Bank debt is the money a company owes to banks for loans or lines of credit taken out for financing purposes.
For example, a manufacturing company carries $750,000 in bank debt — a $500,000 term loan used to purchase equipment and a $250,000 operating line of credit — both listed as liabilities on its balance sheet.
Why it matters: It is typically the cheapest source of capital but requires strong credit and restrictive covenants, impacting financial flexibility.
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