#alternative debt

But while banks do offer short-term loans, sometimes they need a guarantee or large collateral to extend the loan. In addition, banks frequently have enough exposure to certain sectors and therefore have limitations in lending to certain companies. And, even if they do manage to give the loan, companies may realize that they need more money after commencing the project, in which case there is a lot of rework needed to add incremental funds to the sanctioned limit. In such scenarios, raising funds for a short duration, or for a specific activity could become a tedious and time-consuming process.

Newer funding options

However, thanks to a larger investor market, favorable regulations, and technological advancements today, there are a lot of other funding options available to enterprises for raising money in the form of debt.

According to the Reserve Bank of India, businesses today are increasingly relying on private placement for debt financing. And why not? The cost of private placement is less than one-sixth the cost of a public placement!