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What is Debt Financing?
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what is debt financing? Debt financing involves taking a loan to finance a business activity or to develop business. In general, the lenders are usually banks or financial institutions. Such borrowed money attracts interest and repayment plans but does not require the owner to forgo his/her business ownership. Other firms use it as the usual way of financing their large projects without giving up control. Companies should also cautiously evaluate their repayment capacity before taking loans since failing to repay loans may affect the credit ratings and the methods of financing in future. Short-to-medium-term capital requirements are frequently financed by the use of debt financing.
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