The Advantages And Disadvantages Of Using A Long-Term Loan Instead Of A Bond?

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The purpose of this memo is to explain the conclusion reached to determine whether or not to call the bond before maturity and to offer recommendations if the decision is made to call the bond. This report will also include the advantages and disadvantages of using a long-term loan instead of a bond. Upon reviewing the contents of this memo, along with the calculations included in the appendix, the Finance Director should be able to make an assessment.

… Brigham and Houston (2016) study found the following:
“Most corporate bonds contain a call provision, which gives the issuing corporation the right to call the bonds for redemption. The call provision generally states that the company must pay the bondholders an amount greater than the par value if they are called.”
The task was to …show more content…

Barbour, (2013).

Companies usually have the option to decide whether to choose a long-term loan or a bond when they are considering expanding their business. Long-term loans and bonds are somewhat similar because they both carry interest rates. Loans are borrowed from a bank with a set interest rate, while bonds are issued from the public with the company issuing semiannual payments which are done at the end of the term.

The advantages and disadvantages of using a long-term loan instead of a bond are as follows:
…in research by Barbour (2013),

Long-term commercial financing can have a positive on business growth as well as the state 's overall economy.

Having access to capital enables companies to take advantage of new opportunities.

Long-term debt can also be a tool that can help a business manage and improve its financial performance.
According to Michael Wolfe retrieved from http://thefinancebase.com
The advantages of Long-term loan and bonds are:
Choosing a Long-term loan, borrowers have a larger option of lenders, interest rates, and payment

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