Debt Financing

Obtaining funds by borrowing money, often from banks or other financial institutions.

Debt financing refers to the practice of acquiring funds for a business by borrowing money from external sources, such as banks, financial institutions, or investors, with the obligation to repay the borrowed amount along with interest over a specified period. It involves taking on debt as a means of funding business operations, expansion, or investments. Debt financing provides immediate access to capital while allowing the business to retain ownership and control. It typically involves the signing of a loan agreement, which outlines the terms, interest rate, repayment schedule, and any collateral requirements. Small business owners often opt for debt financing to meet short-term or long-term financial needs, manage cash flow, or pursue growth opportunities. It is essential to carefully assess the borrowing capacity, interest rates, and repayment terms to ensure the business's financial sustainability.