Debt Securities

Besides issuing equity securities, borrowing is the other way for a company to raise money. Issuing debt securities, called bonds, allows business owners to raise capital without diluting their ownership and operating control of their business. Businesses generally seek a balance between equity and debt financing, based on the size of their operation, their profitability, their cash flow needs, and the nature of their assets.

A bond is a promise-to-pay issued by the borrowing company for a fixed amount of money lent by the bondholder. The company that issues the bond promises to return a specific amount of money plus periodic interest