Depends on debt product, lender and in some cases your business profile
Varies according to product
Any business – different products suit different business stages or scenarios
Debt financing, also known as debt funding, is when a company borrows money to be repaid at a future date 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.
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.
At Swoop Funding, there are three primary options for companies seeking financing: selling equity, taking on debt, or a combination of both. Equity represents ownership in the company and provides shareholders with a claim on future profits. Unlike debt, equity doesn’t need to be repaid, but in case of bankruptcy, equity holders are last in line to receive payment.
Alternatively, companies can pursue debt financing by selling fixed income products like bonds, bills, or notes to investors. When a bond is issued, the investors who purchase it become lenders, providing the company with capital for growth and expansion. The principal amount of the investment loan must be repaid at an agreed-upon future date. If the company goes bankrupt, lenders have priority over shareholders for any liquidated assets.
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