Debt financing

Debt financing is the use of a loan or a bond issuance to obtain funding for a business. The reasons for debt financing include obtaining additional working capital, buying assets, and acquiring other entities. Short-term debt financing is more commonly used to obtain working capital, while long-term debt financing is used to acquire assets. When debt financing is obtained, the borrower incurs an obligation to pay back the funds. The other type of financing is equity financing, where the entity sells an ownership interest to investors.