Glossary / Debt Capital

Debt Capital

Debt capital refers to funds that are raised by a company or organization through borrowing, typically in the form of loans or bonds. It is a type of financing that involves the company taking on debt obligations in exchange for capital. Debt capital can be obtained from various sources, including banks, financial institutions, and individual investors. The company that borrows the funds is required to repay the debt over a specified period of time, usually with interest. One advantage of debt capital is that it allows companies to raise funds without diluting ownership or giving up control of the business. It can also provide tax benefits, as interest payments on debt are often tax-deductible. However, there are also risks associated with debt capital. Companies that take on too much debt may face financial difficulties if they are unable to meet their debt obligations. Additionally, borrowing money can increase a company's leverage and financial risk. Overall, debt capital is an important source of financing for companies and organizations, but it should be managed carefully to ensure that the benefits outweigh the risks.