Debentures

 

A debenture is essentially a document that either creates a debt or acknowledges the existence of a noncollateralized debt.  The term convertible debenture is used to describe a medium to long-term debt instrument that can be converted into stock at the option of the holder or the issuer.

A debenture is a document evidencing the fact that a company is liable to pay a specified dollar amount of debt with interest and although the money raised by the debentures becomes a part of the company’s capital structure, it is a debt instrument, and is not considered equity capital until such time as the debenture has been converted into stock. .Senior debentures get paid before jefferson-head-capital-FINAL-TWOsubordinate debentures, and there are varying rates of risk and payoff for these two instruments.

Debentures are generally freely transferable by the debenture holder. Debenture holders have no corporate voting rights, although they can make changes to the rights attached to the outstanding debentures at their sole discretion. The interest paid to the holder of debenture is an actual accounting charge reflected in the company’s financial statements.

There are two basic types of debentures:

Convertible debentures, which are commonly used by small to medium sized businesses, can be converted into equity shares of the issuing company after a predetermined period of time. The “Convertibility” feature makes them more attractive to investors and typically have lower interest rates than non-convertible corporate bonds. Non-convertible debentures, which are simply regular debentures, cannot be converted into equity shares of the liable company. As a result, they usually carry higher interest rates than their convertible counterparts.

If your business is looking for this type of funding, then we can help you find the right lender. There are thousands of lenders in the U.S. that can provide funding for your business today.  Contacts us today and tells us about your business, we’ll help you find the right lender for your business needs.