Challenges of Debt Financing

Business and Marketing
Institution
Date

Challenges of Debt Financing
Debt financing creates a great challenge to an organization particularly when it is accruing debts such that it becomes hard to capture an investment opportunity even when it can pay for itself. If the face value is bigger than the expected pay off, holders find it difficult to invest in a project where the benefits will be directed to the debt holders. Investment in an IT project can affect the organization if the debts are excessive. Bond restrictions are also inducted on the use of revenues in case the facility or investment project has an outstanding bond, hence the firm is likely to face pressures from external sources such as banks and impatient stakeholders. This is because money borrowed has to be paid within a fixed time.
Challenges of Equity Financing
Equity financing has a reduced control o...