The decision to issue bonds instead of selecting other methods of raising money can be driven by many factors. Comparing the features and benefits of bonds versus other common methods of raising cash provides some insight. It helps to explain why companies often issue bonds when they need to finance corporate activities.
- When companies want to raise capital, they can issue stocks or bonds.
- Bond financing is often less expensive than equity and does not entail giving up any control of the company.
- A company can obtain debt financing from a bank in the form of a loan, or else issue bonds to investors.
- Bonds have several advantages over bank loans and can be structured in many ways with different maturities.