What is Debt Financing and how does it work

1. What is Debt Financing and how does it work Debt financing is a well-known and regularly used method for businesses to raise capital without diminishing the ownership. In India, This form of funding is getting more widely especially in the area of stratus and from small to medium enterprises, also known as (SMEs) that are looking for expansion opportunities. The following information is said to explore the concept of debt financing in India, The main companies that regularly practice debt financing, and how businesses use it for leverage to help their growth. Debt financing specifically speaking is a process of raising funds by borrowing money that needs to be repaid over time with interest. As for other sorts of financing such as equity financing, Where the ownership stakes are exchanged for capital purposes, debt financing allows businesses to maintain complete control while also having the aim to have capital requirements. Borrowed funds can be used for several things such as working capital, expansion, asset purchases, or other business needs. In terms of debt financing, there are different types of debt financing which are available in India. India has several options to choose from ranging from bank loans, NBFC loans, bonds and debentures, venture debt, and invoice discounting. All useful options with their advantages and such. Traditional banks and financial institutions can offer term loans, working capital loans, and overdraft facilities that usually require collateral good credit history, and financial stability. NBFCs (Non-Banking Financial Companies) can provide flexible repayment terms and quicker loan processes for businesses that might not meet traditional banking requirements. With debt financing, actual money is obtained and can be used for debt funding as well. Several banks tend to be focused on financing and investing. SIDBI (Small Industries Development Bank of India) focuses on giving financial support to MSMEs (Micro, Small, and Medium, Enterprises) through various means. The multiple means would be things like loan schemes, including things like working capital finance and growth capital finance and growth capital. Tata Capital can provide several types of loans such as business loans, term loans, working capital loans, and structured proper debt solutions for businesses that are operating

2. across different industries and companies. Bajaj Finsery gives business loans with flexible repayment options that make it an attractive and well-sorted-after company when it comes to financing. It is much preferred as a choice for SMEs (Small and Medium Enterprises) and start-ups. Northern Arc Capital specializes in structured debt financing solutions for different forms of businesses of all sizes. While focusing on financial inclusion and impact-driven investments. Trifecta Capital is a leading venture debt firm in the country. Offering funding solutions to start-ups that look for non-dilutive capital. Debt financing can offer several advantages and disadvantages/challenges. The Advantage is the ability for businesses to raise funds while also retaining ownership without compromising it with full control. The Interest payments on debt are tax-deductible, which reduces the tax burden giving a financial advantage. Also, Debt financing makes sure there are predictable costs with fixed repayment schedules which is very much unlike other forms of financing such as equity financing, which openly depends on company performance. However, debt financing does come with some challenges like the obligation to make timely fixed repayments regardless of the business’s financial situation. Lenders can require assets as collateral which can be a hurdle for businesses with less tangible assets. Valuable Partners is a strategic investment firm that is committed to fuelling ambition-driven start-ups through specific financial solutions, industry expertise, and long-term mentorship. It focuses on sustainable growth; The Company depends on banking partnerships to have access to credit, providing great debt financing opportunities for portfolio companies. With important factors such as diversity, inclusion, and collaboration, Valuable Partners has an ecosystem where businesses thrive with strategic bonds with their core values. As a leading firm in the responsible capital business, it has continuous access to venture debt and funding solutions slowly growing as a company in its journey. Purpose-driven approach, in-depth industry knowledge, and support from all around. Valuable Partners open up opportunities that go beyond capital, it empowers transformative business success.