- Debt can take many forms: loans, commercial paper and bonds. Bonds are one way a company can raise capital to grow its business.
- A bond is an agreement in which a company agrees to either pay back the value of the bond with interest after a certain period of time, or promises to make regular interest payments on the value of the bond.
- Bonds are bought and sold on the commodities markets and are a way for a company to get private financing. They may offer a higher rate of interest for more secure terms than an investor can get elsewhere, or cost the company less in interest than it would pay to a bank or lender.
- All bonds are a form of debt, but not all debts are bonds. Bonds are often only a part of how a company or project obtains funding. Most commercial lenders will not fund 100 percent of a project, which means that the company must either have cash on hand to contribute or must raise additional funds. Bonds can be a source of those funds.
- Bonds have certain tax benefits for both the issuer and the holder. It is not just companies that use bonds for fundraising purposes; municipalities often use them to fund projects like schools, hospitals and other public works, helping to keep local sales and property taxes lower.
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