Debt financing

Debt financing is a broad term that covers any type of loan that you pay back, with interest, over a set period of time. A loan can come either from a lender – see business loans – or from selling bonds to the public.

If your business needs to raise money (capital) you can either borrow from a lender (i.e. debt financing) or sell a share of ownership in your business (equity financing) in return for capital. You can of course combine the two.

Debt financing includes, for example, business loans, overdrafts, equipment leases, invoice discounting and R&D tax credit loans as well as fixed income products such as bonds, bills, or notes.

You will find there are debt products to suit just about every business stage and situation, whether you are looking for startup finance, working capital finance or a longer-term business loan.

The details vary, but in all cases your business is taking on debt – the lender gives you cash in return for regular repayments that add up to the principal amount you borrowed plus interest within an agreed time frame. The lender usually has a clear idea of how much they’ll get back.

If you’re an established business looking for growth finance or a buyout you might also want to consider direct lending, which is a type of private debt.