Debt

Glossary

Banking

Debt

Debt is money that passes from a lender or group of lenders to a borrower predominantly over a fixed period of time with interest payments at regular intervals, in fixed-rate or floating-rate format. The amount of interest levied by lenders will depend on the riskiness of the borrower or the lenders’ position in the repayment hierarchy. Companies borrowing efficiently through debt leverage can increase returns. Debt can be an efficient method of financing the purchase today of high-value equipment that adds to revenues while repaying the borrowing over time using future operating revenues. The term “debt” in a capital markets context typically refers to bonds, commercial paper or loan borrowing.

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