Debt Funding

At GHL India, we offer comprehensive debt funding services tailored to meet the financing needs of businesses and investors alike. Debt funding, also known as debt financing, involves raising capital by selling debt instruments such as loans, debentures, corporate bonds, and corporate debt securities. These fixed-income instruments provide a reliable source of funding for businesses while offering attractive investment opportunities for individuals and entities seeking steady returns.

What is Debt Funding?

Debt funding, also known as debt financing, allows you to raise capital by borrowing money through loans, debentures, corporate bonds, and other debt securities. These instruments act as a reliable source of funding for your business, offering a predictable payment schedule. At the same time, they provide attractive investment opportunities for individuals and institutions seeking steady returns.

Key Features of Debt Funding:

Debt funding, which involves borrowing money from lenders or investors that must be repaid with interest over time, offers several benefits for businesses:

Maintain Ownership
Tax Deductibility
Predictable Payments
Access to Capital
Flexible Repayment
Build Credit
Against Inflation
Maintain Ownership:

Debt financing allows businesses to retain ownership and control. Unlike equity financing, where ownership is shared with investors, debt financing does not dilute the ownership stake of existing shareholders.

Tax Deductibility:

In many jurisdictions, the interest payments on debt are tax-deductible, reducing the overall tax burden for the business. This can lead to significant cost savings, especially for businesses in higher tax brackets.

Predictable Payments:

Debt financing typically involves regular fixed payments, making it easier for businesses to budget and plan for the future. This predictability can be advantageous for managing cash flow and ensuring that the business meets its financial obligations on time.


Debt financing allows businesses to leverage their existing assets and cash flow to access additional capital. By using debt, businesses can amplify their returns on investment and potentially achieve higher growth rates than would be possible with just equity financing.

Faster Access to Capital:

Obtaining debt financing often requires less time and effort compared to raising equity financing. This can be particularly beneficial for businesses that need capital quickly to seize opportunities or address urgent financial needs.

Flexible Repayment Terms:

Depending on the terms negotiated with lenders, businesses may have flexibility in structuring the repayment of debt. This can include options such as interest-only payments for a certain period, balloon payments, or the ability to refinance at more favorable terms in the future.

Build Credit History:

Successfully managing debt obligations can help businesses establish and strengthen their credit history. This, in turn, can improve their ability to access additional financing in the future and negotiate more favorable terms with lenders.

Maintain Profitability:

Unlike equity financing, which involves sharing profits with investors, debt financing does not require sharing future profits with lenders. This allows businesses to retain a larger portion of their earnings, which can contribute to higher profitability over time.

Hedge Against Inflation:

Inflation can erode the value of money over time. By borrowing at a fixed interest rate, businesses can effectively hedge against inflation, as the real value of their debt decreases over time as prices rise.

Indian Regulatory Framework for Debt Funding

The Indian regulatory framework provides options for both onshore and offshore debt funding for Indian companies. The offshore funding routes are generally highly regulated and need to comply with a number of conditions provided under the Foreign Exchange Management Act, 1999 (“FEMA”). On the other hand, onshore lending generally does not require compliance with FEMA and is generally less regulated.

1. Investment Instruments

Debt investment in India can be made through various instruments, including:

i. Non-Convertible Debentures (NCDs):
These are debt instruments that cannot be converted into equity shares of a company. Investors earn returns on NCDs through interest payments and any upside on sale or extinguishment. NCDs are subject to the overall corporate debt auction limits of India and can be invested in under the Foreign Portfolio Investment (FPI) Route or by a Foreign Venture Capital Investor (FVCI).

ii. Compulsorily Convertible Debentures (CCDs) or Compulsorily Convertible Preference Shares (CCPS):
These instruments mandatorily convert into equity shares of the issuing company based on mutually decided conditions at the time of issuance. CCDs generally offer a lower rate of interest than NCDs and are considered capital instruments. Investment in CCDs can be made under the Foreign Direct Investment (FDI) route.

iii. Optionally Convertible Debentures (OCDs):
OCDs are instruments that may be converted into equity shares of a company, but such conversion is not mandatory. Investment in OCDs may be made under the FVCI route.

iv. Rupee Denominated Bonds (RDBs) or Masala Bonds:
These bonds are issued by corporates outside India but are denominated in Indian Rupees. RDBs are typically priced at a certain spread over the prevailing government security rate and are governed by directions issued by the Reserve Bank of India (RBI).

Security Receipts (SRs):
SRs are instruments issued by Asset Reconstruction Companies (ARCs) in exchange for non-performing assets acquired by them.

2. Investment Routes

Foreign debt can be infused through various routes:

i. Foreign Direct Investment (FDI):
Investment through capital instruments such as equity, CCDs, and CCPS.

ii. Foreign Portfolio Investment (FPI):
Investment by entities registered with the Securities and Exchange Board of India (SEBI) as Foreign Portfolio Investors (FPIs) or by persons resident outside India through less than 10% of capital instruments of a listed Indian company.

iii. Foreign Venture Capital Investor (FVCI):
Investment through securities of an Indian company engaged in limited sectors or units of Category I Alternative Investment Vehicles or Venture Capital Funds.

iv. External Commercial Borrowing (ECB):
I Infusion of capital through direct lending or lending in exchange for rupee-denominated bonds.

3. Onshore Investment Vehicles

i. Non-Banking Finance Companies (NBFCs):
Companies engaged in the business of loans and advances, acquisition of bonds, and marketable securities, among others.

ii. Alternative Investment Fund (AIF):
Privately pooled investment vehicles collecting funds from sophisticated investors for investment purposes.

iii. Asset Reconstruction Companies (ARCs):
Companies purchasing bad assets or Non-Performing Assets (NPAs) from banks or financial institutions in exchange for SRs, aiding in cleaning up balance sheets and reviving stressed companies.

Types of Debt Financing:

Debt financing offers a variety of options to suit different business needs. Here's a breakdown of some common types:

Bank Loans:
This is a traditional and popular option. Banks offer term loans (fixed repayment schedule) and lines of credit (flexible access to funds) based on your business's creditworthiness.

Companies can issue bonds to raise capital from a wider pool of investors. Bondholders receive periodic interest payments and their principal amount back at maturity.

Similar to bonds, debentures are unsecured debt instruments issued by companies. However, they may have different terms and conditions compared to bonds.

Lines of Credit:
A line of credit functions like a credit card for businesses, allowing you to access funds up to a certain limit and repay them over time with interest.

Commercial Mortgages:
These loans are secured by real estate owned by the business and are typically used to purchase or develop property.

Equipment Loans:
Financed specifically for acquiring equipment, these loans come with the equipment acting as collateral.

Invoice Factoring:
Businesses can sell their unpaid invoices to a factoring company at a discount to receive immediate cash flow.

Why Choose GHL India for Debt Funding?


With years of experience in the financial industry, our team of experts possesses the knowledge and expertise to structure and execute debt funding transactions efficiently.

Customized Solutions:

We understand that every business has unique financing needs. Our team works closely with clients to tailor debt funding solutions that align with their specific requirements and objectives.

Access to Capital:

Through our extensive network of investors and financial institutions, we provide businesses with access to a diverse pool of capital to support their growth initiatives.

Risk Management:

We conduct thorough due diligence on potential debt funding opportunities to assess credit risk and ensure the viability of the investment for our clients.

Comprehensive Support:

From structuring debt instruments to facilitating the issuance process and managing investor relations, we provide end-to-end support to clients throughout the debt funding process.

Get Started with GHL India

Grow your business or secure stable returns. GHL India is your one-stop shop for customized debt funding solutions. Contact us today and unlock the potential of debt financing!