Debt Financing

What does it mean?
When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay principal and interest on the debt.

In Other Words...
The other way of raising capital is to issue shares of stock in a public offering, called equity financing.

Related Links
Bond Basics Tutorial - What are bonds and do they belong in your portfolio? Get all the answers in this comprehensive tutorial.

Related Terms
Bond | Creditor | Debt | Equity Financing

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