What Are the Different Types of Business Debt Relief?

Corporate debt refers to liabilities that can be measured by currency and will be paid by assets or services.

Corporate debt

Corporate debt refers to liabilities that can be measured by currency and will be paid by assets or services.

Chinese name

Corporate debt

Meaning

Can be measured in monetary terms

Types of

debt

Form

Liabilities to be paid as assets or services

For enterprises, there are three main sources of debt: ^[1]

The production process of an enterprise can be divided into three major parts: operating activities, investment activities, and fund-raising activities. The organic combination and sequential execution of the three major parts can enable the normal operation and development of the enterprise. Among them, fund-raising is a basic activity for enterprises to raise capital, and enterprises support the normal operation of business and investment activities through cost-effective financing and concentration of capital. ^[1]

Capital is a basic element of an enterprise's business activities and a necessary condition for its creation, survival and development. From the creation to the survival and development, the reasons for corporate capital requirements are different at different stages. The initial planning of an enterprise requires financing to obtain the initial capital necessary to set up an enterprise. In the process of enterprise survival and development, it must always maintain a certain capital scale. Due to the development and change of production and operation activities, additional funding is often required. Certain supply and demand relations and certain investment gains, and external investment activities also need to raise capital; companies need to adjust the corporate capital structure in a timely manner according to changes in the internal and external environment, and also need to raise capital in a timely manner.

The basic purpose of corporate fund-raising is for its own survival and development. In the continuous survival and development of an enterprise, its specific fund-raising activities are usually driven by specific fund-raising motives. Because of the different reasons for corporate funding requirements, the specific motivations for corporate funding are also diverse. For example: financing for the purchase of equipment, introduction of new technologies, development of new products; financing for foreign investment, mergers and acquisitions of other enterprises; financing for cash turnover and scheduling; financing for debt repayment and adjustment of capital structure, etc.

Corporate financing is divided into two parts: equity financing and debt financing. Investors in equity capital require companies to distribute dividends at a target dividend that is higher than the average market interest rate. Investors in debt capital also require companies to pay interest regularly at a set interest rate as the cost of obtaining debt capital cash. Therefore, dividends and interest become liabilities that need to be gradually repaid during the production process.