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What is Debt Financing?

 Debt financing is raising capital by borrowing funds from external sources, with a legal obligation to repay principal plus interest within an agreed timeframe.

 

Key points:

  • Common sources include loans, bonds, and private credit.
  • Preserves ownership but adds repayment obligations.
  • Used for expansion, acquisitions, or working capital.
  • Cost influenced by interest rates and credit profile.