Advantages of using debt finance, Finance Basics

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Advantages of Using Debt Finance

  • Interest on debt is a tax permit able expense and as that it is reduced via the tax allowance.
  • The cost of debt is fixed regardless of profits created and as such within conditions of debt will be lower of high profits the cost.
  • It does not call for a lot of formalities to rise and as such it ideal for critical ventures
  • It is usually self-sustaining in such the asset acquired is required to pay for its cost that is leaving the company along with the value of the asset.
  • In case of long-term debt, amount of loan declines along with time and repayments reduce its burden to the borrower.
  • Debt finance does not influence the company's decision as lenders don't contribute at the AGM.

 


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