debt-financing

Vocabulary Word

Definition

'Debt financing' is like taking out a loan. You borrow money from someone, usually a bank, and you promise to pay it back with extra money, called interest.

Examples in Different Contexts

In business expansion, 'debt-financing' is used to fund growth without giving up ownership equity. A business owner might say, 'We chose debt-financing for our expansion to retain full control of our company while accessing the capital we needed.'

Practice Scenarios

Startup

Scenario:

The startup landscape is becoming competitive and we need to speed up operations. Should we look at investor funding?

Response:

While investor funding is helpful, maintaining full control is essential for us. I think we should opt for debt financing.

Accounting

Scenario:

With the changes in the interest rates, it's essential we revisit our financing strategies.

Response:

Debt financing might become too expensive because of the rate changes. Let's consider other strategies.