Loan capital

Loan capital is funds that a company borrows to finance its activities. Loan capital is either in the form of bonds or bank loans and will usually come at a fixed or variable rate of interest. Loan capital is distinct from share capital. The creditors of loan capital will not control or have a vote in how the company is run. Loan capital can be long-term loans or short term loans. A company would typically use long-term loan capital to finance long term assets such as real estate or plant and equipment within lengthy useful lives of 10 years or more, whereas it is more usual to take out short term loans to finance short term requirements such as working capital.

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