I’m trying to learn more about debt in general, and I’ve read a decent amount about personal debt, but I was hoping to learn more about what corporate debt is, why companies take on debt, and how they usually pay off this debt.
One way certain companies will take on debt is through selling bonds to investors. These bonds act as a loan agreement between a group of investors and the company, allowing the company to finance expenses with debt. In return, the company will give investors interest payments on their debt and pay back the principal by the maturity date of the bond. It’s important to note, though, that debt financing is generally reserved for mature companies. For startups, it’s generally recommended to use equity financing, since it’s cheaper for them to use.