Other Methods of Debt Financing

The next debt financing method is commercial paper. This form of debt financing has a life of less than nine months, and it’s not secured by anything. The proceeds from commercial paper are typically used for short-term obligations.

Next, a company could open up a line of credit with its bank, which allows a company to borrow a certain amount of money. The company is not required to borrow with a line of credit, but it’s allowed to borrow from it.

The next type of debt financing is leasing rather than buying fixed assets. A lease is when you are renting fixed assets.

Let’s say that a company needs a new vehicle, but it doesn’t want to buy it so the company leases it. Throughout the life of the lease, the company makes lease payments. In return for the payments, the company gets to use the asset for as long as the lease. The lease expense is tax deductible.