$	929,540

As of December 31, 2024
Portfolio Investments
Senior Secured Loans	$	-	$	-		$	950,092	$	-	$	950,092
Second Lien Loans		-		-			20,152		-		20,152
Preferred Stock/Units		9,181		-			73,460		-		82,641
Common Stock/Units		2,817		-			16		-		2,833
Equity Interest		-		-			1,198		5,742		6,940
Warrants		-		430			13,752		-		14,182
Total Portfolio Investments		11,998		430			1,058,670		5,742		1,076,840
Cash equivalents		4,026		-			-		-		4,026
Total	$	16,024	$	430		$	1,058,670	$	5,742	$	1,080,866

(1)

In accordance with ASC 820, the Company's equity investment in Runway-Cadma I LLC is measured using the net asset value as a practical expedient for fair value, and thus has not been classified in the fair value hierarchy.

The Company transfers investments in and out of Levels 1, 2 and 3 as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. During the year ended December 31, 2025, the Company's preferred stock investment in CareCloud, Inc., valued at $9.2 million at the beginning of the reporting period, was reclassified from Level 1 to Level 3 due to delisting from the NASDAQ stock exchange. During the year ended December 31, 2024, the Company had warrant investments in portfolio companies that went public, resulting in asset transfers out of Level 3 and into Level 2 at the fair value of approximately $50 thousand.

The following table presents a rollforward of Level 3 assets measured at fair value as of December 31, 2025 (in thousands):


		Senior Secured Loans		Second Lien Loans		Convertible Notes		Preferred Stock/Units		Common Stock/Units		Equity Interest		Warrants	Total
Fair value at December 31, 2024	$	950,092	$	20,152	$	-	$	73,460	$	16	$	1,198	$	13,752	$	1,058,670
Transfers in (out) of Level 3		-		-		-		9,181		-		-		-		9,181
Purchases of investments(1)		137,068		-		1,000		2,773		-		-		2,734		143,575
PIK interest		14,775		879		-		-		-		-		-		15,654
Sales or prepayments of investments(1)		(232,690)		(14,711)		(1,000)		(37,355)		-		-		(273)		(286,029)
Scheduled principal repayments of investments		(11,608)		-		-		-		-		-		-		(11,608)
Amortization of fixed income premiums or accretion of discounts and ETP		5,510		(216)		-		-		-		-		-		5,294
Net realized gain (loss)		(1,501)		-		-		9,256		-		-		(1,888)		5,867
Net change in unrealized gain (loss)		(7,753)		330		-		(21,051)		2		295		1,257		(26,920)
Fair value at December 31, 2025	$	853,893	$	6,434	$	-	$	36,264	$	18	$	1,493	$	15,582	$	913,684
Net change in unrealized gain (loss) on Level 3 investments still held as of December 31, 2025	$	(5,988)	$	36	$	-	$	(11,795)	$	2	$	295	$	(115)	$	(17,565)

(1)

Net of reorganization and restructuring of investments.

The following table presents a rollforward of Level 3 assets measured at fair value as of December 31, 2024 (in thousands):


		Senior Secured Loans		Second Lien Loans		Convertible Notes		Preferred Stock/Units		Common Stock/Units		Equity Interest		Warrants	Total
Fair value at December 31, 2023	$	964,099	$	14,399	$	1,357	$	26,285	$	872	$	950	$	12,838	$	1,020,800
Transfers in (out) of Level 3		-		-		-		-		-		-		(51)		(51)
Purchases of investments(1)		201,613		5,737		339		36,644		-		-		3,832		248,165
PIK interest		11,974		291		-		-		-		-		-		12,265
Sales or prepayments of investments		(224,364)		-		-		-		-		-		(2,033)		(226,397)
Scheduled repayments of investments		(4,780)		-		-		-		-		-		-		(4,780)
Amortization of fixed income premiums or accretion of discounts and ETP		6,654		139		-		-		-		-		-		6,793
Net realized gain (loss)		(2,890)		-		(1,696)		-		-		-		1,647		(2,939)
Net change in unrealized gain (loss)		(2,214)		(414)		-		10,531		(856)		248		(2,481)		4,814
Fair Value at December 31, 2024	$	950,092	$	20,152	$	-	$	73,460	$	16	$	1,198	$	13,752	$	1,058,670
Net change in unrealized gain (loss) on Level 3 investments still held as of December 31, 2024	$	(2,726)	$	(414)	$	-	$	10,531	$	(856)	$	248	$	(2,059)	$	4,724

(1)

Net of reorganization and restructuring of investments.

