Long-term debt financing

Definition / explanation

Langfristig zurückzahlendes Fremdkapital wird nur aufgenommen, wenn der Unternehmer erwarten kann, dass die zur Tilgung erforderlichen Mittel dem Unternehmen erst nach längerer Zeit in Form von Verkaufserlösen zufließen. Langfristige Fremdmittel werden häufig zur financing des Anlagevermögens eingesetzt.
Long-term debt financing includes:

  • loan
  • Industrial bonds

Loan Types

Maturity loan: The loan amount is repaid on the due date specified in advance. In the meantime, only interest accrues.

Annuity Loans: The loan is repaid in installments (usually agreed annually) that include interest and repayment. Since the loan debt becomes lower and lower due to the repayment, but the annual repayment amounts (interest and repayment) remain unchanged, the interest burden decreases and the repayment increases.

Installment loan: The repayment takes place in fixed equal installments; this reduces the interest burden.

Industrial bonds

Large companies, but also the state and banks, often require substantial loans for large investment projects. You get the money you need by running out of bonds.

Bonds (with a value of EUR 100.00 or a multiple thereof) are sold by the banks to customers and give the buyer the right to interest payment and repayment of the bonds at a specified time. Bonds can also be sold at any time; they have a term of 10 to 20 years.

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