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Bonds

What are Bonds?

 

A Bond is a debt security where the issuer borrows funds from the bondholder for a specified period, with a fixed interest rate. The company or government entity promises to repay the principal at maturity. Bonds are commonly used by businesses to raise capital without diluting ownership.

bonds benefits

What are the Benefits of Bonds?

Non-dilutive financing

Bonds allow companies to raise capital without diluting ownership.

Stable financing cost

Fixed interest payments can help businesses plan for the future and manage cash flow.

Investor confidence

Bonds are attractive to conservative investors who want a predictable return.

Why Set Up Bonds?

Raise capital without equity dilution

Companies can raise significant capital without giving up ownership.

Predictable payments

The company can budget for bond interest payments, as they are fixed.

Attract institutional investors

Bonds can be attractive to institutional investors seeking steady returns with relatively low risk.

How to Set Up Bonds

Determine the bond amount and interest rate

Establish how much capital is needed and the rate at which it will be paid back.

Set the conversion conditions

Bonds typically have a fixed maturity date when the principal will be repaid in full.

Structure the bond

Choose whether it will be secured or unsecured, and establish any covenants or conditions.

Examples of Companies Using Bonds

Apple

Apple is known for issuing bonds to raise capital for purposes like stock buybacks and infrastructure investment.

Tesla

Tesla has issued bonds in various stages of its growth to fund expansion and product development.

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