The following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2025 (in thousands):


Description	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Senior Secured Loans(1)	$	721,579	Discounted Cash Flow Analysis	Discount rate	9.3% - 26.0% (14.6%)
				Origination yield	10.2% - 19.1% (13.7%)
				Revenue multiples	0.77x - 8.27x (3.58x)
		132,314	PWERM	Discount rate	13.6% - 46.2% (25.4%)
				Origination yield	12.7% - 29.9% (15.8%)
				Revenue multiples	0.28x - 121.39x (15.20x)
Second Lien Loans(1)		6,434	Discounted Cash Flow Analysis	Discount rate	20.5% - 20.5% (20.5%)
				Origination yield	18.4% - 18.4% (18.4%)
				Revenue Multiples	2.88x - 2.88x (2.88x)
Preferred Stock/Units		35,781	Current Value Method (5)	Risk-free interest rate	3.5% - 3.5% (3.5%)
				Average industry volatility	50.0% - 80.0% (58.1%)
				Estimated time to exit	2.0 - 3.0 (2.7 years)
		483	Option Pricing Model	Risk-free interest rate	3.5% - 3.6% (3.5%)
				Average industry volatility	35.0% - 55.0% (46.2%)
				Estimated time to exit	2.5 - 3.7 (2.7 years)
				Revenue multiples	2.73x - 2.88x (2.73x)
Common Stock/Units		18	Option Pricing Model	Risk-free interest rate	3.5% - 3.5% (3.5%)
				Average industry volatility	55.0% - 55.0% (55.0%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
Equity Interest		1,493	PWERM (4)	N/A	N/A
Warrants(2)		12,000	Option Pricing Model	Risk-free interest rate	3.5% - 3.6% (3.5%)
				Average industry volatility	25.0% - 90.0% (51.0%)
				Estimated time to exit	0.5 - 5.0 (2.9 years)
				Revenue multiples	2.08x - 121.39x (3.82x)
		3,582	PWERM (3)	N/A	N/A

Total Level 3 Investments	$	913,684

(1)

The significant unobservable inputs used in the fair value measurement of the Company’s debt securities are origination yields and discount rates. The origination yield is defined as the initial market price of an investment in a hypothetical market to hypothetical market participants where buyers and sellers are willing participants. The discount rate is related to company-specific characteristics such as underlying investment performance, projected cash flows, and other characteristics of the investment. Significant increases or decreases in the inputs in isolation may result in a significantly higher or lower fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase or decrease in the unobservable inputs.

(2)

The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity-related securities are inputs used in the OPM, which include industry volatility, risk free interest rate and estimated time to exit. The Equity Allocation model and the Black Scholes model were the main OPMs used during the year ended December 31, 2025. PWERM and other techniques were used as determined appropriate. Significant increases (decreases) in the inputs in isolation would result in a significantly higher (lower) fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase (decrease) in the unobservable inputs. For some investments, additional consideration may be given to data from the last round of financing or merger/acquisition events near the measurement date.

(3)

Warrant investments using a PWERM valuation technique contain success fees, in which case the inputs are not applicable because the nature of a success fee is a fixed payout dependent on certain liquidation events.

(4)

Investment valued using a PWERM valuation technique and includes inputs that are based on scenario analysis specific to the asset recovery of such investment.

(5)

Investment valued using the Current Value Method, which may include a Waterfall valuation technique or be based on the redemption value of preferred shares. In the case of the JobGet Holdings, Inc. valuation, the inputs applied are based on an option pricing model that was utilized to value the shares that JobGet Holdings, Inc. owns in JobGet, Inc. In the case of a redemption value technique, inputs may be utilized in order to calculate a DLOM.

The following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2024 (in thousands):


