Question

In 500 words, or 2 pages double-spaced, Discuss the advantages and disadvantages of corporate debt.

Answer 1

Advantages and disadvantages of raising finance bye issuing corporate debt corporate bonds are used by many companies to raise funding for large scale projects such as Business expansion takeovers neutralizes or product development they can be used to replace Bank finance auto provide long term working capital the main features of the corporate Bond are the nominal value the interest rate paid to the bond order The Redemption date

Advantages of issuing corporate bonds

Bonds can be very flexible way of raising Dept capital they can be secured and unsecured you can decide what priority they want to take over other debts they can also offer a way of stabilizing your company's finances by having substantial debts straight interest this offers some protection against variable interest rates of economic changes are the advantages of using wants to raise long term finance include not deleting the value of existing shareholders enabling more cash to be retained in the business

Disadvantage of issuing corporate was there are some disadvantages of issuing boys including regular interest payments to bondholders the interest maybe fix the interest will usually have to be paid even if you make a loss

The potential for your business share value to be reduced if your profits decline this is because Bond interest payments take precedence over dividend

Having to comply with various listing rules in order to increase the credibility of the bonds listed on an exchange particularly an obligation to make information on the company publicly available at the issue stage and regularly during the life of a bond

Ongoing contact with investors can be somewhat Limited show changes to terms and conditions or waivers can be more difficult to obtain compared to dealing with bank lenders who tend to maintain a closer relationship

Liquidity corporate debt trade in secondary markets which permits investors to buy n sell them securities they have been issued by doing so investors can

The major risk of Corporate bond is credit risk if Ishwar goes out of business the investor may not receive interest payments or get his or her principle back this contrast with bonds that have been issued by a government with her credit rating as this entity good theoretical increase taxes to make payments to bondholders another notable risk is events companies could face unforeseen circumstances that could undermine their ability to generate cash flow the interest payments for repayment of principal associated with Bond depend on issue of ability to generate this cash flow corporate bonds can provide a reliable stream of income for investors the deppe securities become particularly attractive after the financial crisis as Central Bank stimulus help on many fixed income securities logo.

Wise production there are many types of Corporate Bond such a short term bonds with maturity is of 5 years or less medium term bonds the maturity if 5 to 12 years beyond maturity considerations corporate bonds may offer many different coupon structures bones that has zero coupon rate do not make any interest payments.

The most obvious disadvantage of debt financing is that you have to repay the loan + interest debt financing is also boring against future earnings this means that instead of using all the for future profits to grow the business or to pay the owners you have to allocate a portion to the payment

Advantages of debt financing maintaining ownership unlike equity financing debt financing gives you complete control and ownership over your own business as the business owner you do not have to answer to investors tax deductions online private loans interest fees and charges on business loan are tax deductible.

The most important consideration when buying on credit or taking out alone is whether the debt it is a good or bad good debt investment that will grow in value or generate long-term income

The most common ways that start of waste gas is my Asian stocks in the business the primary advantage of selling the stock is that there is no obligation to repay the investing for the shares so they can be white for a Startup which has no credit history and therefore can find it next to impossible to get financing without the owners issuing a personal guarantee of the business loan

If a business has access to credit market in showing corporate bonds can be useful source of capital small businesses typically have to Resort to direct loans from banks and other lenders but the advantages and disadvantages of both are similar the best thing about issuing bond is that everyone knows the terms of won so it is easy to understand bondholders don't have right to anything beyond repayment of whats on to them

. The disadvantage that you have to meet the terms precisely with serious consequences for failing to do so paying interest on time is necessary to avoid default and some loans also require the business to add her to Bond convenience that is if breached can also let to default regardless of whether a business gets financing to issue in stock or corporate Bond there is always advantages and disadvantages important to balance them for your situation in order to make the right decision for your business