Debenture capital definition
/What is Debenture Capital?
Debenture capital is a loan that an organization secures with its assets. This situation is most common for smaller organizations that cannot convince lenders to issue them debt without some form of collateral.
Disadvantages of Debenture Capital
The main problem with debenture capital is that a failure to repay the associated debt can result in the lender seizing the assets used as collateral on the loan. Depending on the nature of the assets, this can effectively terminate the borrower’s operations and thrust it into bankruptcy. Consequently, it can make sense to keep these types of loans down to a manageable level.