Debt capital is an important component of a company's balance sheet and includes all outstanding debts to third parties.
This can be, for example, loans, bonds or vendor loans. In contrast to equity capital, which is raised by the company itself, the funds for debt capital come from external investors or lenders.
Debt capital has the advantage that it is usually quicker and easier to raise than equity capital. In addition, the company does not have to give up shares or pay dividends. However, debt capital also carries risks, as it has to be repaid and interest can occur.
Too much debt can lead to the company getting into financial difficulties if the debts can no longer be serviced. Depending on the type of debt, liquidity bottlenecks or repayment difficulties can arise, limiting the company's ability to act.
It is therefore important that companies keep an eye on the ratio of equity to debt capital and structure their financing in such a way that they can operate stable and successfully in the long term.