Description	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Senior Secured Loans(1)	$	944,513	Discounted Cash Flow Analysis (6)	Discount rate	10.2% - 45.7% (15.6%)
				Origination yield	11.1% - 29.9% (13.9%)
				Revenue multiples	0.28x - 15.25x (4.22x)
		2,148	PWERM	Discount rate	40.0% - 40.0% (40.0%)
				Origination yield	18.6% - 18.6% (18.6%)
				Revenue multiples	1.25x - 1.25x (1.25x)
		3,431	Waterfall Approach (5)	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	52.5% - 52.5% (52.5%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
				Revenue multiples	3.75x - 3.75x (3.75x)
Second Lien Loans(1)		20,152	Discounted Cash Flow Analysis	Discount rate	18.6% - 19.2% (19.1%)
				Origination yield	13.0% - 18.4% (14.5%)
				Revenue Multiples	1.90x - 2.85x (2.17x)
Preferred Stock/Units		35,563	Waterfall Approach (5)	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	52.5% - 52.5% (52.5%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
				Revenue multiples	3.75x - 3.75x (3.75x)
		37,897	Option Pricing Model (6)	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	45.0% - 62.5% (45.1%)
				Estimated time to exit	3.0 - 4.7 (3.0 years)
				Revenue multiples	2.82x - 12.87x (12.76x)
Common Stock/Units		16	Option Pricing Model	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	62.5% - 62.5% (62.5%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
Equity Interest		1,198	PWERM (4)	N/A	N/A
Warrants(2)		10,860	Option Pricing Model	Risk-free interest rate	4.1% - 4.3% (4.1%)
				Average industry volatility	22.5% - 110.0% (47.7%)
				Estimated time to exit	1.0 - 3.8 (2.9 years)
				Revenue multiples	1.27x - 8.89x (3.41x)
		2,802	PWERM (3)	N/A	N/A
		90	Waterfall Approach	Revenue multiples	1.93x - 1.93x (1.93x)

Total Level 3 Investments	$	1,058,670

(1)

(2)

The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity-related securities are inputs used in the OPM, which include industry volatility, risk free interest rate and estimated time to exit. The Equity Allocation model and the Black Scholes model were the main OPMs used during the year ended December 31, 2024. PWERM and other techniques were used as determined appropriate. Significant increases (decreases) in the inputs in isolation would result in a significantly higher (lower) fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase (decrease) in the unobservable inputs. For some investments, additional consideration may be given to data from the last round of financing or merger/acquisition events near the measurement date.

(3)

(4)

Investment valued using a PWERM valuation technique and includes inputs that are based on scenario analysis specific to the asset recovery of such investment.

(5)

Investment valued using a Waterfall valuation technique. The inputs utilized in the valuation are based on an option pricing model that was utilized to value the shares that JobGet Holdings, Inc. owns in JobGet, Inc.

(6)

Includes Gynesonics, Inc., which was sold on January 2, 2025. As of December 31, 2024, the Company valued its investments in Gynesonics, Inc. at the expected sales proceeds from the acquisition.

Fair Value of Financial Instruments Reported at Cost

The Company records its debt at amortized cost on the Consolidated Statements of Assets and Liabilities. The fair value of the Company’s Credit Facility, April 2026 Notes, December 2026 Notes, August 2027 Notes, and April 2028 Notes (each defined in "Note 7 – Borrowings") are estimated using Level 3 inputs, which involves discounting the remaining payments based on comparable market rates for similar instruments as of the measurement date. The July 2027 Notes and December 2027 Notes are publicly traded on NASDAQ and are valued using Level 1 inputs, reflecting the most recent market prices of $25.24 and $25.24 per share as of December 31, 2025, respectively. As of December 31, 2024, the market prices were $24.88 and $25.10 per share, respectively.

The following table provides additional information about the approximate fair value and level in the fair value hierarchy of the Company’s outstanding borrowings as of December 31, 2025 and December 31, 2024 (in thousands):


			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total
As of December 31, 2025
Credit Facility	$	168,783	$	-	$	-	$	179,962	$	179,962
April 2026 Notes		24,962		-		-		25,528		25,528
July 2027 Notes		79,649		81,272		-		-		81,272
December 2027 Notes		51,030		52,247		-		-		52,247
April 2028 Notes		106,696		-		-		93,848		93,848
Total	$	431,120	$	133,519	$	-	$	299,338	$	432,857

As of December 31, 2024
Credit Facility	$	308,449	$	-	$	-	$	321,785	$	321,785
April 2026 Notes		24,839		-		-		25,616		25,616
December 2026 Notes		69,630		-		-		65,512		65,512
July 2027 Notes		79,116		80,114		-		-		80,114
August 2027 Notes		19,628		-		-		20,054		20,054
December 2027 Notes		50,670		51,957		-		-		51,957
Total	$	552,332	$	132,071	$	-	$	432,967	$	565,038

Historical Timeline

Fiscal Year	Filed
2025	Mar 12, 2026	Showing above
2024	Mar 20, 2025

2023	Mar 7, 2024

2022	Mar 2, 2023

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Runway Growth Finance Corp. Fair Value Disclosure

Note 5 – Fair Value of Financial Instruments

Historical Timeline

About Fair Value Disclosures

Other Available Disclosures