Sources Of Debt Financing And Different Instruments

When it comes to debt financing, there are some careful considerations to be made as debt financing is a complex procedure. For this, you have to understand the different sources and the types of such financing. Sources may also vary as per the requirement and size of the business but to categorize them all there are primarily two major sources namely, public and private sources. All your friends, relatives and family members, credit unions, banks, money lenders, consumer and commercial companies for finance, insurance and factor companies, trade credit and leasing companies make private source. Public sources include various loan programs of the state and the federal government.Image result for Sources Of Debt Financing And Different Instruments

Advantages Of Private Sources   

Taking any loan from the private sources has its benefits like they provide loans on more flexible terms and conditions for repayment. It is more flexible when you take loans from friends and relatives, and you may even end up borrowing money without and interest. Moreover, such private sources may also go beyond their lending policy and even give you a loan for any unproven business proposition and idea, on the basis or personal relationship and knowledge. One thing to be kept in mind while taking a loan from such private sources is to sign the agreement carefully so that the lender does not get involved in your business and also prevent future misunderstandings.

Borrowing From Public Sources

When you want to borrow from public sources you just have to make sure that all your documents and eligibility is precisely as per the requirement as there would be minimum flexibility in norms, rules and terms of lending. The benefit in taking a loan from public sources is that there are some loan programs and you can find the best-suited one according to your requirement from such a huge list. You may check online to know more about such loan programs. The rate of interest is also significantly low as compared to other traditional loans from private sources.  

The Government Bonds

Apart from obtaining different types of loans for your different need from the different sources, you may also opt for bonds that are issued by the governments and even some big business companies. These are a useful instrument for debt financing and are used very commonly as well. The investor has to pay the issuer of the bond the market value and for the exchange of it get a guarantee of loan repayment and alas a promise for scheduled coupon payments. Assets of the issuer back such type of investment as the bond holders are liable to make payments in case of any unwanted situations.

Debentures As Short Term Capital

You can also use debentures as a short-term capital and the difference between it, and other bonds are that it is not backed by any assets. Such short-term capital can be used by you for funding any projects which are fund specific. Once you get the revenue, the bondholder’s investment is repaid. Such bonds and debentures are guaranteed income in fixed rate and are very popular, and the only requirement in such cases are your general trustworthiness and credibility.     

People who are trapped in credit card debts are seeking for credit card debt settlement plans so as to make their troubles less and live a tension free life. Learn about it and you will surely want to try it out if you are struggling with the same issue.