Definition of Debt Financing
Debt financing occurs when a company raises money with an interest from any individual or an institution to repay the existing debt. Debt loan is of two types, secured and unsecured loan. A loan that is backed by the company’s asset is known as a secured loan. An unsecured loan is usually less in amount with a lesser period. A firm raises money through debt financing for maybe capital expenditures or working capital.
Debt financing is secured with agreed future payout dates. Debt amount along with interest could be made on a monthly, bi-annually or yearly basis to the creditor.