debt financing
Capital through loans
Debt financing is raising capital by borrowing money that must be repaid with interest, typically through loans or bonds.
Companies choose debt financing over equity financing to avoid giving up ownership stakes: The startup used debt financing to expand without diluting the founders' shares.
The borrowed funds create a liability on the balance sheet, but interest payments are often tax-deductible.
- loanBorrowed money repaid later
- bridge loanTemporary financing between transactions
- term loanFixed-schedule bank advance
- bankPlace holding deposits
- interest rateCost of borrowing money
interest payment · collateral · startup funding · bond · junk bond · credit line · debenture · covenant · promissory note · credit union · maturity date · investors · lender · repayment · equity · treasury · mortgage · underwriting
debt financingretained earnings
Profits kept by company
bootstrapping · organic growth · self-funding · cash reserves