Long Term Finance


USHMS Inc., ensuring effective and efficient intermediation channels for long-term financing is a complex and multi-dimensional task. The Commission adopted a Green Paper on the long-term financing of the European economy on 20 March 2013, including a public consultation. Its purpose is to initiate a broad debate about how to foster the supply of long-term financing and how to improve and diversify the system of financial intermediation for long-term investment in Europe. Responses to consultation questions will contribute to further assessment by the Commission of the barriers to long-term financing, with a view to identifying possible policy actions to overcome them.

Advantages Of Long-Term Debt Financing

From the issuing firm's perspective, the major advantages of long-term debt financing are as follows:

1. Debt is least costly source of long-term financing. It is the least costly because:

  • Interest on debt is tax-deductible,
  • Bondholders or creditors consider debt as a relatively less risky investment and require lower return.

2. Debt financing provides sufficient flexibility in the financial/capital structure of the company. Flexibility in capital structure of the company can be increased by inserting call provision in the bond indenture. In case of over capitalization, the company can redeem the debt to balance its capitalization.

3. Bondholders are creditors and have no interference in business operations because they are not entitled to vote.

4. The company can enjoy tax saving on interest on debt.