The two major forms of debt financing
Debt financing comes from two sources: selling bonds and borrowing from individuals, banks, and other financial institutions.
What is Debt Financing?
- Debt financing is the process through which a business sells debt instruments to retail and/or institutional investors in order to raise funds for working capital or capital expenditures.
- The people or organizations receiving the funds become creditors and are given the assurance that the principal and interest on the loan will be paid back.
- The other method of raising money in the debt markets is by issuing stock in a public offering; this process is known as equity financing.
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